Foreign Collusion, Naked Shorting (Counterfeiting) & Money Laundering — All Illicit Wealth
Connecticut, SEC Sue Southridge Capital for Fraud
Karen Freifeld and Joshua Gallu, 26 October 2010
Southridge Capital Management LLC was sued by Connecticut over $26 million in fees charged investors based on what state Attorney General Richard Blumenthal called false statements about the value of assets.
The investment firm, based in Ridgefield, Connecticut, also was sued today by the U.S. Securities and Exchange Commission and accused of defrauding investors in hedge funds.
SEC Charges Conn. Hedge Manager With Fraud
Matt Ackermann, 25 October 2010
The Securities and Exchange Commission and the Connecticut banking commission have sued a Connecticut hedge fund manager with fraud.
The SEC and Connecticut Banking Commissioner Howard Pitkin charged Southridge Capital Management LLC and its chief executive officer, Stephen M. Hicks, with defrauding investors in million of undeserved fees.
According to a filing in federal court in Connecticut Monday, the SEC alleged that Hicks overvalued the largest position held by funds managed by Southridge and Southridge Advisors LLC. The SEC also said he made material misrepresentations to investors and misused their money to pay legal and administrative expenses of other funds managed by Hicks and Southridge. Continue reading “Article: SEC Charges Conn. Hedge Manager With Fraud”
UPDATE 1-SEC, Connecticut charge fund manager with fraud
Jonathan Stempel, 25 October 2010
NEW YORK, Oct 25 (Reuters) – A Connecticut hedge fund firm was sued on Monday by U.S. and state regulators for allegedly inflating the value of its holdings, allowing it to fraudulently collect millions of dollars of undeserved fees.
Southridge Capital Management LLC and its Chief Executive Stephen Hicks, 52, were sued by the U.S. Securities and Exchange Commission and Connecticut Banking Commissioner Howard Pitkin over their management and financial reporting of several funds.
The SEC said Hicks falsely valued Southridge’s largest holding, speech recognition company Fonix Corp, at $30 million or more based almost entirely on a 2004 transaction in which Fonix bought two companies from an entity he controlled.
It also said Hicks raised $78.9 million over the 2004 to 2007 period after falsely promising investors that more than 75 percent of assets would be put in liquid investments or cash.
Connecticut alleged the overvaluing of fund assets allowed Ridgefield-based Southridge to fraudulently collect more than $26 million in fees from 2004 to 2007. Continue reading “Article: UPDATE 1-SEC, Connecticut charge fund manager with fraud”
Southridge Capital Management Founder Charged With Fraud Though He May Not Know It Yet
BESS LEVIN, 10 October 2010
This afternoon, Connecticut regulators accused investment adviser Southridge Capital and its chief executive Stephen Hicks of “preparing false financial statements” that “inflated the assets of five funds from 2004 through 2007 so that they could charge higher fees,” in an alleged scam that netted them an ill-gotten $26 million.
Additionally, many investors have apparently put in redemption requests as far back as 2001, though none of them have seen a dime. Attorney General said the firm told “lucrative lies” which hurt not only its clients “but also the entire economy.” How is Hicks taking the news? Is he ashamed and/or embarrassed? Is he defiantly calling the charges bogus, telling family and friends he’ll fight them? Is he proud of what he’s done and the alliterative prose he inspired in Blumenthal? Or does have no idea he’s been accused of anything, having only seen a bunch of missed calls on his phone?
SEC Brings Fraud Charges Against Another Hedge Fund
Stephen Taub, 25 October 2010
Another day, another hedge fund accused of wrong-doing by regulators.
The Securities and Exchange Commission Monday charged hedge fund manager Stephen M. Hicks and his investment advisory businesses with defrauding investors in funds managed by Southridge Capital Management LLC and Southridge Advisors LLC by overvaluing the largest position held by the funds. The SEC also alleges that Ridgefield, Ct.-based Hicks “made material misrepresentations” and misused investor money to pay legal and administrative expenses of other funds managed by Hicks and Southridge. Continue reading “Article: SEC Brings Fraud Charges Against Another Hedge Fund”
Rare Element Resources: Potential Short Opportunity
Shareholder Watchdog, 21 October 2010
We have witnessed a fair share of bubbles over the past 15 years: internet stocks, housing, crude oil, and Chinese stocks. We have had some success in identifying “bubbles” in individual stocks and warning the investment community about specific issues (including HUSA at $20.35 see here and PCBC at $5.11 see here). Continue reading “Article: Rare Element Resources: Potential Short Opportunity”
Bank of America: Bondholders’ Naked Play for a “Do-Over” on Mortgages
Marion Maneker
CBS, 20 October 2010
Yesterday’s Bank of America (BAC) bond scare was an interesting reminder of just how much of a mess the foreclosure crisis really is. It may not be the same kind of swoon we experienced two years ago, but the vulnerabilities created by the shoddy mortgage origination and servicing industry will probably haunt the financial system for years to come — like war reparations.
It took a while for the financial world to sort out the meaning of the letter PIMCO, Blackstone and the New York Federal Reserve Bank sent to Bank of America yesterday asking that $47 billion in bonds be “put back” to the bank because of deficient servicing by Countrywide, the Bank of America subsidiary that originated the loans. The markets and the journalistic community can be forgiven for over-reacting.
Field of Schemes: David Einhorn’s latest short
Richard Smith
NakedCapitalism, 15 October 2010
Einhorn is the famous Lehman short of 2008; he got a lot of flak from Clueless Charlie Gasparino for that. I seem to remember our own Lehman bear, Yves, getting snarled at by Charlie G somewhere along the line, too. But of course, Einhorn, via his vehicle Greenlight Capital, had it right; as did Yves (something that those decrying the “Yellow Journalism” of recent NC posts on “foreclosuregate” would do well to consider).
Edward Wyatt
New York Times, 9 October 2010
Sitting in a Minneapolis mansion and listening to a charismatic investment manager describe a currency trading system that kept earning handsome returns year after year, Arthur F. Schlobohm IV was certain he had stumbled onto a Ponzi scheme.
A longtime trader who started running tickets on the floor of the New York Stock Exchange as a teenager, Mr. Schlobohm, known as Ty, knew that Minneapolis, his home for nine years, was too small a town for a $4.4 billion investment fund to have escaped his notice.
Morgan Stanley Challenges “ETF Collapse” Theory
ETF, 24 September 2010
Matt Tagliani, head of European and Asian ETF product at Morgan Stanley in London, has challenged the theory of an ETF collapse caused by the lending and short sale of ETFs.
The theory, promulgated by Bogan Associates, LLC in a 15 September white paper entitled “Can an ETF Collapse?” was publicised in a subsequent FT Alphaville blog and then featured as the topic of a CNBC strategy session on Wednesday this week.
Naked Short Selling Banned By EU
Global Custodian, 15 September 2010
European Regulators have issued new rules aimed at controlling naked short selling and derivatives trading. Naked short selling, where the investor sells shares short without confirming the availability of the stock, has been banned.
Investors will also be forced to disclose their short position in a firm to regulators if it exceeds 0.2%, and to the market as a whole if it crosses 0.5%. Investors will have to disclose short positions on sovereign bonds, even if the position was obtained using credit default swaps.
The ban on naked short selling by the European Commission will be enforced from July 2012 after approval from the European Parliament. Previously, the seller did not have to prove their ability to obtain the stock. According to todays proposal, in order to “to enter a short sale an investor must have borrowed the instruments concerned, entered into an agreement to borrow them, or have an arrangement with a third party to locate and reserve them for lending so that they are delivered by the settlement date [at the latest 4 days after the transaction].” Continue reading “Article: Naked Short Selling Banned By EU”
Chinese coal company’s share placement produces interesting collection of investors
Chris Carey
sharesleuth, 13 September 2010
Sharesleuth took a closer look at the registration statement covering the resale of those shares, and found that no fewer than eight people who participated in the placement have been the subject of Securities and Exchange Commission actions or criminal prosecutions.
The list includes at least four people who were directly or indirectly linked to stock-manipulation schemes. Several other investors were previously involved in a small cluster of U.S. companies whose placements were manipulated by a ring of boiler room brokerages in the 1990s.
Alisa Greenstein, Hedge Fund Law Report, 27 August 2010
On August 9, 2010, the United States District Court for the Southern District of New York (Southern District) effectively ended the decade-long litigation between Internet Law Library, Inc. (INL), its executives and several of its shareholders, and Southridge Capital Management, LLC (Southridge), its principals and affiliates, including hedge fund Cootes Drive, LLC, and its broker, Thomson Kernaghan & Co., Ltd. (TK & Co.). The litigation arose out of a “floorless” or “toxic” convertible securities purchase agreement between INL and Cootes Drive.
The agreement allowed Cootes Drive to demand conversion of its INL preferred stock into common stock based on a floating conversion ratio tied to the common stock’s market price, and obligated Cootes Drive to float a $25 million line of equity, so long as INL common stock remained priced above a certain level. This arrangement arguably provided Cootes Drive and its affiliates with an incentive to aggressively short-sell INL common stock, because the further they decreased its price, the more common stock Cootes Drive could obtain on conversion (which it could use to cover its short positions and profit from the difference), and because that decrease would eliminate its obligation to provide a line of equity. The agreement proved disastrous for INL, just as it has for many other companies with similar financing arrangements. Continue reading “Article: Manhattan District Court Writes Final Chapter in Litigation Between Internet Law Library and Hedge Fund Adviser Southridge Capital Management; Orders Tech Firm to Pay Adviser Almost $1.2 Million in Attorney’s Fees on Top of Damages”
Naked Shorting Will Cause U.S. Exchange Exodus
Bud Burrell
Financial Wire, 5 August 2010
This week, an important online news service released an article that should send shockwaves into our public markets. In very curt form, the article chronicles the many abuses of U.S. public companies by short selling manipulators, particularly through naked short selling and regular and derivative based synthetic shorting. By implication, the article recites the sheer embarrassing ineffectiveness of our regulators, who are engaged in a pattern of systematic conflicts of interest with revolving doors that are a major disgrace to our own government.
Matt Taibbi
Rolling Stone, 4 August 2010
Cue the credits: the era of financial thuggery is officially over. Three hellish years of panic, all done and gone – the mass bankruptcies, midnight bailouts, shotgun mergers of dying megabanks, high-stakes SEC investigations, all capped by a legislative orgy in which industry lobbyists hurled more than $600 million at Congress. It all supposedly came to an end one Wednesday morning a few weeks back, when President Obama, flanked by hundreds of party flacks and congressional bigwigs, stepped up to the lectern at an extravagant ceremony to sign into law his sweeping new bill to clean up Wall Street.
THE DOLLAR HAS NO INTRINSIC VALUE : DO YOUR ASSETS?
