Article: Refco – When Smart Money Isn’t So Smart

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Refco: When Smart Money Isn’t So Smart

Matthew Goldstein

Bloomberg, 16 July 2007

The titans of the private equity world fancy themselves smarter, shrewder, and more sophisticated than any one else on Wall Street. Investors have bought into the sentiment as they’ve scooped up the shares of the private equity firms that have gone public recently: Blackstone Group (BX) and Fortress Investment Group (FIG). But a recent report on the spectacular collapse of Refco—the once-dominant commodities broker that was laid waste by a massive accounting fraud—paints an unflattering portrait of the private equity firm that engineered Refco’s August, 2004, leveraged buyout and its initial public offering a year later (see, 7/11/07, “Kill the Private-Equity Tax Break”).

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FindLaw,  11 July 2007

ATSI COMMUNICATIONS, INC., a Delaware Corporation, Plaintiff-Appellant, v. The SHAAR FUND, LTD., Shaar Advisory Services, N.V., RGC International Investors, LDC, Rose Glen Capital Management, L.P., Corporate Capital Management, InterCaribbean Services Ltd., Citco Fund Svcs., Luc Hollman, Sam Levinson, Hugo Van Neutegem, Declan Quilligan, Wayne Bloch, Gary Kaminsky, Steve Katznelson, Trimark Securities, Inc., Levinson Capital Management, and W.J. Langeveld, Defendants-Appellees,

Marshall Capital Services, LLC., Jesup & Lamont Structured Finance Group, MG Security Group, Inc., Crown Capital Corporation, John Does 1-50, Kenneth E. Gardiner, Nathan Lihon, and Sei Investment Co., Defendants. ATSI Communications, Inc., a Nevada Corporation, Plaintiff-Appellant, v. Uri Wolfson, Defendant-Appellee, Sam Levinson, Defendant.

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Article: SEC moves to close loopholes in short-selling rule

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SEC moves to close loopholes in short-selling rule

James Langton

Investment Executive, 14 June 2007

The U.S. Securities and Exchange Commission has voted to take additional steps that it believes will close loopholes in its short-selling rule, Regulation SHO, further reducing persistent failures to deliver stock within the standard settlement period.

The SEC voted to adopt final amendments to its rules that, it says, will further reduce fails to deliver in certain equity securities. Regulation SHO, which became fully effective in January 2005, provides a regulatory framework governing short sales of securities.

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Web: Counterfeiting Stock (Primer)


Counterfeiting Stock

Illegal naked shorting and stock manipulation are two of Wall Street’s deep, dark secrets. These practices have been around for decades and have resulted in trillions of dollars being fleeced from the American public by Wall Street. In the process, many emerging companies have been put out of business. This report will explain the magnitude of this problem, how it happens, why it has been covered up and how short sellers attack a company. It will also show how all of the participants; the short hedge funds, the prime brokers and the Depository Trust Clearing Corp. (DTCC) — make unconscionable profits while the fleecing of the small American investor continues unabated.

Who Profits from this Illicit Activity?

The short answer is everyone who participates. Specifically:

  1. The shorts — They win over ninety percent of the time. Their return on investment is enormous because they don’t put any capital up when they sell short — they get cash from the sale delivered to their account. As long as the stock price remains under their short sale price, it is all profit on no investment.
  2. The prime brokers — The shorts need the prime brokers to aid in counterfeiting shares, which is the cornerstone of the fraud. Not only do the prime brokers get sales commissions and interest on margin accounts, they charge the shorts “interest” on borrowed shares. This can be as high as five percent per week. The prime brokers allegedly make eight to ten billion dollars a year from their short stock lend program. The prime brokers also actively short the victim companies, making large trading profits.
  3. The DTC — A significant amount of the counterfeiting occurs at the DTC level. They charge the shorts “interest” on borrowed shares, whether it is a legitimate stock borrow or counterfeit shares, as is the case in a vast majority of shares of a company under attack. The amount of profit that the DTC receives is unknown because it is a private company owned by the prime brokers

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PDF (14 Pages): Counterfeiting Stock (Primer)

Article: Overstock attempts to uncover malicious naked shorts

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Overstock attempts to uncover malicious naked shorts

Keith Hahn

Dealbreaker, 25 April 2007

Patrick Byrne, the CEO of, is seeking $3.5bn in damages from 10 prime brokers for intentionally manipulating Overstock’s share price through naked shorting. The big names charged are Bear Stearns, Citigroup, Credit Suisse, Goldman Sachs, Merrill Lynch, and Morgan Stanley.

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Article: SEC seen shy on naked shorting

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SEC seen shy on naked shorting

Bloomberg, 23 April 2007

Critics of short-selling practices they deem abusive are up in arms over what they say is continued inaction by the Securities and Exchange Commission.
They say that the SEC delayed long-overdue reforms last month when it asked for more comments on proposals to tighten up exemptions to a rule intended to curb illegal “naked” short selling.

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Article: Bloomberg TV’s Special Report “Phantom Shares” (later nominated for an Emmy for Investigative Journalism)

Article - Media, Publications

Bloomberg TV’s Special Report “Phantom Shares” (later nominated for an Emmy for Investigative Journalism)

PATRICK BYRNE, 05 April 2007

Bloomberg Television has produced a shocking 25 minute exposé showing how Wall Street rogues are exploiting a crack in the system to steal tens of billions of dollars from Americans. The Bloomberg piece starts by talking about Overstock (I make a brief appearance, as a guy just trying to be a good citizen), but goes on to describe a wildly illegal scheme that hurts thousands of companies and millions of Americans with stock accounts. This may turn into a financial scandal that makes Enron look like a Sunday picnic.

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Article: Cramer controversy: Did he manipulate market?

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Cramer controversy: Did he manipulate market?

Daniel Pannone, The Signal, 26 March 2007

When I wrote the story about Jim Cramer two weeks ago, I had the feeling that it would not be the last time I mentioned him. However, I’m surprised how quickly Cramer provided me with controversy to criticize.

Cramer has recently gotten himself into trouble after he made comments that could be construed as a discussion of stock and market manipulation on a Wall Street Confidential video segment from

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Article: Cramer vs. Cramer

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Cramer vs. Cramer

Henry Blodget, Slate, 22 March 2007

Jim Cramer and I had a bit of a tiff a few weeks ago, so some readers might view this column as just another round in that fight. Others might see it as the pot calling the kettle black, orschadenfreude. Think what you will—but as the author of a column about bad investment advice, I feel compelled to comment on what just might qualify as the worst financial counsel ever offered.

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Article: Jim Cramer Admits To Stock Manipulation When At Hedge Fund

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Jim Cramer Admits To Stock Manipulation When At Hedge Fund

Philip David, Seeking Alpha, 21 March 2007

My thanks to Trader Mike, who wrote a nice article on a subject we had been discussing all weekend on the member site as all the market manipulation of the past two days made me forget to talk about the evidence of market manipulation we uncovered last week.

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Article: Cramer bragged of manipulating stock prices

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Cramer bragged of manipulating stock prices

In an interview for a financial website, Jim Cramer, the extroverted host of CNBC’s “Mad Money,” boasted about manipulatin Cramer g stock prices when he was a Wall Street trader.

In a webcast on that has been widely viewed on YouTube, Mr. Cramer spoke about bringing down the prices of a high-flying stock and admitted that his actions might have been illegal.
“A lot of times when I was short, I would create a level of activity beforehand that would drive the futures. . . . It’s a fun game,” he said in the interview with’s executive editor Aaron Task.

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