Article: GameStop hearing targets stock lending, social media

Article - Media, Publications

GameStop hearing targets stock lending, social media

Michael Shaw, 23 March 2021

Two issues emerged from a congressional hearing on the volatile trading of GameStop Corp. shares: Lawmakers and regulators need a greater understanding of how technology helped foster the frenzy, and regulators need systems to understand such events — and possibly to manage them.

House Financial Services members and witnesses spent most of their time at the hearing last week focusing on the role of short-selling in the GameStop trading frenzy in January. They specifically looked at the source of securities used to take short positions, and they looked at how a bunch of retail investors seemingly were able to outmaneuver the professionals. Continue reading “Article: GameStop hearing targets stock lending, social media”

Article: JP Morgan Chase, Bernie Madoff’s $64.8 Billion Ponzi Scheme and Crime on Wall Street

Article - Media, Publications

JP Morgan Chase, Bernie Madoff’s $64.8 Billion Ponzi Scheme and Crime on Wall Street

Dennis M. Kelleher, 06 December 2017

As the headlines have made clear for years, JP Morgan Chase has a long rap sheet of illegal conduct and, although overlooked, it includes enabling Bernie Madoff’s $64.8 billion Ponzi scheme, the largest in history, which caused net losses of more than $17 billion and untold human wreckage.

Six years ago on December 11, 2008, federal agents arrested Madoff, the ringleader of the Ponzi scheme — as a coda to an age of regulator and prosecutorial incompetence and neglect, Madoff was not caught; he was arrested after turning himself in. This happened in the middle of the largest financial crash since 1929, when the country’s economy was collapsing and when a second Great Depression was a very real possibility. Although not responsible for the crash and collapse, Madoff in handcuffs was in some ways the face of Wall Street greed and criminality.

However, that is a false and misleading picture of crime on Wall Street.

After all, how could this one guy possibly pull off such a crime and at that scale and for so long? He couldn’t have and didn’t. Like most substantial illegal and criminal financial activities, Madoff had a very close relationship with a big Wall Street bank: JP Morgan Chase, the country’s largest bank. Given the focus on the crash and economic calamity in 2008 and JP Morgan Chase’s years-long efforts to prevent any information from being publicly disclosed, JP Morgan’s role in enabling this massive crime wasn’t publicly known for years.

That veil of secrecy ended when a compliant was filed by a court appointed trustee to recover funds for the thousands of injured investors, as summarized in this article: “Trustee: JP Morgan Abetted Madoff.“ In the complaint, the trustees alleged that JP Morgan Chase “was at the very center of the fraud, and thoroughly complicit in it.” JP Morgan Chase, the complaint stated, “turned a blind eye to” Madoff’s fraud.”

Madoff’s decades long fraudulent scheme resulted in the loss of “$64.8 billion in paper wealth and at least $17.5 billion in cash losses.“ The second, third and fourth largest Ponzi scheme losses in history collectively only amounted to 60% of what Madoff stole. While this was happening, JP Morgan made hundreds of millions of dollars from “servicing” Madoff’s accounts and saved itself another $276 million invested with Madoff by remarkably well-timed withdrawals, conveniently just before the scheme was revealed. All of this is documented in the complaint.

Moreover, there is clear information that JP Morgan Chase, including senior officials in compliance and elsewhere, knew about the Ponzi scheme long before Madoff decided to turn himself in. In fact, it appears that JP Morgan Chase “ignored red flags for about 15 years“ that Madoff used JP Morgan Chase accounts to run his fraudulent scheme. Just one egregious example: the complaint quotes (p. 31+) from a June 15, 2007 email from John Hogan, Chief Risk Officer, Investment Bank, JP Morgan Chase to Matt Zames, a senior executive and head of several business lines, stating:

“For whatever its worth, I am sitting at lunch with Matt Zames who just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a [P]onzi scheme….”

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Article: Steve Cohen: The Feds Get Tough, Sort Of

Article - Media, Publications

Steve Cohen: The Feds Get Tough, Sort Of

MATT TAIBBI, 01 August 2013

He’s Wall Street’s ultimate comic-book villain – with his glowing bald head and marble eyes, he looks a little like Lex Luthor. But maybe the best comparison for famed hedge-fund shark and long-suspected insider-trading ringleader Steve Cohen is the Joker. Earlier this year, when the SEC extracted $616 million from Cohen’s fund in two regulatory settlements, he expressed his deep remorse by buying, within weeks, a $155 million Picasso and a $60 million beach house in the Hamptons, right down the road from his other Hamptons beach house, worth $18 million.

It was a big fat middle finger to the government, flipped by a man who clearly thought he was getting away with a slap on the wrist, the way every other brazen Wall Street crook in the past half-decade has done so far. Continue reading “Article: Steve Cohen: The Feds Get Tough, Sort Of”

Article: In Pursuit of the Naked Short by Alexis Stokes

Article - Academic

In Pursuit of the Naked Short

Alexis Stokes, Texas State University

Journal of Law and Business 5/1 (Spring 2009)

This article explores the origins of naked short-selling litigation; considers
the failures of significant naked short-selling lawsuits in federal court;
surveys the obstacles erected collectively by constitutional standing requirements, the Federal Rules of Civil Procedure, the Private Securities Litigation Reform Act, brokerage firms, death spiral financiers, and the Depository Trust and Clearing Corporation; examines the efficacy of Regulation SHO, SEC rule 10b-21, and new FINRA rules; discusses recent state legislation and state court litigation; and identifies non-litigation options to curb naked short-selling. Ultimately, this article seeks to answer the question: If manipulative naked short-selling is more than a mythological scapegoat for
small cap failure, what remedies are, or should be, available?

PDF (62 Pages): Article In Pursuit of the Naked Short

Article: Naked Truth Dressed to Baffle

Article - Media

Naked Truth Dressed to Baffle

Kevin Kelleher

TheStreet, 29 August 2005

It all started when the company completed a 350-to-1 reverse stock split — an unusual step in itself, but one that paled alongside what came next. With 5.43 million shares outstanding and a float of 1.15 million shares, Global Links saw trading volume of 143.5 million shares in the first four sessions of February, driving the stock as low as 8/100ths of a penny.

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