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

Web: Jim Cramer Called Onto The Carpet By Jon Stewart

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Jim Cramer Called Onto The Carpet By Jon Stewart

Bob O’Brien

Sanity Check via Wayback, 13 March 2009

Everyone needs to watch these three segments of the Jon Stewart show. They are remarkable, because they show an intelligent, reasoned man confronting the intellectual dishonesty, if not larceny, that is financial reporting in America.

What makes them so remarkable is that Stewart is not a top economist, nor a seasoned DA, nor an expert on financial markets, nor a skilled attorney. He’s a comedian. He makes funny remarks about things, and mocks the world, and is generally hysterically funny in his efforts.

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Web: Random Musings On The End Of The American Experiment

Web

Random Musings On The End Of The American Experiment

Bob O’Brien

Sanity Check via Wayback, 6 March 2009

I think the defining moment for me was when Bernanke responded to the question from Congress, as to whether the American people (and their elected representatives in Congress) would be told to whom all their tax dollars have been given or lent. That single word summed it up perfectly for me: “No.”

Any illusions that the money trust in the US, that collection of bankers and hedge fund managers and industrialists who are the beneficiaries of the systematic looting of the Treasury under the current “emergency” measures, is going to do anything other than precisely whatever it likes, or is going to report to those being looted, was dispelled at that moment. Likewise, nobody has been able to articulate why the massive swindle at AIG continues to be subsidized by our tax dollars – but again, no reporting on where those dollars are going will be forthcoming.

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Web: Remember How Naked Short Selling Wasn’t a Big Deal?

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Remember How Naked Short Selling Wasn’t a Big Deal?

Bob O’Brien

Sanity Check via Wayback, 28 January 2009

Bernie Madoff’s brokerage owed $600 million in stock to its clients, that it, well, didn’t actually have on hand, as in the shares were either never delivered to the brokerage, or far more likely, it just, “Desked the trades” – meaning that it took the client cash, represented the securities as having been bought in the market and delivered (via the brokerage statement the client got every month), but never bothered with buying the shares.

Also known as one type of naked short selling.

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Web: Merrill Pays $15 Billion in Compensation After Taking $10 Billion in TARP Funds

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Merrill Pays $15 Billion in Compensation After Taking $10 Billion in TARP Funds

Bob O’Brien

Sanity Check via Wayback, 23 January 2009

After all, the logic, or rather the gun to the head of the taxpayer by Hank Paulson, was that the economy would vaporize if we didn’t take taxpayer money and give it to Wall Street banks and insurance companies, to, er, lend, or to relieve them of the burden of having to carry the toxic paper they created on their books any longer.

At the time, I said that was clearly a lie, and all this would be is a redistribution from the Treasury, to the Wall Street buddies of Paulson’s who got us into the mess in the first place.

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Web: Goldman Sachs and Madoff – Mr. Paulson Shocked To Learn There’s Gambling Going On In There!!!

Web

Goldman Sachs and Madoff – Mr. Paulson Shocked To Learn There’s Gambling Going On In There!!!

Bob O’Brien

Sanity Check via Wayback, 11 January 2009

Apparently, Goldman knew that Madoff was a fraud almost a decade ago. As this article in the Telegraph points out, there was a company-wide ban against doing anything with his firm after they did diligence on him:
“More than a decade ago bankers from Goldman Sachs’ asset management division were despatched to Bernard Madoff Investment Securities to discover how the legendary fund manager maintained such consistently good returns.

The American banking giant prided itself on managing funds in-house but if it could get a better deal for its clients at Madoff, Goldman would gracefully admit it and allocate some funds.

One former Goldman partner said: “I remember the guys came back baffled. Madoff refused to let them do any due diligence on the funds and when they asked about the firm’s investment strategy they couldn’t understand it. Goldman not only black-listed Madoff in the asset management division but banned the brokering side from trading with the firm too.”

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Web: Will the Justice Department and the SEC Go After Blatantly Illegal RICO Activity by the Nation’s Most Prominent Hedge Funds?

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Will the Justice Department and the SEC Go After Blatantly Illegal RICO Activity by the Nation’s Most Prominent Hedge Funds?

Bob O’Brien

Sanity Check via Wayback, 3 January 2009

Apparently hedge funds like Kynikos, and SAC, have a secret for their outsize performance.

Racketeering, and illegal frontrunning, if my read is correct.

That’s the only conclusion one can draw from the stunningly simple and obvious analysis of email records that Judd Bagley, over at the Deepcapture site, has compiled.

You have Jim Chanos, who is all over the airwaves as the advocate and public face of the hedge fund world, who argues against any and all regulation or oversight for hedge funds or short sellers, apparently actively frontrunning information illegally obtained from stock analysts, who eagerly shared their analysis and spreadsheets with him in advance of publishing negative smear pieces subsequently shown by time to have been nothing more than hatchet jobs.

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Web: SEC Allows Deci-Billion Dollar Ponzi Scheme to Run For Years

Web

SEC Allows Deci-Billion Dollar Ponzi Scheme to Run For Years

Bob O’Brien

Sanity Check via Wayback, 16  December 2008

So, you have these cops, see? They patrol the neighborhood where all the cocaine gets sold, and yet for all their hard work, the coke problem spirals out of control. Many, when they choose to leave the force, get massive pay increases by going to work for some of the private security firms long linked to the coke dealers. They will occasionally bust small time dealers, or new entrants into the market, however the very visible kingpins in the neighborhood, who drive Bentleys and have their own planes, never get looked at. In fact, should anyone suggest that a Colombian with a 4th grade education not be a legitimate multi-million dollar business owner, they will get investigated. The town’s awash with coke and coke profits, but according to the cops, nobody knows where it all comes from, who is trafficking in it, or anyone that’s dirty. Everyone is mystified by the coke deluge.

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Web: The SEC May Be The Country’s Worst Enemy

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The SEC May Be The Country’s Worst Enemy

Bob O’Brien

Sanity Check via Wayback, 19 September 2008

Government has now, with the stroke of a pen, altered the way the markets work. Which again, is fine, if short selling goes the way of the buggy whip, for good. But that is unlikely. So what it has done is prepare the stage for volatility unlike any seen in the markets ever before. Wildly high highs, to be followed by devastating lows.

I’m not so concerned about the wildly high highs. It’s when the rule expires that I have a problem with. And it is the absence of coherence in the reasoning that I have a huge problem with.

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