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Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines

Location: Blogs Bob O'Brien's Sanity Check Blog    
Posted by:   bobo 4/11/2006 11:00 PM

Notorious hedge fund operator and short seller, and currently one of the defendants in the OSTK lawsuit, abruptly announced plans to retire today. No explanation was cited.

Better stay in the country. Call it a hunch.

In other news, Electronic Trading Group LLC sued 11 of the largest brokers on Wall Street for naked short selling.

You know, the practice that Dr. Byrne and I and David Patch and Bud Burrell and Mark Faulk have been banging on at this website for some time, and that NCANS was formed to highlight last January?

The practice that we were vilified and mocked for stating was an issue that was widespread? That was denied by Wall Street as even existing, and then when proof surfaced that it exists, that it wasn't a problem?

Tut tut. Apparently it does exist, and is significant enough for a massive class action suit against the blue chip names on Wall Street.

Huh.

Want to bet that companies like NFI, where there is hard evidence of massive FTDs from 2004, 2005 and 2006, are also drivers of large class action suits - the damages being lost market cap (for the companies), and lost profits (for investors)? Because if the practice of creating huge supply of stock is one that is a Wall Street trick, then Wall Street is liable for the damage it does.

Yikes. This is going to be as ugly as anything you can think of. Hedge funds engaging in the abusive practice will be sued, and brokers doing it will be sued.

And the SEC issued its guidelines for issuing subpoenas to reporters. Appears that they followed the major ones in the Cramer, Herb, Remond, Thestreet.com instances, thus those fine folks are SOL.

I go on vacation for a week and all hell breaks loose.

Wonder how large the ex-clearing problem I have been saying is much, much larger than the FTD problem actually is? So far, that is the only way to clear large FTD positions that I can think of without causing the price of the security to rise - wanna bet that when companies like NFI or OSTK drop off the SHO list, it will be discovered that it is because the massive naked positions were just shifted elsewhere and called something else?

Stay tuned for that shoe to drop.

Unless, as I theorized earlier, that the suit is a PR sham that will be easily dismissed, thus "proving" that no problem exists, and painting the hedge funds as victims...
Copyright ©2006 Bob O'Brien
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Comments (39)
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By InTheKnow on 4/12/2006 5:49 PM
My friend has 55,000 JAGH in his accuont and the letter for his proxy vote says he has 15,000 shares to vote!

WTFF? Business as usual... not for long!
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By n-tres-ted on 4/12/2006 5:58 PM
Uh oh. Things are beginning to pop. Bobo, I notice your first two links are the same; both link to the suit against brokers. Thanks for the post. Just got back from a little vacation trip myself.
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By cynabear on 4/13/2006 4:07 PM

Got the following from the Yahoo MB...supposedly from DR's letter to friends, clients and staff....can anyone verify?
"I will be freer to pursue more actively and creatively the philanthropic and civic issues which are meaningful to me, including the rising threat to free expression in the investment business," Mr. Rocker wrote in that letter, part of which was read to a reporter over the phone by a Rocker Partners client.
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By InTheKnow on 4/13/2006 4:15 PM
Sounds Milkenish!
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By yoda on 4/13/2006 4:37 PM
cynabear

It is from a WSJ article about Rocker...

Short Seller Rocker
Plans to Retire
From Fund in '07

By KAREN RICHARDSON
April 14, 2006


"the rising threat to free expression in the investment business"

Looks to me like Cox supplies the rules and Rocker supplies the lawyers. I call it fraud, but it look like Wall St. callls it "philanthropic and civic issues which are meaningful to me."
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By piddly_sum on 4/13/2006 4:44 PM
Anybody else notice this: the six companies continuously longest on the SHO lists and still trading more than a few bucks (GLBC, KKD, MSO, ABLE, OSTK, MDTL) were all up today, with an average gain of 3.1%?

The snowball is gaining momentum, keep up the great work!
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By bobo on 4/13/2006 5:09 PM
There's a cool poll going on at CNBC which is trying to get feedback for the sentiment as to whether the poor short sellers are getting blamed too much for poor stock performance. I voted no. You should cast your vote as well.


http://moneycentral.msn.com/content/CNBCTV/Promos/P149620.asp
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By bobo on 4/13/2006 5:11 PM
I guess Rocker's important work to combat the threat to free expression in the investment business doesn't include filing SLAPP suits against his critics, which subsequenly get laughed out of court. Does anyone believe this self-righteous horse-poop?
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By cynabear on 4/13/2006 6:08 PM
ok...now the disgusting statements by DR have been veriified i think i'll start LMAO before I go get sick........
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By cynabear on 4/13/2006 6:08 PM
ok...now the disgusting statements by DR have been veriified i think i'll start LMAO before I go get sick........
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By blackbart on 4/13/2006 8:51 PM
SEC Cox's NEW MOTTO! Mankind is divided into rich and poor, into property owners and exploited; and to abstract oneself from this fundamental division ;and from the antagonism between poor and rich means abstracting oneself from fundamental facts.
Joseph Stalin
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By Oink Oink on 4/14/2006 3:19 AM
PORK

The report, released April 4, was the 16th annual exposé of what the group calls “the most glaring and irresponsible pork-barrel projects” in congressional appropriations bills.

The number of pork-barrel projects approved by Congress last year dropped by 29 percent, but the dollar level increased from $27.3 billion last year to $29 billion for fiscal 2006. The new report and database offer 9,963 examples of what the group calls wasteful federal spending, searchable by state.

CAGW defines pork as a line item in a federal appropriations bill that designates U.S. tax dollars for a local project “in circumvention of established congressional budget procedures.” Typically, pork-barrel projects are not competitively awarded or requested by the president, and are not the subject of congressional hearings, CAGW said.

Alabama, represented on the committee by Sen. Richard Shelby (R), received more than $100 million for a variety of education-related projects, including $250,000 for Girls Inc. of Alabama, described as “a national nonprofit youth organization dedicated to inspiring all girls to be strong, smart, and bold.” With more than $14 million in existing funding, CAGW quipped that “Girls Inc. is strong enough not to need a federal handout, but smart and bold enough to ask for and accept one."

http://www.stateline.org/live/ViewPage.action?siteNodeId=136&languageId=1&contentId=102284
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By Cash Cow on 4/14/2006 3:37 AM
In the first quarter, revenue grew in all six of G.E.'s businesses and profit was up in all areas except at NBC.

Isn't GE selling off some of it's businesses?
Anybody wonder why they don't sell off NBC.
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By mhelburn on 4/14/2006 6:55 AM
My understanding of the marketmaker exemption is that it can be extended past the touted deadline. I believe that the exemption is being abused and the number of fails so great, the extentions are probably not being sought and instead the primes are simply kiting shares. They could have something in place that gives them the automatic extension when their exemption is timed out. This would be another loophole that would completely invalidate any suit against the brokers for naked shorting. The suit, on the surface, looks absolutely valid and the brokers appear to be committing fraud, but the purported losses can only be rationally attributed to people who are lending shares and not getting the higher borrow fees that the brokerages are pocketing.
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By bbhindyou on 4/14/2006 8:09 AM
Easterbunny where are you? I really need you now.I need to laugh a little while before the crying begins. A classic comic tragedy now is the time to laugh as all the players scramble about trying to be the innocent bystander now that the dues have come.the tragedy is that we have paid for this show before and it cost us as a country our collective asses as well as in many cases a arm and a leg.A few paid even more .The guy jumping out of a window in a market crash ,why is that a familliar american image related to the stock market? Well bunny where are you ?I need to laugh I paid for the show .Before I have to start that long crawl through the lobby with the rest of the patrons of this establishment who like me have paid the pounds of flesh this show requires.Some day I will be sitting on my grand kids porch tring to bum a bed and dinner talking about how it would have been had there been a free market system, again, and they will roll their eves and say 'here it comes again how grandma and grandpa lost their asses and a arm and a leg to naked short selling'.But they will forget and their kids will probably buy tickets to see the show.I hope they have a Easter bunny at least a few laughs with the tragedy.Easter bunny where are you?
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By happyswede on 4/12/2006 6:40 PM
Bobo,

Get your ass back off vacation A.S.A.P.! There is too much breaking news,

Then NFI releases a great March production report to top it all off!

Should be an interesting in the market tomorrow.

Regards,

Tom
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By Wonder Boy on 4/12/2006 6:42 PM
New SEC Regulations concerning the 'media' at http://www.sec.gov/news/press/2006/2006-55.htm

The Government doesn't negotiate with terrorists to save lives, but COX will negotiate with the attorneys of the media to save their butts! Much of the media look like terrorists to me. Sheeesh.
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By bobo on 4/12/2006 7:13 PM
So the naked short selling story is gaining traction - this is likely just the first of these types of suits.

Rocker retires - I don't blame him. Still culpable for all actions in his offshore and domestic funds for years 2004-2006.

I wonder how well he knows Marc Rich - another Steinhardt buddy. He decided to stay living abroad.

And the SEC basically decides that if you carry a press card you can do whatever the hell you want and never have to say you're sorry. Just get lawyered up and play Milken with them - everything is negotiable.

Sort of sickening.
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By financial_circus on 4/12/2006 7:18 PM
New WSJ online twisted story: http://users2.wsj.com/lmda/do/checkLogin?mg=wsj-users2&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB114489334762224801.html%3Fmod%3Dyahoo_hs%26ru%3Dyahoo Can anyone post?
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By Jeff Mitchell on 4/12/2006 7:24 PM
Given the high cost of legitimate shorting (as highlighted recently by Mark Cuban from the pov of an investor, and as per the ETG lawsuit from the pov of hedge funds), my prediction is that the end result will be the SEC will make it much easier and much less expensive in the future to legitimately short stocks. I'm scratching my head wondering if this outcome will be considered a victory, a draw, or a loss for the folks who frequent this blog.

- Jeff
I can't finda anything on ELECTRONIC TRADING GROUP, ANYWHERE By Who is ELECTRONIC TRADING GROUP????????????? on 4/12/2006 7:24 PM
Ok, should I get paranoid. I ran a D&B on ELECTRONIC TRADING GROUP
in New Jersey and it came up with Nothing.

Who are these guys?
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By hoagx on 4/12/2006 7:28 PM
I'm all shits and grins!!! Keep spreading the word! Great job guys!!!!!!
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By Niel Storts on 4/12/2006 7:29 PM
Ol' davy will be retiring to "D" block. Personally, I think the twit just found that his paranoia was working overtime with the exposure. This is good though.
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By rtway1 on 4/12/2006 8:02 PM
I still smell a bad odor every time that guy Cox talks. He still speaks the language of politician, where he spends a lot of time saying nothing. I hope Charlie Gasparino turns up the heat by just being a good reporter and honest, and I think he is both. I wish I could be a fly on the wall at Becky and Joe,s coffee room tommorrow a.m. The next big question will be if they drag out knob job Herbie to announce the retirement of his mentor(gag, puke,). Will GW,s book be recycled for third world country toilet paper. I think they would know the difference. If nothing else it should get interesting and the bunny has a lot to celebrate. Have one for me.
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By bobo on 4/12/2006 8:05 PM
Golly, Jeff, you mean those annoying securities laws passed after the crashes of 29 and 32 are making short selling too pricey to do on a massive, price impacting manner? Huh. My prediction is that once all facts are known, my take on the systemic crisis scope of this will have been found to have been conservative, and that between all the loopholes that exist currently (offshore clearing firms, market maker exemptions, ex-clearing, kiting, short parking, etc.) the system will be faced with either acknowledging that it has allowed a legitimate mechanism to bet against a stock's rise become the single greatest mechanism for outright theft and market manipulation since junk bonds and deregulation of the thrift industry.

So far the data is supporting my view. I like my odds of being right. We have gone from a world where a cuban could whine that there was no naked short selling to speak of a year ago, to where brokers are being sued over the issue and we have FOIAs showing 40+% of a stock's daily volume being bogus shares.

How much worse does it have to get for those greedy parasites who are benefitting from the rules beign violated to understand that they have killed the host? Want to discuss why several generations of Americans kept their money out of the markets in the past?

The cost of shorting a stock has nothing to do with the SEC. The brokers set the premium. The SEC's job is to enforce the 1934 Securities Exchange Act, not to figure out how to make several hundred pasty-faced scumbags in NJ and CT more money. Oh, and did I mention that more money is likely being laundered via hedge funds and naked short selling than anyone can even imagine?

Jeff. Quit while you are behind. You seem bright. You know where this is going. The subpoenas will show a network of Milken-Boesky-Levine proportions, where a group of arrogant financial filth have stolen billions by manipulating stocks. There will be many familiar names - old habits die hard. The brokers will be shown to have been complicit. And there will be redress.

Call it one of my hunches.
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By TheresASpyInTheHouse on 4/12/2006 8:18 PM
Bob:

You keep worrything that the class action is a sham that will be dismissed. Here's the thing-- how often do you see ONE class action suit filed against a company now-a-days? I'd expect three more by the end of the week.. They will then all be consolidated and only one firm will get the job of representing everyone-- not nesessarily any colluding firm, if there is one.
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By old duffer on 4/12/2006 8:22 PM
Anyone guess how high the corruption trail will lead before the master of the universe is forced to display the fact he is our new dictator...like it or not?
Electronic Trading Group, LLC is not a hedge fund By other_opinions on 4/12/2006 8:30 PM
Ok, I did some digging on Electronic Trading Group, LLC.

Robert Kanter http://www.robertkanter.com/ founded Electronic Trading Group, LLC in 1992 as electronic trading was beginning to take off.

At the end of 2003, he was bought out by the Jeffrey Meister, the CEO.

The Kanter 2003 and earlier SEC filings are at

http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001113056&owner=include

I've not had time to go through them yet.

The post Kanter filings are at

http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000932532&owner=include

and are all paper filings, so there is little information there.

Their website was at

http://www.etgtrade.com

but that just has a link saying they have been purchased by the Schonfeld Group ( http://schonfeld.com/ ). That was announced on October 24, 2005. See

http://www.wstonline.com/news/investment/showArticle.jhtml?articleID=172303897

The best history of ETG that I could find is copied below from a Google cache of http://www.pairstrader.com/site/65/default.aspx as retrieved on Mar 30, 2006 19:33:30 GMT according to Google. Pairstrade.com is unresponsive to me tonight. That description does not include the October purchase by Schonfeld. However, from that description (copied from Google cache below), it appears that ETG provided services for day traders, hedge funds and other active traders. Presumably, they used the entities they are suing for back office service.

A working theory is that the pressure bobo, Byrne, Biovail and other have applied has led to hedge funds concern about their exposure. Many of them had used ETG for placing some of their short sales. Perhaps the funds tried to unwind some positions or perhaps the funds just got concerned by the noise and began to question ETG. ETG talked to the big boys and found out they were screwed.

I imagine that revelation was very much like Inspector's Renault's revelation in Casa Blanca when he was "Shocked! Shocked!" to find out that gambling was going on at Ricks. Whatever the case, the hedge funds threatened to come after ETG. ETG via Schonfeld was likely not the ony one they used or the only one they threatened, but my guess is that the suit may be legit. Schonfeld may have seen the writing on the wall and realized this was going to blow up big. By suing and going after class action status, they will be the lead plaintiff and get the lions share of any settlement.

It could still be a feint. I'd really like to see the filing because that and the exhibits may give us a sense early on as to whether the avalanche has started.

Pairtraders Google cache of ETG:

ETG Proprietary Trading
1860 Blake
Denver, CO 80202
(303) 292-1500

Legacy:

ETG registered as a Broker/Dealer in 1995 following the merger of the Electronic Trading Corp (ETC) with Automated Trading Systems (ATS). ETC, ETG's predecessor company, was founded in 1992 in order to take advantage of the opportunities created by providing electronic access to individual traders for stock executions thereby “bringing the floor upstairs”. This development led to the creation of ETG.

ETG initially focused on trading listed stocks using the proven trading philosophies handed down from one generation of Specialist to the next. These principles of trading were born out of self-preservation, out of trading during the Depression, World War II and the protracted bear market of the 70's. Boiled down, these ETG Core Trading Principles, modified and updated to adapt to the markets and technology of the 21 st century, essentially are focused on providing for the trader a framework for money management, discipline and timely initiations and liquidations. The updated ETG principles are currently being taught to a new generation of traders in our Atlanta training program.

In 1997, following some regulatory changes that “leveled the playing field”, ETG began focusing on the OTC markets in addition to the listed markets. Our business has evolved by following the idea that a disciplined trader can make money in any arena that has liquidity and equal access. We currently provide our proprietary traders, hedge fund clients and customers access to stock, option, and futures markets. We also trade on numerous international stock exchanges. Ultimately, our goal is to provide access to any market, anywhere, anytime.

In June of 2003, ETG purchased ProTrader Securities from Instinet Group. This acquisition more than doubled ETG's customer base adding to its proprietary trading business. The acquisition was a win-win for both the customers and firm as it provided the customers access to ETG's trading expertise, service platform and professional staff.

Relevant History:

The relevant history of ETG is being written now. In January of 2004 significant positive changes were effected at the firm. At the end of 2003, Jeffrey Mester, the CEO, led a buyout of the firm by new investors who are committed to making ETG and its affiliates the premier firms in their businesses. The firm is committed to growing its business by providing a level of service, competence, reliability and technological support that is superior to its competitors.

The legacy structure of the proprietary business has been replaced with a model that focuses on creating the appropriate balance between providing the proprietary trader with superior support, a compensation structure that rewards the profitable successful trader, and competitive commission rates with the firm's return on equity.

The management and owners of ETG are committed to changing the perception of the industry whereby it is assumed that there is an adversarial relationship between firm and trader. ETG strives to create relationships that are balanced and mutually beneficial. The traders have ownership and control over their own business.

ETG is positioned and committed to be the leading provider of a platform that suits the trader's needs whether that structure is as a customer, proprietary trader or hedge fund client. Join with ETG and help write our new history.

ETG Proprietary Trading
1860 Blake
Denver, CO 80202

(303) 292-1500
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By rtway1 on 4/12/2006 8:31 PM
Bobo, it sure wouldn,t hurt for us all to call our local pols. who have done shit and demand they get involved again. I hope that dope ass Shelby reads this. Also in light of the recent trial we should all be reminded that terrorist money can be easily obtained through offshore naked shorting and that not one government official has ever stepped up to the plate to say he is looking into that. That is sickening, all for the greed of people who have more than they will ever spend in a lifetime and give nothing back to those they stole from.
BoBo, Who is ETG By Who is ETG on 4/12/2006 8:42 PM
I have NEVER seen any story announcing a class action that did not prominently feature the attorney's name.

What is going on here?

There is no public record on ETG for 2006. Trust me, get paranoid about this supposed lawsuit.
ETG also formerly listed a NASDAQ MM By other_opinions on 4/12/2006 8:51 PM
Forgot to mention that Telerate lists ETG as a Nasdaq Market Maker:

http://channeltg.telerate.com.sg/bc/webhelp/ndaqe.htm

It appears that they are no longer a Market Maker. I wonder what securities they were MM for when they were? Anybody know how to find out?
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By stanley steamer on 4/13/2006 7:06 AM
I was forwarded this rebuttal (in caps) to the recent WSJ article, thought your readers would enjoy it.

April 13, 2006


TRACKING THE NUMBERS

Street Sleuth
Despite SEC Rules, a Small Amount DEFINE SMALL, 3 TO 4 TIMES A COMPANY'S
ISSUED AND OUTSTANDING SHARES??
Of Naked Shorting Appears to Persist DEFINE PERSIST....200 DAYS? 250 DAYS?

By AARON LUCCHETTI and KARA SCANNELL
April 13, 2006

A little more than a year ago, new federal rules changed the way short
sellers go about the timeless but much-maligned NOT TRUE , LEGAL
SHORTSELLING IS SELDOM MALIGNED business of betting on stock declines.

The Securities and Exchange Commission's primary goal with those rules,
known collectively as Reg SHO (for short sales), was to clean up abusive
practices by some short sellers who trade shares they never actually hold
LOCATED AND BORROWED, NOT "HOLD"....NOTE TO AARON AND KARA : PLEASE TRY TO LEARN ABOUT THE TOPIC YOU ARE WRITING ON BEFORE YOU WRITE....-- a tactic dubbed "naked shorting." Market watchers say the rules have helped combat the practice, but a small band of short sellersHOW DO YOU KNOW IT IS SMALL? DID THE SEC TELL YOU THE NAMES OF THE PERPETRATORS? IF SO, PLEASE SHARE THE NAMES WITH YOUR READERS persist in flouting the rules in their trading of a few hundred or so stocks.HOW DO YOU KNOW IT IS A FEW HUNDRED STOX? READ THE BLOOMBERG MAGAZINE ARTICLE BY DRUMMOND AND TRY TO EXPLAIN HOW 341 OF 341 PROXY FIGHTS CAN HAVE OVERVOTE!?


Shorts, as they are referred to colloquially DONT TRY TO LURE THE READER INTO
BEING RELAXED, have continued to crop up in the news, often in a negative
light: Several small companies FORMERLY KNOWN AS LARGE COMPANIES UNTIL THEIR MARKET CAP WAS DRIVEN LOWER BY PERSISTENT FTDs.... are waging legal and public-relations battles against some of these bearish traders MORE
SPECIFICALLY AGAINST THE TACTICS USED WHICH LIKELY CONSIST OF MARKET
MANIPULATION, and in at least one case the complaining has led to a SEC
investigation WHICH HAS LED TO 2-3 JOURNALISTS HERE AT DOW JONES WHO HAPPEN TO SIT TWO DESKS OVER FROM US AND WE LIKE THEM SO WE ARE TOLD EACH DAY BY OUR C SECTION EDITOR TO WRITE AN ARTICLE TO DEFEND THEM WITHOUT REALLY MENTIONING THAT WE ARE DEFENDING THEM. Regulators are considering more rulesTHEY ARE? PLEASE TELL US WHAT YOU KNOW AND DO SOME REAL NEWSBREAKING REPORTING, and NYSE Group Inc.'s New York Stock Exchange plans to fine and censure several brokerage firms for their apparent mishandling of some short sales.SO NOW, ONE YEAR LATER, RAMTAHAL OF NYSE IS GOING TO FINE THE MEMBER FIRMS FOR RECORDKEEPING VIOLATIONS??

Rule makers are "making some good strides,"MAKING GOOD STRIDES? THE SEC HAS
BEEN TRYING TO CLOSE THIS LOOPHOLE FOR YEARS says Bill Rhodes, who has
studied heavily shorted stocks at the research firm he runs, Rhodes
AnalyticsAARON AND KARA:DID YOU ASK HOW RHODES ANALYTICS GETS PAID? WHO ARE THEIR BIGGEST PAYING CUSTOMERS? WHETHER OR NOT ANY OF THE PERPS UNDER SUBPOENA ARE IN FACT CUSTOMERS OF THE FIRM?. "But they're still trying to get their hands around some of the issues." I SUGGEST YOU INTERVIEW DR SUSANNE TRIMBATH

Short sellers pay a fee to a brokerageNOT ALWAYS, SOME STOX ARE EASY TO
BORROW or other trading firms to borrow shares, then sell them. The goal is
to buy the same stock later in the open market once the price has droppedBUT
THE SHORTSELLERS OF DIFFICULT-TO-BORROW STOX HAVE A HUGE ADDED INCENTIVE TO GET THE STOCK TO DROP QUICKLY BECAUSE THEY ARE PAYING A NEGATIVE REBATE THAT CAN RUN AS HIGH AS 30% ANNUALIZED. At that point, short sellers would return the borrowed shares and pocket the difference between their buying and selling prices as profit.YEP THAT'S THE DEFINITION OF LEGAL SHORTSELLING

The technique has been used for generations and is popular again amid market
uncertainty: "Short interest" at the NYSE -- the number of shares accounted
for by shorts who have yet to close out those trades
-- stands at 8.2 billion, down 6% from the record last November but double
the number in late 1999, near the stock market's peak.DID IT OCCUR TO YOU
THAT THE RISE IN SHORT INTEREST IS DUE TO THE FACT THAT HEDGE FUNDS ( A.K.A. THOSE WHO PURSUE LONG/SHORT STRATEGIES) HAVE GROWN FROM $100B TO $1.5TRILLION IN THAT PERIOD?

Short sellers can keep overvalued stocks in checkTHIS PLATITUDE HAS BEEEN
REPEATED SO MANY TIMES THAT YOU COULD JUST INSERT " PLATITUDE # 201" INTO YOUR STORY RATHER THAN WASTE THE INK EVERY DAY REPRINTING WELL-WORN LINES LIKE THIS.., and many professional short sellers, including hedge funds that specialize in the trade, are known BY LAZY REPORTERS WHO RELY ON THEM FOR IN-DEPTH, EASY TO REPRINT STORIES for the quality of their research. Some have gotten credit for sounding early warnings EARLY WARNINGS? YOU MEAN AFTER ENRON RAN UP FROM 35 TO 70 AND THE SHORTS WERE GETTING KILLED? SO THE SHORTS THEN TOLD THE PRESS THE STORY TO TRY TO GET THE STOCK DOWN? YOU MEAN EARLY WARNINGS LIKE THAT? on corporate disasters in the making, like Enron Corp.

Some executives at public companies, however, allege that shorts stretch the
truth to crush a company's stock ISNT IT ILLEGAL TO STRETCH THE TRUTH?. Even
more unscrupulous, critics contend, is naked shorting, or shorting a stock
without actually borrowing it to deliver to the buyer, usually in violation
of securities law.NOT USUALLY. A VIOLATION OF THE LAW IS A VIOLATION OF THE
LAW.

The SEC's answer to the issue -- Reg SHO -- went into effect in January
2005. Rules from other regulators already in place at the time had not
"fully addressed the problems of naked short selling," the SEC said
then....I.E. THE FTD PROBLEM WAS GROWING EXPONENTIALLY BECAUSE THE LAW CURRENTLY ON THE BOOKS, THE SECURITIES ACT OF 1933-34, WASN'T WORKING TO STOP THE LOOPHOLE THAT HAD APPEARED AS A RESULT OF DEMATERIALIZATION

Reg SHO holds brokerage firms responsible for locating shares for a short
trader rather than just processing the trade on faith that the shares can be
delivered to the buyer. The broker either takes the stock out of its own
inventory or makes a reasonable assumption..AND "REASONABLE ASSUMPTION" HAS ALWAYS BEEN AN ADEQUATE GOVERNOR ON WALL STREET'S GREEDY BEHAVIOUR it can get the stock elsewhere for delivery to the brokerage firm acting on behalf of the stock buyer.

The SEC regulation also established "threshold" lists, published daily by
stock-market operators OPERATORS? THAT'S THE WORD YOU REALLY WANT TO USE? I GUESS YOU COULDN'T USE REGULATORS OR SELF-REGULATORY ORGANIZATIONS HERE .... like the Big Board and Nasdaq Stock Market Inc., to identify stocks that appear to have slipped through the initial safeguardINITIAL SAFEGUARD??WHAT PART OF ILLEGAL DON'T YOU UNDERSTAND?. These stocks are the ones thought to be the target of naked shorts NO. THESE ARE THE ONES THAT HAVE LARGE FTDs.... If at least 10,000 shares and 0.5% of a company's shares outstanding fail to be delivered to buyers for five consecutive business
days, that company's stock is added to a threshold list. At that point, any
broker that has new short sales that have failed to deliver have to close
out the failed trade after 13 business days.

The month Reg SHO was implemented, 371 securities were on the threshold
list, according to data provided by Merrill Lynch. Since then, the number
has fallen 16%.HOW MANY OF THE INITIAL REG SHO LIST HAVE DROPPED OFF DUE TO BEING DELISTED(I.E. A VICTORY FOR THE SHORTS)? The decline indicates the rule is having an effectNO IT DOESN'T! PROVE THAT YOUR STATEMENT IS TRUE. YOU CANNOT BECAUSE YOU NOR I HAVE THE FACTS FROM THE SEC OR DTCC.., but skeptics say the presence of more than 300 companies on the list shows more work needs to be doneTHAT IS A GOOD ASSUMPTION. There are more than 6,000 stocks listed on all the markets that publish threshold lists, many of them
small.AND IT IS OK TO NAKED SHORT SMALL COMPANIES?

At the NYSE, the number of companies on the list has decreased more sharply,
to 49 from 78; many are the baskets of stocks or other securities known as
exchange-traded funds, says Anand Ramtahal, a vice president at the NYSE's
regulation unit.MAYBE BECAUSE THE NYSE HAS BOOTED SOME OF THE STOCKS OFF THE NYSE, OVER TO THE NASDAQ??

While some companies come and go from the threshold list, others are
"perpetually" FUNNY HOW PERPETUALLY AND 13 DAYS ARE NOT THE SAME THING on it, says James Angel, associate professor of finance at Georgetown
University. "This raises serious questions,"IT SURE DOES.. he says, about
how trades are handled.

The SEC is weighing whether to expand Reg SHO rules to force brokers to
cancel some trades on threshold-listed stocks that were made even before the
stocks went on the list.NOW THIS IS NEWS! GOOD REPORTING! ARE YOU SAYING
THAT THE SEC IS CONSIDERING WAIVING THE GRANDFATHER PROVISIONS AND LIFTING THE VEIL AND FORCING FTDS TO BE COVERED? NOW THAT IS NEWS.

Such a change could affect several heavily shorted stocks like online
retailer Overstock.com Inc., Martha Stewart Living Omnimedia Inc. and Krispy
Kreme Doughnuts Inc. that have been on threshold lists for several
months.AND 200 OTHERS PROBABLY..

Authorities seem certain that at least some improper trading has continued,
though many violations appear to be technical glitches.YES, THE ASPCA HAS
RECENTLY REPORTED THAT DOGS HAVE EATEN OVER 700 MILLION ELECTRONIC STOCK CERTIFICATES ...THE DOGS SEEM TO BE ATTRACTED THE ELECTRONIC STOCK CERTIFICATES TASTE.. The National Association of Securities Dealers says it has more investigations of improper naked short sales than in the past,MAYBE
BECAUSE A FAIR AMOUNT OF ATTENTION HAS BEEN BROUGHT ON THIS MATTER IN THE PAST YEAR says Steve Luparello, head of the NASD's market regulation. The
NYSE's cases against the brokerage firms, expected to be announced in coming
weeksSO THE NYSE IS GOING TO FINE ITS MEMBER FIRMS FOR REG SHO VIOLATIONS? WANNNA BET THAT THE FINES TOTAL LESS THAN 1% OF A GIVEN FIRMS ANNUAL EARNINGS FROM STOCK LOAN?, concern firms that allegedly mislabeled short sales on regulatory forms WOULD THAT BE INTENTIONALLY FAILING TO MARK
SHORTSALES AS SHORT SALES, THEREBY DECLARING THEM LONG SALES? WHILE WE ARE
AT, ASK THE SEC OR DTCC IF THE AFORMENTIONED IMPROPERLY MARKED LONG SALES
THAT THEN GO ON TO BECOME FTDs ARE INCLUDED IN THE NUMBERS TO CALCULATE THE REG SHO THRESHOLD LIST? or failed to monitor or verify whether short-selling customers were actually borrowing securities.DID IT OCCUR TO YOU TO THINK THAT MAYBE LAST NIGHT'S NEWS THAT HEDGE FUNDS FILED A CLASS-ACTION SUIT AGAINST THE PRIME BROKERS MEANS THAT THE BIGGEST PRIME BROKERS ARE CULPABLE HERE? DID IT OCCUR TO YOU TO INVESTIGATE AND REPORT ON THAT ANGLE? OR DID YOU INVESTIGATE AND OMIT IT FROM YOUR STORY??

Not all the new rules on shorting make it harder to employ the trading
strategy NO ONE IS TRYING TO MAKE IT HARDER. LEGAL SHORTSELLING IS GOOD . THE GOAL IS TO ENFORCE THE LAW.... For example, a year ago the SEC also put in place a pilot program eliminating "price tests" on some stocks. The
commission soon will decide the fate of those tests, which include the
NYSE's "up-tick rule." That stricture prevents a stock from being shorted in
a down market, specifically if the current bid is below the stock's
previously traded price. Proponents of such rules say they limit runaway
market dives. Economists complain the price tests distort the market.AND THE
RELEVANCE OF ENDING YOUR ARTICLE WITH THIS FACT IS.......?

Write to Aaron Lucchetti at aaron.lucchetti@wsj.com1 and Kara Scannell at
kara.scannell@wsj.com2

URL for this article:
http://online.wsj.com/article/SB114489334762224801.html
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By bryedge on 4/13/2006 8:57 AM
Bob,
After reading the PR of the suit filed by Electronic Trading, and your concerns of it being a sham, I too am concerned that this will be nothing more than a distraction manufactured by the defendants to later declare their innocence.

First, the use of the word "colluded". The use of this word would seem to require that all of the defendants would have to be tried altogether. This will make pre-discovery a circus of delays. Just allowing eleven different lawyers a turn at the podium will add years to the litigation.
Next, proving such a vast conspiracy between such "fine upstanding companies", will be incredibly difficult and will, again, provide numerous occassions to delay. Without physical proof to justify moving forward, dismissal looks inevitable.
Also, given the reality that "money buys justice", Electronic Trading will have trouble funding a fight against one of these defendants, let alone the whole gang.
With growing cynicism, I can hardly believe the plaintiff has not consider the huge scope of the issue.

That strange smell is "rat", imo.
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By genie on 4/13/2006 11:40 AM
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19655 / April 13, 2006
SEC v. Ramy El-Batrawi, et al., United States District Court for the Central District of California, Case No 2:-06-cv-02247-(MRP)(RZ)
SEC Files Fraud Charges Against Ramy El-Batrawi, Adnan Khashoggi, GenesisIntermedia, and Others Arising Out of $130 Million Stock Loan and Manipulation Scheme
The Securities and Exchange Commission today filed a complaint in the United States District Court for the Central District of California charging Ramy El-Batrawi, Adnan Khashoggi, and others with orchestrating a scheme to manipulate the stock price of GenesisIntermedia, Inc. (GENI), a now-defunct public company that was based in Van Nuys, California. The Commission alleges that the scheme, which occurred between September 1999 and September 2001, resulted in the misappropriation of more than $130 million, the collapse of several broker-dealers, and the largest bailout in the history of the Securities Investor Protection Corporation.

According to the complaint, Ramy El-Batrawi, GENI's Chief Executive Officer at the time, and Adnan Khashoggi, with the assistance of Richard J. Evangelista, Wayne Breedon, and Kenneth P. D'Angelo (a stock loan broker previously charged by the SEC and criminal authorities), developed a manipulation scheme by which they could profit from lending GENI shares (rather than selling them). The complaint alleges that El-Batrawi and Khashoggi, through an offshore entity called Ultimate Holdings, loaned approximately 15 million shares of GENI stock to Evangelista's employer at the time, Native Nations Securities, a New Jersey broker-dealer, and more than a dozen other broker-dealers in exchange for cash based upon the market value of the shares.

According to the complaint, Ultimate Holdings loaned stock through Native Nations (and other broker-dealers) to Breedon's employer at the time, Deutsche Bank Securities Limited in Canada, and received the current market value of the stock in cash. As GENI's stock price fluctuated, the loaned stock was marked-to-market by the broker-dealers. Ultimate Holdings received additional cash when GENI's price increased, and was obligated to return cash when the stock price dropped. By lending the shares in this manner, El-Batrawi and Khashoggi raised approximately $130 million without giving up control of the stock or depressing the market price for the stock.

The complaint also alleges that the defendants inflated GENI's stock price by systematically engaging in fraudulent and deceptive practices that had the intended effect of generating additional cash proceeds from the broker-dealers participating in the stock loan transactions. Their illegal manipulative activities included reducing the supply of GENI stock to control the public float, promoting a short squeeze without disclosing to GENI shareholders that El-Batrawi and Ultimate Holdings had effectively already sold their stock through the stock loans and were attempting to prevent their stock loans from unraveling, and making trades through nominee accounts. The complaint alleges that while these activities were ongoing, El-Batrawi also was secretly compensating Courtney Smith, a well-known financial commentator, to tout GENI on television to create demand for the stock, and, in conjunction with Douglas Jacobson, GENI's chief financial officer at the time, was making false and misleading statements in periodic reports filed with the Commission.

The manipulation caused GENI's stock price to increase approximately 1,400%, from a low of $1.67 per share (split adjusted) on September 1, 1999 to a high of $25 per share on June 29, 2001. After the scheme collapsed in September 2001, GENI's stock price plunged to pennies per share. El-Batrawi and Ultimate Holdings then defaulted on their obligations to repay the approximately $130 million they had obtained from the stock loans, which caused several of the broker-dealers in the stock loan chain to go bankrupt.

The Commission charged El-Batrawi, Khashoggi, Ultimate Holdings, Evangelista, and Breedon with violating the antifraud provisions of the federal securities laws, specifically Section 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Exchange Act, in connection with the stock loan and manipulation scheme. The Commission also charged GENI, El-Batrawi, and Jacobson with violating these antifraud provisions by making false and misleading statements and material omissions in GENI's filings with the Commission; charged GENI with violating the reporting and books and records provisions of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13; and charged El-Batrawi and Jacobson with violating Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2 and aiding and abetting GENI's violations of the reporting and books and records provisions. The Commission further charged Ultimate Holdings with making false or misleading statements in certain filings with the Commission, in violation of Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2. As relief, the Commission is seeking permanent injunctions against all defendants, an accounting of the money that defendants obtained as a result of their illegal conduct, disgorgement (with prejudgment interest), and civil penalties. The Commission is also seeking to bar El-Batrawi, Jacobson, and Khashoggi from serving as officers or directors of a public company.

The Commission acknowledges the cooperation of the United States Attorney's Office for the Central District of California and the Federal Bureau of Investigation in this matter.

This is the third lawsuit that the Commission has filed in connection with the GENI stock manipulation. See SEC v. Kenneth P. D'Angelo, et al., Litigation Release No. 18344 (September 11, 2003); SEC v. Courtney D. Smith, Litigation Release No. 19064 (February 7, 2005). D'Angelo and his company, RBF International, settled with the Commission; the Commission's case against Smith is pending.



http://www.sec.gov/litigation/litreleases/2006/lr19655.htm



--------------------------------------------------------------------------------
Home | Previous Page Modified: 04/13/2006
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By robelita on 4/13/2006 11:47 AM
The rats are becoming cannibals and feeding on each other. It is apparent that a game of miscreant musical chairs has already started and positioning has begun for the last remaining chair. Rocker-you're dead meat. Retiring won't prevent you from
escaping liability. You're on everyone's radar. You and the rest of the miscreants are going pay for your sins. Justice will be had!
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By shelbywhatajoke on 4/13/2006 1:28 PM
I say its time for a full page Add In the washington post . put in the add all the evidence of naked shorting . mention all the law suits in the add that are happening due to the crimes on wallstreet .also put in the add that senator shelby new about the crime for years and did nothing . the headline should read SENATOR SHELBY MUST PUT IN HiS RESIGNATiON ....I will donate
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By mhatmccane on 4/13/2006 1:31 PM
I'm guessing when the SEC issued the "journalists" guidelines, they grandfathered Greenberg, Cramer, et al, so those guys will not have to produce anything. And, when I read the guidelines, it looks like anyone who lawyers up won't have to produce anything either.
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By gregcable2002 on 4/13/2006 2:02 PM
I think maybe the investors in these hedgefunds are becoming aware at whats going on and are demanding answers now.Someone invested in all those counterfiet shares and its not just the small investor,ya think?
Re: Rocker Announces Retirement, Hedge Funds Sue Brokers Over Naked Short Selling, SEC Issues Guidelines By geni on 4/13/2006 2:15 PM
Khashoggi, Ex-GenesisIntermedia Executive Sued by SEC (Update1)

April 13 (Bloomberg) -- Saudi financier Adnan Khashoggi and former GenesisIntermedia Inc. Chief Executive Officer Ramy El- Batrawi were sued by U.S. regulators over claims they orchestrated a $130 million stock loan and manipulation scheme.

Between 1999 and 2001, Khashoggi , El-Batrawi and others loaned $130 million in GenesisIntermedia's shares to broker- dealers while artificially inflating the stock price, the Securities and Exchange Commission said in a statement. El- Batrawi failed to repay the loans when the scheme collapsed, causing some of the dealer-brokers to go bankrupt, the SEC said.

GenesisIntermedia is a defunct Van Nuys, California-based telemarketing company that was 85 percent owned by El-Batrawi and Khashoggi. Last year, a California jury acquitted financial commentator Courtney D. Smith of charges he failed to disclose payments he received from GenesisIntermedia to promote the company's stock.

Attorneys for El-Batrawi and Khashoggi couldn't be immediately located to comment. SEC attorney Kara Brockmeyer said the agency hadn't determined who the attorneys for El- Batrawi and Khashoggi were.

Trading in GenesisIntermedia was halted in September 2001 after the shares plunged 65 percent. The wreckage caused the failure of MJK Clearing Inc. of Minneapolis and saddled the Securities Investor Protection Corp. with a $42 million payout.

The company sold the ``Ab-Twister'' exercise device and ``Men Are From Mars, Women Are From Venus'' relationship products through infomercials. The company was also attempting to place Internet kiosks in shopping malls.

The case is SEC v. Ramy El-Batrawi et al, U.S. District Court for the Central District of California, 06-2247.




To contact the reporter on this story:
Edvard Pettersson in Los Angeles at epettersson@bloomberg.net.

Last Updated: April 13, 2006 17:23 EDT





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