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Judge Decides American Juries Too Stupid To Know Right From Wrong

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Posted by:   bobo 12/20/2007 11:17 AM

I don't have much time today, but wanted to comment on the ruling handed down today in the NSS suit against the brokers.

Basically, the judge decided that a jury couldn't be trusted to hear the case, because the gray area of securities law is too complicated for the knobheads that comprise the jury system.

Here's the most offensive quote:

"The threat of a 'nonexpert jury' (meaning mouthbreathing American morons, versus Wall Street insiders) mistaking (meaning correctly determining that the conduct is fraud and criminal) lawful conduct under the securities laws (versus illegal fraud and corruption and chicanery) as evidence of a conspiracy under the antitrust laws (basically correctly determining that Wall Street functions as a criminal cartel, under all possible RICO definitions) and exacerbated by the prospect of trebled damages, would place immense pressure on defendants to curtail the open exchange of information (meaning the brokers wouldn't want to supply any discovery, as it would show they are guilty)," the judge said. "Such antitrust suits would likely chill a broad range of activities that the securities laws permit and encourage (why is unknown) , and would likely inhibit the short selling activity that provides market liquidity and pricing efficiency. (Of course, it would also curtail criminal naked short selling and stock manipulation, but apparently the stakes are too big to let the banks face any rule of law)".

Why securities should be exempt from antitrust protections covering all other products or goods is unknown.  Why juries are too stupid to be trusted to rule on something as simple as price fixing, and yet can rule on everything else imaginable, is also unknown. We just have to assume the judge, being apparently endowed with incredible intellect unseen in common men, and thus convinced that they shouldn't be allowed to sit in judgement of something as important as naked short selling and price rigging (but capable of making decisions causing men to go to the gas chamber), understands far more than the framers of the Constitution and the bill of rights.

I don't have any questions - basically, the judge can't allow a case to go before the jury, because if all facts were known the jury would likely slam the brokers for tens of billions, due to the obvious fact that they are behaving exactly as the anti-trust laws prohibit them from acting, using the SEC's self-serving rules, often passed without appropriate scrutiny, as a pretense for violating the law of the land. Nowhere do I know of anything in the Securities rules that say you can just ignore the law of the land, because you are Wall Street, however apparently that is the case.

What a frigging farce.

 

Copyright ©2007 Bob O'Brien
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Comments (37)
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By Judge Junky on 12/20/2007 5:38 PM
We don't need no stinkin' juries do we? Afterall this is Amerika isn't it? Someone clear that pesky kangaroo outa my courtroom before someone spots him. For my next trick I will perform fellatio on myself. Gather round.
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By lenofus on 12/20/2007 5:39 PM
What does any jury know about murders? Rape? Robbery? do they seed the jury with Criminals so they have some real life experience.

We're in a period of time where the guys that say, "we know best" are selling themselves to our natural enemies llike so many whores on the docks. Yet they get break after break, and no one who can do anything will challenge.

Can it get any more bizarre. Yes, I believe it can. I don't know how, but I'll bet it does.
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By old duffer on 12/26/2007 7:43 PM
You reap what you sow! EOM
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By mhelburn on 12/27/2007 7:21 AM
In an uneven match like "keep away", two bullies torment the third by tossing his ball back and forth always throwing the ball higher and faster than the third can reach or run. What a surprise when the third either gets so angry or so smart as to ignore the ball and just go after one of the bullies. Visualize this: ball exits hand of bully and he is slammed to the ground, pummelled to a point of not being able to get up and the ball then becomes a heavy burden on a game of one to one.

What happens when a big brother or big sister sees the unfairness of game? Does the sibling stand aside or does the sibling go after the other bully and the brother's ball? Brothers and Sisters, it is time to teach the bullies a lesson about ownership.
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By Sean on 12/28/2007 5:26 PM
Mr. RMR Thank you for saying it (writing it) as it is!!!
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By mogambo on 12/28/2007 5:25 PM
As if that is not bad enough, he goes on, "We now know the Fed does not understand markets or economics, but is trying to bail out ifs friends on Wall Street at the expense of 300 million Americans, nay, of the whole world."

This reminds me of an email from Junior Mogambo Ranger (JMR) Michael M., who sends a quote from Richard Karn: "A large portion of my outrage has always been based on the betrayal inherent in monetary inflation: it victimizes those least able to protect themselves, which is why I equate central bankers with pedophiles. A system that purposefully cannibalizes its own is genetically unfit for existence." Exactly! And well said! The perfect amount of disgust and perversion!

http://www.dailyreckoning.com/Writers/Mogambo/DREssays/MG122707.html

Inflation isn't caused by workers looking for raises. It is caused by printing money out of thin air, making each dollar worth less. It's like making rulers shorter. It takes more of them to measure the value of goods.

The criminals would have us all in food lines, if it saved them a buck.
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By RMR on 12/30/2007 5:19 PM
http://video.google.com/videoplay?docid=-2637635365191428174

An extraordinarily illuminating 4 part BBC series on origins of consumer capitalism and calculated dominance of banking interests over all. Amazingly pertinent to our political and economic situation today, the stock market crash of '29 (which was wrought in large part by unchecked naked shorting of stocks)-- and to the concept of a judge deciding that a jury of ordinary citizens is too stupid....

Also explains why & how people are manipulated to buy shit they don't need and vote against their very own economic interests --also, how the very rich get even richer by capturing and corrupting the media and the truth.

This series should be seen by as many people as possible -- and anything we can do to increase awareness of its availability will be to the general good.

http://video.google.com/videoplay?docid=-2637635365191428174

(someone may have posted this reference before, but for my money, it can never be posted enough)
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By oldfeller on 1/1/2008 7:13 PM
While we watch in amazement at the seemingly insane direction our leaders are taking us with regards to all things monetary, there is an explanation. It`s not simple but here is a link that consolidates the basics. From Ron Paul.

http://mises.org/multimedia/mp3/audiobooks/MisesPersonalView.mp3
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By Sean on 1/8/2008 4:42 PM
Happy New Year to All.

What is amazing is that most of this information has be made public by several entites and not one person in authority has made an effort to clean this mess up. I see no changes in the process or behaviour of these crooks and I conceed to Bobo.. GET OUT OF THE MARKETS PERIOD. Now what would happen if police officers and firemen ect, find out that they are being ripped off by these pencil neck geeks...hhhhmmmmnnn. I think I will try that rout!!!
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By more justice at work on 1/8/2008 4:44 PM
from yahoo board...

Federal Judge Rejects Key Claim in SEC 'PIPEs' Enforcement Case Against Edwin Buchanan Lyon, IV., and Gryphon Family of 'Hedge' Funds - Dismisses Claims That Lyon and Gryphon Violated Section 5 of the Securities Act
Thursday January 3, 2:45 pm ET
DALLAS, Jan. 3 /PRNewswire/ -- Gryphon Partners, a Dallas based "hedge" fund, today announced that on January 2, 2008, the Honorable Sidney H. Stein, United States District Judge for the Southern District of New York, dismissed all of the SEC's claims under Section 5 of the Securities Act of 1933 against Edwin Buchanan ("Bucky") Lyon, IV., and the Gryphon Family of funds, in a case of major significance.
ADVERTISEMENT


The SEC had maintained that Lyon and Gryphon violated Section 5 in the manner in which they traded certain Private Investments in Public Equities ("PIPE") offerings. In particular, the SEC alleged that Gryphon violated Section 5 when it took a short position in the PIPE issuer's publicly traded shares prior to the resale registration statement and then "covered" its short position with PIPE shares after the effective date of the resale registration statement. The motion to dismiss before Judge Stein centered on whether the delivery of once-restricted PIPE shares to close a short position converted the underlying short sale into a sale of PIPE shares, constituting an unregistered distribution and violating Section 5.
Judge Stein ruled that the SEC's characterization of these practices, which formed the foundation for its entire case against Mr. Lyon, was "implausible" and could not be supported by either the plain meaning of Section 5 or the statute's underlying purpose. Judge Stein further found that the SEC based its claim on agency materials that provided "negligible support" for its view of short sales and that it quoted "selectively" and "misleadingly" from one of them to support its case.

Mr. Lyon stated that "we are very gratified that Judge Stein has rejected what was the centerpiece of the SEC's case against Gryphon and myself. We look forward to prevailing on the few remaining issues in the case and believe that we will be entirely vindicated in this manner."

Counsel for Gryphon and Mr. Lyon, Christopher J. Clark of Dewey and LeBoeuf, noted that, "Judge Stein's well reasoned and careful opinion obviously undermines the SEC's entire theory of a Section 5 violation both in this case, and the many, many other enforcement actions that the SEC has brought and is considering bringing against hedge funds. This is an important decision for Gryphon, for Bucky Lyon, and for the hedge fund community as a whole."

Contact: Christopher J. Clark (212) 424-8555



Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By Valueinvestor on 1/8/2008 5:24 PM
Some facts about USXP may be a bit questionable, but in the main this is an excelent letter that encapsulates the issues at hand...

A LETTER TO A CONGRESSMAN

______________________________________________________

December 30, 2007

Congressman Dana Rohrabacher
2300 Rayburn House Office Building
Washington, D. C. 20515
Ph: 202-225-2415 / Fax: 202-225-415

Dear Congressman Rohrabacher,

I am one of your constituents living in the City of Long Beach. I have been a teacher in the Los Angeles area for several years and an occasional investor in the stock market. Over the years, throughout my investing experiences and through my seasonal work in a business law office, I have learned of the immense corruption that has been, and still is rampant on Wall Street, and the completely unrestricted license given to the criminals by both the Securities and Exchange Commission and the Justice Department to rob and steal Americans blind. It is this corruption and the lack of law enforcement for which I am writing you this day.

Although I might expect unsavory characters to infiltrate Wall Street and utilize unscrupulous tactics to steal money from innocent investors, I never expected to see both the SEC and the DOJ sit by idly and merely watch the process without making any real efforts at law enforcement. The issues of naked short selling and counterfeiting shares of stock has permitted an unrestricted thievery from people selling bogus stock to innocent investors. Basically, these criminals either sell electronic shares without any real shares to back up the sales, or they physically counterfeit shares and put them into the market with the complicity of dishonest transfer agents and/or brokerage houses. Basically, the bad guys are being allowed to sell what they never owned in the first place. Years of complaints have been submitted to every law enforcement agency, congressman, federal prosecutor and the media, and the only changes seen are the increased rate of theft. Simply put, all aspects of real law enforcement has been on vacation!

With these additional illegal shares in the marketplace, the ordinary balance of supply and demand is corrupted and the price always unfairly suffers to the negative. Basically, if you create an unnaturally high supply in the light of an ordinary demand, you will kill the price of any currency, goods or services, including stocks. After destroying the price, the criminals have a vested interest in seeing the company die, so they engage in every imaginable act of sabotage to discredit the company and destroy growth-related opportunities. It has become a racket of immense proportions and is on one of the primary reasons that the USA has gone from being the place that 90% of the IPO's in the world opened up for trading 20 years ago, to now being the place that merely 15% of the IPO's in the world open for trading. Our system is failing and the regulators have the proverbial front row seats to the entire affair.

Just to give you a figure tossed about by both the media and by congress, I will quote both Bloomberg and Orin Hatch as they both expressed the fact that there are at least $6 billion dollars per day in sales of stock that are not backed up by real stock. That amounts to approximately $1.5 trillion per year. Imagine that has gone on for almost 20 years! The naked shorting does not address the massive amounts of counterfeit stock in the system that the Depository Trust fails to catch, and from my understanding, participates in creating. Overall, the economy, the standard of living and the very national security of our country is being destroyed from those enemies, both foreign and domestic, by way of these ongoing acts of thievery.

Sir, I love this country and the people in it. I am confident that you have patriotic blood in your veins and that you want America and Americans to succeed. However, I ask you what is logical to expect for America, if at the bottom of our financial pool, there is a massive drain with a minimum of $6 billion dollars per day being siphoned out? This nation will soon be turned into a 3rd world nation, with the middle class gone and nothing remaining but the elites, who either had enough money to weather the storm of theft, or who are the thieves themselves. The rest of America, the vast majority of once middle class people, will be left impoverished. After all, it is not merely the direct investor who is suffering due to this radical and unjust siphoning of wealth to the elite upper crust of criminals (many being foreign banking entities). If not robbed blind, perhaps those cheated investors might have started a new business employing a dozen people, or they might have given their employees a pay raise, or maybe loan someone money to for the purchase of a new home. In other words, it is all of us who suffer on a grand scale, either directly or indirectly, due to this ongoing thievery.

Perhaps the most distressing fact to be viewed is that while many states have been forced to take up the charge to protect their citizens, the federal government has actually interfered with their law enforcement efforts. States like Oklahoma, Utah, Florida, South Dakota and Louisiana have tried to address these terrible injustices, either through their legislatures or their courts, but the federal government has actively interfered to protect the bankers. One such instance is the Florida State lawsuit of Universal Express lawsuit against the Wall Street brokers. In that case, as Universal Express was making serious headway in holding the Wall Street firms and the Depository Trust and Clearance Corporation accountable for their criminality, the SEC filed an involuntary bankruptcy action against Universal Express and sought to appoint themselves as trustees. This bankruptcy action was filed immediately after the Florida court ordered the Depository Trust to turn over critical records that would have exposed their illegal conduct. Basically, the bought and paid for SEC stepped in and halted the state action with a preemptive strike in the federal court. Clearly, the actions were to protect the bankers by stopping devastating discovery from taking place.

Another case is that of Overstock.com, a company that has been devastated by the practice of naked short selling. That company was forced to file their lawsuit in California State Court due to the fact that little justice can be achieved in the federal court system if the plaintiff is seeking relief against Wall Street.

It has become clear that the framers knew what they were doing when they created a federal system with separate federal and state governments, for the dangers of total corruption on the federal level is too easily achieved. The federal corruption and efforts to undo the states power is easily witnessed in the Universal Express case, as well as the absurd Executive Orders and traitorous treaties the Senate and Executive are entering into with the UN and other signatories. These acts on the federal level cut out the rights of the people to make any decisions and yet, they become the law of the land all the same. Welcome to the North American Union, The Law of the Sea Treaty, the seemingly unlimited "emergency" powers for FEMA and the removal of the right to habeas corpus, all laws of this land that never saw the light of one state's vote or one American vote of approval. Sir, we are losing our country and we are losing it fast!

Sir, you took a sacred oath to protect the constitution and serve your constituents faithfully. I implore you to take a step back and reevaluate the current soft stance the congress has been taking on these critical issues and lead the charge for change. I know it will entail a degree of personal risk, but sir, you sought and accepted your post and all of the duties so associated with it. I encourage you to either act with conviction and fierce determination, or to step aside and let another person accept the charge. If you merely sit and watch, you become a major part of the problem.

I implore you, do not merely read this letter and toss it in the pile of constituent complaints or concerns without taking these matters to heart and making it a priority to right this sinking ship called America. Americans are being raped and the last 3 administrations have merely sat by, pretending to be leading us, while in reality, they have been selling us out and assisting the criminals. Note that the SEC rarely takes any administrative action, other than to punish individual investors for trivial matters, and when they finally land one of the bigger fish for stealing millions or even billions, they ALWAYS end up settling their claims for a mere pittance in comparison to what was stolen. The message being sent is that crime does pay in America, so long as you are of the elite banking class.

I will sign off for now. I thank you for your consideration and I pray for your wisdom and well being.

Sincerely,

David Woodman
Long Beach, California



cc: Senator Dianne Feinstein
Senator Barbara Boxer
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By Sean on 1/8/2008 5:23 PM
Am I the only one noticing what is happening to the Prime Brokers in the last couple of weeks, also with the absolute manipulation of OSTK down to an all time low of 12.25 from a high of 39.29 on October 31, 2007. I would think there would be a little more discussion on this topic. What am I missing here? Have we just gotten use to this abuse? If so, shame on us. But I would like to think something big is going on behind the scenens. OSTK, EAG,JAGH, SNDA just to name a few may be getting some results without us knowing. I can only hope. Also Happy New Year to Bobo and all.
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By Sean on 1/8/2008 5:27 PM
FOX Stock at 52 Week Low Due to Electioneering Charges...

NewsWire / New York / 1-5-08 // Fox News parent company NewsCorp (NWS/NYSE) has lost over $3 billion in market capitalization in less than a week as the stock plummeted to a 52 week low amid electioneering charges against Fox for excluding a major presidential candidate from a nationally televised forum. Many feel Fox is trying to rig the election.

http://www.digg.com/politics/FOX_Stock_at_52_Week_Low_Due_to_Electioneering_Charges


Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By n-tres-ted on 12/20/2007 3:15 PM
At least we learned the alleged facts from the three complaints before the judge dunked the case back below the surface. I always figured the case would be settled by the plaintiffs before trial, since the only claims were for antitrust violations. But it is outrageous that the securities firms can be thought to be exempt from antitrust monopolization prohibitions that apply to everyone else. Why? Because their business is so complicated? Every executive in every industry would argue the same. I assume an appeal to the 2nd Circuit will be filed, which will probably burn another year or more. JMOO
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By fc..... on 12/20/2007 5:40 PM
Sounds to me like the judge is in someone's back pocket.
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By Sean on 12/20/2007 5:41 PM
Bobo, they re-released the article deleting the term Naked short from it!!Now how do you like them apples!!
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By blackbart on 12/20/2007 9:01 PM
Sean- This is so idiotic that the street is scrambling to cover up the exposure hence the elimination of "naked short" from the article. This is something that even Joe Sixpack can figure out contrary to the moron judge who claimed it was too sophisticated for the jury to understand. Chances are that the judge himself did not have a clue but he understands envelopes of euros.
Sadly the plaintiffs are so dirty that it is like having the mob reporting to the police dept. that someone has stolen their pilfered and illegal booze.
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By Valueinvestor on 12/20/2007 9:12 PM
Bobo..this is someone you know only too well...someone who has been helping USXP shareholders understand the terrible mess in that company...the similarities between Judge Lynch and this Judge are astonishing...

What Judge Marrero has done here in citing the `threat of a non-expert jury' is identical to what Judge Lynch did in the USXP Case.

The actions of Judge Lynch are now in front of the Circuit Court of Appeals, on two appeals points:

Lynch dismissed the authority of the Bankruptcy Court to allow registration of shares sold under an S-8 that Court approved.

Lynch ignored the agreement of the SEC to Jury trial, citing as his reason `the inability of a non-expert jury' to understand the issues, thereby ignoring 7th Amendment entitlement to Jury Trial.

The SEC blew the response totally.

They ignored the first issue effectively, asserting the position their authority trumps that of the Bankruptcy Court (it does NOT).

They ignored their prior agreement to a Jury trial in the USXP matter (verified by emails to Tifford and given to Lynch).

The Judge appointed the Receiver without a hearing, and without said receiver posting a bond.

The SEC inserted many non-relevant asserted `facts' into their pleading not specific to the items in appeal, trying to throw anything at the Wall to make it stick.

The SEC exceeded the strict page limit the Appeals Court without prior authority from that Court.

USXP got the final response, and introduced naked shorting as a cause for the Appeal to be sent to the Court of Claims initially.

They trapped the SEC in this, in that they don't get another swing at the ball.

Three senior lawyers familiar with the pleadings of Arthur Tifford would bet they will win their Appeals actions. You should pull these pleadings.
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By theTurtle on 12/21/2007 6:35 PM
Is there any precedent for a decision like this? Above and beyond that, I thought this was a very clear and simple case. I would imagine that 99% of cases going through the courts/jury system are more complex than this one. Is the Judge contending that if the facts where established that a jury couldn't understand how to apply the law to the facts? Or is he contending that the facts can't be established?

Anyone see the movie "12 Nonexpert Men." It was pretty good. It was a pretty good movie.

theTurtle
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By Sean on 12/21/2007 6:36 PM
Blackbart, Bobo and others I have a question.. Were our Prime Brokers and Bank not reporting making billions of dollars in profits quarter after quarter for the past 2 years or so? If so, how come these writedowns that they currently have to do because of this fabricated "Subcrime Mortgage" disaster are necessary?. This process by which amazingly were destroyed alot of hugely "Naked" shorted Mortgage lending companies like NFI, AHL,ect(thus the Prime of all Primes Gold Sachs did not have to cover. The money that they stole from us was all registered as profits without taxes. Then GS had the unmitigated gall to give out 18billion dollars in bonuses while the rest of the PB's had to look for funding from China to stay afloat???Why did'nt Goldman lend MS and Citi some of their bonus pool so they would not have to borrow from China and Dubai? WHAT AM I MISSING HERE? Please enlighten me..please. Thank you! I believe this is all far from over!!
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By stryker-ny on 12/21/2007 6:37 PM
Valueinvestor...Is there an approximate timeframe when the appeal will be heard???...Altomare is not smelling like a rose in this play...either that , or the SEC has just lied about the whole deal here...tia
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By mhatmccane on 12/21/2007 3:57 PM

So, the door is open for the brokers to settle out of court and seal the settlement, or, do the shorts have to file an appeal and then they settle?
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By No more USXP on 12/22/2007 8:11 AM
I have no idea whether the USPX case was a complete fraud or the SEC was a complete fraud. We experienced the same posts with CMKX which appears to have been a complete fraud. Does that make the naked shorting legal? No but if you defend a known pedophile in court claiming his rights were violated you will get laughed out of court. Let the dust settle on these fringe cases and give us posters a break until you know for certain that you did not buy into a hoax. It helps to have clean companies when you point a finger at naked shorting.
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By kevin on 12/22/2007 8:12 AM
"It (a bank) can take the depositors' goods, the goods that it holds for safekeeping, and lend them out to people on the market. It can earn interest on these loans, and as long as only a small percentage of depositors ask to redeem their certificates at any one time, no one is the wiser. Or, alternatively, it can issue pseudo warehouse receipts for goods that are not there and lend these on the market. This is the more subtle practice. The pseudo receipts will be exchanged on the same basis as the true receipts, since there is no indication on their face whether they are legitimate or not. It should be clear that this practice is outright fraud." --- Murray Rothbard: Man, Economy, and State

"The bold effort the present bank has made to control the Government, the distress it has wantonly produced,. . ., are but premonitions of the fate that awaits the American People should they be deluded into a perpetuation of this institution (The Bank of the United States), or the establishment of another like it." --- Andrew Jackson (December 2, 1834)

From the technology of power dynasties using economics.

http://www.rexresearch.com/articles/ocultech.htm
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By bobo on 12/22/2007 8:23 AM
Kevin:

Yes, the central banking concept was despised by the framers of the constitution, as they fought a revolution to get out of the clutches of the bank of england. When that bank coerced the king to outlaw colonial script, which has no banking system leeching off it's value every year, the colonies were plunged into an immediate depression, as their net worth was drained by bank of england's inflationary policies. That's why we went to war, per Ben Franklin.

That the current system is unquestioned is testament to the idea that if you can wait out the memory of generations who know better, you can do anything you like. The new ones, you simply indoctrinate into your perspective, and brand the truth "craziness" or "conspiracy theories." By using negative labels, you can shut down critical thinking. It also helps if you run the schools, so that everyone but your kids grow up without any capacity for critical thinking. Makes it easier for your kids to run the place, as they don't go to your government schools. Controlling the popular understanding of key concepts is also a big part, hence the importance of co-opting resources like Wikipedia. Repeat the lie, insist it is true, tell everyone they are far better off than previous generations (even though it is provably false - in the 50's a guy working at a gas station could support a wife and kids, own a house, at least one car, all on his 40 hour per week job, and now it takes two earners working their asses off, and the bank owns everything), and repeat over and over that the population is both fortunate to live with their ever limited freedoms, and also is in danger of evil boogiemen whose existence requires the government to abrogate those dwindling freedoms. Same scam across most regimes - the Soviets did it with us as the boogieman, the nazis used the communists, the japanese used the chinese and then the round eyes, we used everyone whose assets we wanted to grab - the indians, the mexicans, now the oil rich middle easterners. There are simply no new ideas.

Wall Street is simply taking the central bank scam to its ultimate conclusion, but with less patience and subterfuge. I do believe that the internet has changed everything, as most info we now understand wouldn't have been available 10 years ago.
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By kevin on 12/22/2007 5:43 PM
Another quote from that last link I posted.

Further, the periodic cycles of easy money and tight money that we initiate through our control of the Central Bank cause corresponding fluctuations in all markets. Our inner circle knows in advance the timing of these cycles and, therefore reaps windfall profits by speculating in commodity, stock, currency, gold, and bond markets. Monopolistic stock and commodity Exchanges are a vital adjunct to our power made possible by our Central Bank power. We do not allow a fair auction market to exist, but make a great show of "tough" government regulation to create a false sense of confidence among small investors. With the aid of our regulatory charade and financial power we are able to maintain Exchanges tailored to our entourage's need to manipulate stock prices at the expense of independent investors. Our privileged specialists on the floors of our Exchanges, aided by the propaganda of our financial press and brokerage houses, continually play on naivete and greed to drain the savings of the unwary into our coffers. The stock, commodities, and securities held in trading accounts by the Exchange and brokerage houses provides us with a clout far beyond our own actual holdings with which we can manipulate prices and win proxy fights for corporate takeovers.

Little danger to our lucrative racket exists from public-spirited regulation. Our manipulations are so complex that only the most brilliant experts could comprehend them. To most economists our Exchange operations appear to be helpful efforts to "stabilize" the market. We ruling bankers, if able to keep peace among ourselves, become richer and richer as time passes without the annoyance of exerting productive effort of benefit to others.

The next speaker, Professor G. will discuss the secrets of social legislation and policy that do so much to cement our power.
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By bbhindyou on 12/22/2007 10:15 PM
Bobo,
I,m glad too see someone who understands how it all works.
The ability to teach yourself through hunting up resources and applying critical thinking is the people in powers worst nightmare.
I hope the number of informed individuals is increasing daily.
Thank you for doing a lot to help stimulate the process!
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By oldfeller on 12/23/2007 12:49 PM
bbhindyou- I agree wholeheartedly. The learning curve of the average citizen is spiking like never before. My accountant has laughed for years at my attempts to make a buck in the market. He has always insisted it`s far too crooked to even try. When I told him about this federal judges ruling he nearly blew a gasket describing how much he would love to be on the jury that this judge deems too complicated for we the people to understand.
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By Sean on 12/23/2007 3:17 PM
In direct response to No more USXP's post, please note the following.

I have had the discussion as to whether both CMKX and USXP were scams and the bottom line is that these companies cannot be taken seriouslyl because of the billions (USXP 41 billion and CMKX 703 billion) that they put into the market place. How can they even remotely talk aout naked shorting? The fact that USXP has not yet been halted does seem strange though, but I digress. Now for the converse in our discussion. What about Eagletech, they were a real company with a real product and patent for such, less than 5 million shares outstanding, the company has proof that is was manipulated and still suffered the same consequence of CMKX, delisting!! So at both ends of the spectrum our faithful SEC seems to lump the good, the bad and the ugly and destroy them when the entities they protect(The Prime Brokers) may be held to task. So in ending I say, it does not matter whether the company is a hoax or not a scam or not if the SEC wants to destroy them and allow the PB's to steal from us they can and there is nothing that we can do about it!! That's just how it is.
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By Valueinvestor on 12/24/2007 1:59 PM
Sean and others...it is possible that you and others are not so engaged or intimately involved with the USXP story as I and several other shareholders have been for the past six odd years...from what little I have read and heard about CMKX, I believe these guys did play a dirty game and they should be held accountable along with those who naked shorted it...with USXP, I implore you to reserve judgment...God knows I too could not for the life of me figure out why this guy was diluting the crap out of the share structure...but then, and this is just a good, solid hunch on our part (backed by several other coincidental occurences), the company in this case has already proven NSS and won two separate solid RICO judgments in jury trials..the company claimed and we have selective proof ourselves that the stock was naked shorted several times its O/S even at the current 40 billion shares legally outstanding...thus, rather than throw the baby out with the bathwater, I humbly request you hold judgment a little bit longer...what if it does turn out that USXP is the one company that is able to come out looking like the David that brought down Goliath ? You will look like those who jumped on the bandwagon cheering on a little too late...so I am not asking that you support the cause, simply that you reserve judgment, because frankly none of you know even a fraction of what some of us shareholders do in this space, and we too have incomplete and distorted knowledge about all the facts...but from what facts we do know, this could be a historic fight headed by a headstrong CEO, a little too bombastic and daring perhaps, but nevertheless one who took the fight all the way to the door of the Juggernaut in spite of getting mortally wounded many times...the USXP story is not the CMKX story...it is not even the EATC or OSTK story...the only common thing amongst these is that they have all been naked shorted, like countless others...but we need a few true leaders in this space, leaders who appear to be winning, and winning now, today, not in some distant fyuture...EATC and OSTK are years away from even being heard...USXP has a chance to make history now, in January, and you folks better get tyour act together IF AND WHEN THAT HAPPENS...cheers and happy holidays...
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By Sean on 12/25/2007 8:01 AM
Value, with all due respect I feel your pain but "If it looks like a duck,if it quacks like a duck and lastly if it walks like a duck.. well you know the rest. I am just going by what the public has been made aware of. I am sure the same can be said about all the others stocks you mentioned and their respective shareholders that feel the same way as you and the other USXP shareholders feel. However until the actual and factual truth is made public the current negative speculation will stand in my eyes and many others. That is just how it is. There is just too much evidence to corroberate these sentiments. Now as far as OSTK and EAG and now SDNA(please see today's SEC charges against manipulators), the evidence speaks for itself.
I am not here to judge any company but these are just my opinions which based on the evidence I stand by. Seasons greetings and I will not be hogging up the blog regarding this matter anymore.
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By stryker-ny on 12/25/2007 8:03 AM
Valueinvestor..Thanks for that Christmas present of a post...and a Happy New Year to you and your family......
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By gregcable2002 on 12/25/2007 6:36 AM
in the end you get a judge who claims the case is to complex for a jury to understand,guess what? 2008 will be the year of the judge making ALL the rules in line with what the bankster gangsters dictate,FACISM IS HERE.
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By mhelburn on 12/25/2007 8:05 AM
When the banks have to get infusions of cash from overseas investors to stay solvent, the hedges they had from insurers suddenly go away, and the balance sheets start showing what is really on the books, it is just tooooo scary to imagine. It was too scary several years ago and the SEC grandfathered the fails instead of cleaning them up and they only got worse. The judge just doesn't want the system to collapse when the truth gets out. He's really keeping all of it hidden for our benefit. We should be thanking him for keeping us in blinders.. Justice is blind, and deaf, and mute and quadraplegic... and on life support....
Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By Sean on 12/26/2007 7:42 PM
I think this is huge!!

2007-12-20 21:08 ET - Street Wire

Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission


by Mike Caswell

The U.S. Securities and Exchange Commission has filed civil fraud charges against Bermuda brokerage LOM (Holdings) Ltd. for manipulating two Vancouver stocks, Sedona Software Solutions Inc. and SHEP Technologies Inc. The suit, filed on Wednesday, Dec. 19, in New York, names LOM principals Scott and Brian Lines as defendants, as well as two Vancouver men, William Peever and Phillip Curtis.

The SEC is seeking to ban Scott and Brian Lines from penny stocks for life. The regulator alleges that they and others secretly took control of Sedona through nominee accounts. Using paid touts, deceptive press releases and manipulative trades, they kept Sedona at prices between $9 and $10 while they dumped 159,300 shares, for proceeds of $1.5-million. The scheme ended when the SEC halted the stock. (All figures are in U.S. dollars.)

In the alleged SHEP manipulation, the script was almost the same, except the defendants made $4.3-million selling three million shares.

The Lines brothers, who operate LOM (Holdings) and its various subsidiaries from Bermuda, have not responded to the allegations.

SEC's complaint

The SEC's 67-page complaint names as defendants the Lines brothers; LOM (Holdings) and its various subsidiaries; Anthony Wile, 39, a Canadian living in Florida; Wayne Wile, 63, a Canadian living in the Cayman Islands; Robert Chapman, 72, a stock tout from Florida; William Peever, 48, a Vancouver resident and an LOM client; Phillip Curtis, 47, also a Vancouver resident and an LOM client; and Ryan Leeds, 35, a Florida stock broker.

SEC describes Sedona manipulation

The Sedona allegations trace back to December, 2002, when the Lines brothers struck a deal to merge Sedona with Renaissance Mining Corp. Inc., a private company owned by Tony Wile. Renaissance had a deal to acquire three gold mines in Central America, but needed $5-million in financing. The Lines brothers agreed to serve as Renaissance's investment banker, and they also agreed to take Renaissance public through a merger with Sedona, a shell company.

The SEC claims that in January, 2003, the Lines brothers secretly acquired control of Sedona. To conceal their ownership, they used five nominee companies called Gateway Research Management Group Ltd., Clyde Resources Ltd., Warwick Ventures Ltd., Iguana Investments Ltd. and ICH Investments Ltd. They enlisted several friends to be "signature directors" of these nominees. The friends were responsible for signing any paperwork, but did not put up any money.

Meanwhile, Tony Wile was issuing deceptive news releases on Renaissance that gave the impression the company had acquired three producing gold mines in Central America. A Jan. 8 release said the company had transitioned from exploration to production in just a few short months. In fact, the SEC says the company only had a letter of intent to acquire three mines, and the acquisitions were contingent on the company raising $5-million, among other things.

To kick off the promotion, Tony Wile held a party in Boca Raton with over 100 people. He notified Brian Lines of the event in a Jan. 2, 2003, e-mail. "This is the start of a massive promotion," he said. "Too bad you can't be in Boca [for the party]."

Around the same time, Mr. Chapman and three other newsletter writers issued purportedly independent research reports on Renaissance. Mr. Chapman, who the SEC says secretly controlled 370,000 Renaissance shares, called the company "an incredible opportunity." He said the stock was at $10 and could hit $62, even though it only traded at three cents.

The Lines brothers were making similar misrepresentations as they tried to raise money for Renaissance. Scott Lines told LOM customers that Sedona would open around $7 to $8 per share on Jan. 21. He also told them that Renaissance had already acquired the mines and that they would produce 100,000 ounces that year.

On Jan. 21, some unusual trading began. The Line brothers placed an order to sell 20,000 shares at $9, and 13 minutes later, Wayne Wile placed an order to buy 5,000 shares at $8.25. This was highly unusual, because the stock had been dormant for seven months and last traded at three cents. Similar trades followed.

After that, numerous public investors bought the stock at artificially inflated prices, the SEC says. Between Jan. 21 and Jan. 27, Brian and Scott Lines sold 143,000 shares between $8.95 and $9.40. They had bought those same shares for seven cents.

On Jan. 29, 2003, the SEC suspended Sedona, ending the scheme.

After the suspension, the Lines brothers altered records to conceal their roles in the scheme, the SEC says. Among other things, they told employees to backdate share purchase agreements and told the SEC that the five nominee companies were the true owners of the stock.

The SHEP manipulation

The SHEP manipulation followed almost the same script, except that it included Vancouverites Mr. Peever and Mr. Curtis as shareholders.

At first, the SHEP promotion faced some difficulties, which Scott Lines and Mr. Peever blamed on naked shorters. In spite of that, they eventually managed to sell three million of the company's shares at inflated prices, for proceeds of $4.3-million.

Again, after Brian Lines learned that the SEC was investigating SHEP, he instructed his lawyer to file ownership reports showing that nominees actually controlled SHEP shares. The SEC says the reports are misleading, and Mr. Peever, Mr. Curtis and the Lines brothers were the beneficial owners.

The SEC is seeking orders banning the Lines brothers and the other individual defendants from participating in penny stock offerings for life. It is also asking for civil penalties and appropriate disgorgement orders.

BCSC case

The SEC action comes almost three years after a B.C. Securities Commission panel dismissed allegations that LOM (Holdings) improperly withheld trading records from BCSC investigators. The BCSC was investigating trades that LOM made in San Telmo Energy Inc., a TSX Venture Exchange company.

Those allegations surfaced in May, 2004, just one month before the SEC subpoenaed Scott Lines, Mr. Peever and Mr. Curtis to provide trading information related to SHEP and Sedona. The SEC's case came to Vancouver that June when the SEC filed an application with the B.C. Supreme Court for information about the trading by Mr. Peever and Mr. Curtis.


Re: Judge Decides American Juries Too Stupid To Know Right From Wrong By Sean on 12/26/2007 7:39 PM
My previous post was about the wrong Sedona, not the SDNA that we are awre of but another that was manipulated!!! Sorry about that.
RE: Où est le Quatrième Pouvoir? Is the truth so unspeakable? By RMR on 12/26/2007 7:40 PM
An open letter to leading journalists re their silence on government enabled Wall Street crime.

To: krugman@nytimes.com, gretchen@nytimes.com, keith olbermann , loudobbs@cnn.com, ethicist@nytimes.com, walter hamilton < walter.hamilton@latimes.com>, Dan Jamieson , kathy.kristof@latimes.com, norris@nytimes.com, Bill Oreilly , Joe Scarborough , slabaton@nytimes.com, sorkin@nytimes.com, Ben Stein , tom.petruno@latimes.com, walt@nytimes.com

Cc: Robert Greenwald , jeff@jeffcohen.org, newshour@pbs.org, crooks liars , debra@naomiklein.org, thom@thomhartmann.com, Liz Moyer , fran kessler , nvonhoffman@observer.com, jconason@observer.com, huffington post

Dear Journalists:

While pandering politicians and milquetoast media gush and flush over steroids, dogfights and other drivel dujour, there are people out there stealing trillions of OUR very own real money-- and being allowed, if not enabled to get away with it because those legally responsible for protecting the investing public and enforcing the laws on the books-- do just the opposite; with no one, including most of y'all, doing much of anything to hold anybody accountable. Où est le Quatrième Pouvoir?

It wasn't just the Inspector Generals at State and the EPA who resigned with plenty to be ashamed of. But when the SEC's longtime IG ignominiously flew the coop after a major coverup and years of looking the other way, for you guys, it was a non-event. How come?

Various sections of the US Securities & Exchange Acts expressly oblige the SEC to refrain from and prohibit any acts that harm the investing public -- yet they have regularly, consistently, almost addictively ignored the statutes' mandate-- to instead permit and thereby encourage explicitly proscribed conduct that unfairly and illegally steals from the public to enrich hedge funds, investment banks, broker-wheeler-dealers and other market insiders-- all to the extreme prejudice of the investing public and the global credibility of US capital markets.

Contrary to the odious blather of SEC Chairman Cox, our markets are not "the gold standard of integrity"-- but of fraud and deceit.

If they can raise capital elsewhere (and they can), European and Asian companies avoid US exchanges not because our reporting requirements are too stringent, but because they know our securities markets are murky cesspools of manipulation and malfeasance, and want no part of them (no matter how much Senator Chucky spins-for-his-supper to the contrary).

Do you all just accept that the US stock markets are thorougly corrupt-- and you're just not allowed to talk about it-- except under cover of spineless adolescent epithets like mischief, hijinx, and shenanigans? Why are those words always used to chide billion dollar Wall Street criminality-- but never the common thief who steals far less?

And how come former SEC chairman Harvey Pitt's recently pronounced Ten Requirements For a Level Playing Field,* a pragmatic blueprint for real market reform, was, for most of you, another non-event? As if it had never happened. The former head man speaks the truth about the markets, and how to fix them-- but it's of no interest to you? Duh?

Don't you all have pension funds/investments of your own? A trust fund, or something tucked away for your old age or your family's security?

So what about it, Lou Dobbs? You know the market down and dirty. Does it commit more or less egregious crimes than the lettuce pickers? Why not vent your righteous wrath on the big bucks being cherrypicked by the un-policed counterfeiting and trading of phantom shares, entitlements, and off balance sheet "swaps,"* mere ghosts of the legal securities they kidnapped and "dematerialized" ** to hide the ugly truth from the unwitting, chronically uninformed, misinformed lambs of the investing public.

Come on, Paul Krugman, you're a trained economist and an astute political observer. What you write about lack of foresight and oversight from the Fed applies no less to the crime-blind, investor-betraying SEC. How can you possibly not know this? Like your ever-equivocating quipster colleague Ben Stein, you've probably got some hedge fund pals too, but are you really unaware of Wall Street's intentionally opaque, sinisterly skewed playing field and the grievous injury it perpetrates on the tens of millions of American investors former SEC honcho Arthur Levitt described as "the most undersupported and underrepresented constituency in the country"?

And you, Gretchen. I know you know the score-- and that the SEC's failure to protect the public arises not from computer shortages-- but from gross ethical deficiencies-- from the top down! Just which editor is it at "all the news that's fit to print" who tells you if the shoe fits Wall Street-- it's too tight for the NY Times? Is that why neither you nor any of your brethren have sifted the cover story to enquire as to how the Milberg Weiss firm just happened to have plaintiffs handy to sue certain companies just after certain hedge funds had established huge short positions therein?

Don't you all know enough already about the massive lies and manipulation that occur daily in the markets to at least wonder whether you actually own what your monthly brokerage statements say you own?

And what about that $192 billion in undelivered securities-- on the NY Stock exchange alone? Shares people bought and paid for in good faith, but somehow never received-- even though the sellers got paid and the brokers on both side of the transaction got paid... It's likely that $192 billion is but a fraction of the real figure which could be ten or twenty times greater if you factor in offshore and off the books transactions.

Keith Olberman-- you deserve a medal for your outspoken courage and integrity, but if ever your on-the-nose, call-a-spade-a-spade indignation was needed, it is here and now regarding the wild west, oversight-free, government-abetted, institutionalized corruption of our capital markets that sacrifices companies, lives, and highly desirable medical and technological advances to the unchecked greed of free-roaming market predators with "juice" (as a senior SEC officer recently called it).

How can you all be so sure none of those phantom undelivered shares are in your own accounts-- represented only by the IOUs of your trusty broker-- rather than the actual shares and bundle of stock ownership rights you thought you bought, including voting rights and the right to receive a real dividend taxable at only %15-- rather than a broker's pseudo-dividend "payment in lieu of dividend," taxed at much higher ordinary income rates? Better check that tiny print in your brokerage agreement.

For those not already o & o, or should I say "captured" by the $ecurities industry-- how can you just ignore reality? Or are you indeed, forbidden to think or write the truth? If so, it's very sad, because one of these days, the truth will out-- at least on this subject. Thanks to the internet and the dedicated efforts of market reform advocates like Byrne, OBrien, Patch and others, too many people already know! The secret is out! And the roster of shareholder and company victims is expanding exponentially-- along with their outrage and disgust at the pompous pretense of law enforcement and integrity; a sanctimonious hypocrisy that punishes a Martha Stewart and the occasional teenage tout-- but gives a virtual free pass to professional Wall St. thieves who steal with impunity in a zero sum game they have rigged, to near perfection.

We no longer have to wait for Steps 8 (Restrict the Press) and 10 (Subvert The Rule of Law) of Naomi Wolf's prescient End of America warning. Regrettably, they are already upon us. And where are you, once noble knights of the Fourth Estate?

Most sincerely,
R. M. Rosenthal


*Former SEC chairman Harvey Pitt's Ten Requirements For a Level Playing Field:

http://pointers.audiovideoweb.com/stcasx/avwebnjwin9536/nov16/event_clip.wmv/play.asx


"First, SROs and the SEC need actively to pursue ongoing chronic and serial short selling infractions.

Next. Meaningful penalties have to be imposed for violations of existing Reg SHO requirements.

Third, the SEC should define and punish as fraud, abusive naked short selling practices.

Next. The SEC should act quickly and forcefully, otherwise, state regulation is more likely. And as I’ve already said, I don’t think that’s the best way to go. Our capital markets work because they’re governed by uniform rules from Portland, Maine to Portland, Oregon. State regulation means fragmented requirements, practices, and procedures, and could cause loss of our competitive edge.

Next. The SEC should eliminate the option market maker exception. It isn’t demonstrably of any value, and it risks facilitating illegal activity.

Next. Reg SHO should impose firm locate requirements as a condition precedent to all short sales.

Next. Reg SHO should cover securities that are also traded in the pink sheets. Naked shorts occur in the shares of small, thinly traded issuers, and those are likely to trade in the pink sheets.

Next. Chronic and unjustified violations of T+3 settlement rules should be punished.

Next. Before brokers are allowed to borrow margin shares, they should make clear disclosure and give investors the opportunity to opt out.

Next. Securities lending should occur openly and transparently at arm’s-length prices, enhancing returns, increasing efficiency, promotion valid short selling, and curbing abuses.

Next. The NSCC should allow members to settle borrowing and lending activity through these facilities that I’ve just mentioned so accurate accounting and data is available to market participants and regulators.

Next. Shady activities thrive in shadowy market corners. Exchanges in other markets should be required to report the securities on daily threshold lists and aggregate daily volume of fails for each such security.

And, finally, Form 13F institutional investor reports should disclose both short and long positions. That would provide issuers and investors with a better understanding of trading activity."


**dematerialization

Starting in 2008, the exchanges and broker-dealer owned and controlled DTCC are requiring companies to make all their outstanding shares eligible for DRS (Direct Registration System), otherwise known as the "dematerialization" of stock certificates. If they succeed in this scurrilous scheme, it will mean the elimination of all paper stock certificates and any way of EVER reconciling the actual number of real shares extant in the clearance and settlement systems. Just like attempts to eliminate paper ballots and any paper trail via electronic voting machines, the elimination of stock certs would enable the criminals to eradicate the only existing physical evidence of their wrongdoing. No oversight. Just trust us.



***swaps

Re: Lenin: Repeat A Lie Often Enough....
By wiki on 12/9/2007 9:25 PM
- swaps to simulate a call off balance sheet.

"The first swaps were commonly used as a way to hedge exposure to market risk for a low fee. For instance, if a trader decides to short sell a stock, there is considerable "market risk" if the stock price rises. In order to hedge that risk, the trader could enter a swap agreement for the same stock, paying a small fee to "hold" it while not actually having to pay for the stock itself. In this case if the stock price does rise, they simply end the swap and use the stock to pay off the short. In effect, they are buying insurance against their position. Known as total return swaps, in these contracts all cash flows, dividend payments for instance, are payed or received by the holder as if they owned the stock directly. Yet for accounting purposes they are off-balance sheet and do not appear as an asset (they do not legally own the stock in question)."

http://en.wikipedia.org/wiki/Swap_%28finance%29

Edits:

http://wikiscanner.virgil.gr/f.php?ip1=69.74.41.0-255&ip2=167.206.132.0-255&ip3=12.149.140.128-191

Re: Lenin: Repeat A Lie Often Enough....
By wiki on 12/9/2007 9:26 PM
This swap thing could be REALLY important.

As I understand it:

Let's say Mr. Short has attacked a victim company and is short $10 million worth of that company's stock. He is at great risk if the stock goes up, so he does a deal with the prime brokerage. He explains to them that he is going to continue to short the sh_t out of the victim company, so it likely won't go up, but he enters into this deal.

He agrees to pay the prime brokerage the 5% interest on $10 million if they agree to pay him any capital gains and dividends on $10 million worth of the victim shares.

He hasn't put up a dime for this agreement. At 5%, he pays $42,000 per month to in effect insure his short position. He pays them interest on money that doesn't exist and they agree to pay him the upside on shares that don't exist. Because the SEC has said a long contract is the same as owning the shares, he isn't technically short. His long contract cancels out his short position, so he doesn't need to borrow real shares.

Example:

He shorts 40 million shares of victim co. at $25
He needs to put up 102% of the net value, but he has the proceeds from the sale, so he has to put up 2% or $200,000 as collateral.

A) Outcome A, stock down 20%: He's bet well and the stock has gone down to $20 six months later. He's only tied up $200,000 of his own money + ($42,000 x 6). He buys back in at $20, for 8 million and the prime brokerage gives him back his $200,000 collateral.

He makes $10 million - $8 million - $252,000 in swap fees or $1,748,000. I'll say it again, on risking $200,000 in collateral and promising to pay $42,000 per month, he has made almost $2 million.

B) Outcome B, stock running like stink and is up 100% to $50. No problem, he just collapses the swap. His profit on the swap is exactly equal to his loss on his short position.

He gets back his collateral, so that doesn't matter. His loss is only 6 x $42,000 or $252,000.

C) Outcome C, stock goes to zero. He makes $10,000,000 - $252,000 or $9,748,000

Both sides can't lose. The prime brokerages don't care as they've agreed amongst themselves to just net to create infinite numbers of claims on real shares. They know they can't ever be bought in and they make fees on every transaction they do with their hedge fund customers. Most of the time it will go down and they get paid interest on money that doesn't exist. They also keep the interest on the 102% cash while it is being held as collateral and the profits will likely continue to sit in their coffers for the next deal.

The hedge funds can manipulate stocks down without any fear of a squeeze. The worst that can happen to them is they lose their interest payments for the time they were short.

The contract is off balance sheet and not taxable to either party as no one bought anything and there is no capital gains. It's only a swap of cash flows that nets to nothing.

Imagine if you are the SAC Capital sized hedge fund manager. For the cost of the interest payment, you can balloon your assets by 50 times, then collect your three percent management fee, EVEN IF YOU LOSE.

What I've described is an equity swap, but they do it for interest rates, currencies, etc., putting the whole world financial system at risk. No wonder they are afraid to buy anyone in.

"The five generic types of swaps, in order of their quantitative importance, are