First here is the definition I found in the online Meriam Webster Dictionary:

>> Pon·zi scheme – an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks.

My first thoughts when the news about the Madoff “ponzi scheme” hit the news wires was that the term “ponzi scheme” did not apply to naked shorting. Now I am beginning to think that this first thought was NOT CORRECT.

When I consider that “naked shorting” is “illegal counterfeiting,” and that the counterfeiting hedge funds and their supporting cast members might very likely have to declare bankruptcy if they were FORCED to buy in the open market all the counterfeit share they created, then there seems to be some connection between the term “ponzi scheme” and “naked shorting/ counterfeiting”.

Consider this:
“…investors are paid off with money put up by later ones”

Counterfeiting hedge funds are making easy money through counterfeiting and they are NOT explaining to their “new investors” (nor old ones) that they keep a “second set of books” which show the continually rising debt they are daily accruing for converting the counterfeit shares into genuine shares through regulatory mandated “buy-ins”.

Since the counterfeiting hedge funds are hiding their second set of books, and not explaining to investors they are accuring a hiden debt, is not this a type of “ponzi scheme?”

Thank you and the others for all you do to help us in this struggle.

I’m well aware of the “Catch 22″ here wherein a family run corporation may have already committed enough of their own funds and that you might not able to expand UNTIL you go public.

Yet to be cash flow positive development stage corporations are the prey of choice for abusive naked short selling criminals. Why? Because they can predictably put your share price into a “death spiral” which will FORCE you to sell shares into the market to fund your monthly “burn rate” at lower and lower share price levels throughout time. By the time you do become cash flow positive you are likely to have so many shares “outstanding” that any future earnings are going to be diluted by a gazillion shares and your all-important “earnings per share” (EPS) will still be negligible and your future share price will be predicated upon a multiple of EPS.

That’s why these criminals love to attack biomedical companies with new cancer cures because they know that they have huge monthly “burn rates” and that due to the nature of the FDA approval process there is no way that this company will be cash flow positive for a very long time. The decision making process for certain of these abusive naked short selling criminals becomes saving human lives versus purchasing a yacht longer than your neighbor’s yacht in the Hamptons.

Unregulated hedge funds spend $11.2 billion annually to the DTCC participating market intermediaries willing to be the most “accommodative” (break the greatest number of securities laws) to the needs of the hedge fund manager making “2 and 20″. In a “closed system” like Wall Street where do you think the billion dollar plus annual “earnings” of dozens of hedge fund managers come from?

Once a naked short position gets to a certain level the bad guys need to naked short sell all day long just to keep the collateralization requirements tolerable for an astronomic naked short position. If they merely stopped their daily naked short position then the share price will gap upwards. It’s tough to cover an astronomic naked short positon in a market that’s already gapping upwards. After covering 10% of your naked short position the price level might be at a level wherein the collateralization requirements for the other 90% might be financially prohibitive.

One has to appreciate how incredibly easy it is to “accidentally” run up an astronomically large naked short positions wherein the company under attack doesn’t go bankrupt on cue. Why not? Because maybe just maybe they weren’t the “scam” that the bad guys thought they were and there are tons of buyers more educated than the bad guys in the business that the company under attack is in.

Every single DTCC participating market intermediary is extremely financially incentivised to flood the share structures of pretty much all corporations with FTDs and the “securities entitlements” that they procreate. The coup for the bad guys ocurs when the NSCC predictably claims to be “powerless” to buy-in the delivery failures of its abusive “participants” that absolutely refuse to deliver that which they sold even though the NSCC is the “Central counterparty” to that trade that is now the creditor of that failed delivery obligation.

There could never be a systemic fraud as beautifully designed or as effectively covered up as abusive naked short selling is.

By: pleiadian
13 Jan 2009, 10:12 AM EST
Msg. 36826 of 36826
Jump to msg. #

What if the Fed Bank has been cornered and the treasury has taken it over. As far as I am concerned all the Naked SHorting of equities profits ultimately go back into the Fed bank coffers through their surrogate the DTCC..Is the Fed Bank being forced to use all the cash they have stolen and that is why all the infusion of cash that is keeping the market floating. Covering all the naked short shares. Just a thought…..

R101

Some of their wriggle language:

Transcript: “DTC is the record holder of all of those shares 12 through CDINCO”
Dave: In other words, the DTC keeps track of how to divvy Cede’s ownership among clearing house partcipants of the DTC (in most cases, not the actual broker or investor unless they use DRS)

Transcript: “All of that is in our nominee named CDINCO. The stock is not re-registered and all of the movements take place through a book-entry system at DTC.”
Dave: In other words, the DTC registers it in the name of the mysterious Cede, who they nominate to own it. It doesn’t tell you who owns Cede.

Transcript: “we issue a proxy card to all our registered proxy holders, including CDINCO, which then issues an omnibus proxy card to all the people that they held chairs for, including all the brokers, who then issue proxy cards for all their
voters. And the shares that are loaned out, then they get another proxy card.”
Dave: But you can’t vote proxy cards. At the end of the day, the proxy cards are only directions as to the wishes of all the various entities that have claims on IOU’s and they finally get reconciled into netted directions / wishes for Cede and as far as I can tell, Cede generally votes in accordance with those wishes.

But the reality is that as Senator Metcalf was told by the lawyers, Cede has the right to vote as it sees fit as it literally owns the shares and only has a trust agreement with the beneficial owners which is only governed by contract law.

The penalty for voting against instructions is just damages for civil breach of contract.

It just seems bizarre to me that the DTC wouldn’t more clearly disclose the relationship between themselves and the actual owner of the shares.

Cede must have a board of directors and domicile and corporate charter. What is it? Are the shares encumbered or subject to counterparty risk? Why does the DTC need Cede? Why not just register electronically each night in the clearing participant’s name at the company transfer agent? How would the computer horsepower required to move actual ownership be any different than moving beneficial ownership, which they do each night today?

This is a link to an SEC “Roundtable” addressing voting issues. Starting on the 11th page is a good summary of how the DTCC is “wired”. When you see “CDINCO” substitute “CEDE and Co.” the nominee of the DTC. The “Broadridge” citation refers to the old “ADP” due to a spin off.

Senators Raise Questions About Geithner’s Nomination at Treasury

By JONATHAN WEISMAN

Sen. Charles E. Grassley, ranking Republican on the Senate Finance Committee, is raising questions about a housekeeper who worked briefly for Treasury Secretary-nominee Timothy Geithner without proper immigration papers, and multiple years when Mr. Geithner didn’t pay Social Security and Medicare taxes for himself.

Senate Finance Committee Chairman Max Baucus (D., Mont.) has summoned committee members to his office this afternoon to air the matter ahead of any public confirmation hearing.

According to people familiar with the matter, Mr. Geithner employed a housekeeper whose immigration papers expired during her tenure with Mr. Geithner, currently president of the Federal Reserve Bank of New York. The woman went on to get a green card to work legally in the country and federal immigration authorities didn’t press charges against her, these people said.

The second issue involved taxes due while Mr. Geithner worked for the International Monetary Fund between 2001 and 2004. As an employee, Mr. Geithner was technically considered self-employed and was required to pay Social Security and Medicare taxes for himself as both an employer and an employee.

He apparently failed to do so, resulting in Internal Revenue Service audits his last two years at the IMF. As soon as the IRS brought the issue to his attention, he paid the taxes with interest, these people said.

It’s unclear how much of an impediment these issues will be to Mr. Geithner’s nomination. On its merits, his ascension has been widely praised. Mr. Geithner spent most of his career managing government responses to financial crises, from the 1990s bailouts of Mexico, Indonesia and Korea, to the market meltdown that has brought Wall Street to its knees.

At the same time, similar issues have derailed nominations in the past. President Clinton’s first and second choices for attorney general both withdrew amid allegations that they failed to pay taxes for household help. President George W. Bush’s first choice for Labor secretary withdrew after it emerged that she had employed an illegal alien.

Obama aides said they didn’t believe these issues would present a problem, given the minor nature of the infractions and the gravity of the role he has been nominated to take.

On the tax front, Mr. Geithner’s oversight is not uncommon. The IRS has mandated loose rules for U.S.-born IMF employees unaware of their obligations to pay payroll taxes.

Sen. Baucus nonetheless decided to hold a closed-door meeting to allow the two matters to be aired before Mr. Geithner’s public confirmation hearing.

“It’s important that I talk to senators, which I’m going to be doing,” Sen. Baucus said as he went into the meeting.

Democratic senators plan to defend Mr. Geithner, saying that the nature of the complaints pale in comparison to the gravity of the crises he has been asked to face, a severe economic recession, turmoil in the financial markets and the collapse of the U.S. auto industry.

Write to Jonathan Weisman at jonathan.weisman@wsj.com

Source: Geithner failed to pay personal taxes

WASHINGTON – Treasury secretary designee Timothy Geithner is meeting with senators to discuss why he failed to pay personal taxes and check the immigration status of a housekeeper.

An official with President-elect Barack Obama’s transition office says Geithner (GYT ner) answered senators’ questions during a meeting he requested Tuesday. The person requested anonymity because the source is not authorized to speak publicly on Geithner’s situation.

Obama’s transition team was expected to release a statement about the issue later Tuesday.

Obama named the 47-year-old Geithner as his pick for Treasury secretary in November, citing as a top priority tackling the nation’s financial crisis.

Is there any chance there could be enough opposition to her nomination to cause Obama to rethink this one? I am afraid she just isn’t up to the tough enforcement that is required here. We need someone like maybe Gary Aguirre, Patrick Fitzgerald, or meybe even Robert Shapiro. Who will be involved with her confirmation hearings? Can we influence these folks? Can we encourage them to either block her or get her to hire one of the above for the enforcement division?

The whole voting proxy thing is a bit of a fraud as Cede doesn’t legally have to follow the instructions provided to them as the “actual” legal owner of shares doesn’t have to vote the way the “beneficial” owners direct them to.

My belief is they never have to exercise this right as there is self censorship. Just as an editor of a media outlet would never run a story criticising a major advertiser, an officer of a media outlet would never select a slate of board members that weren’t friendly to Wallstreet’s interests.

http://www.bis.org/publ/cpss20r3.pdf

It is interesting that the NSCC, DTC and DTCC have different corporate types.

As I understand it, the reason they need a nominee is because under NY State Banking law, the DTC is not allowed to register client assets in their own name. If it was an alter ego or a subsidiary of the DTC, it would show up in the DTC annual report and it doesn’t.

The word nominee means the organization that you nominate – in other words, a different organization. It has to be a different organization to comply with law, which begs the question, what IS that organization?

Senator Metcalf tried to determine the ownership in 1971 (28 years before the DTCC was formed) and he concluded it was another name for the Stock Clearing Corporation, a private subsidiary of the privately owned NYSE. Now that the NYSE is public, I have to wonder who Cede was spun off to.

See pg. 3 where he identifies Cede & Co. as the Stock Clearing Corp., the private sub. of the private NYSE. Why all the cloak and daggers secrecy? Why wouldn’t the DTC register in the name of DTC Trust Co. and describe DTC Trust Co. as a non profit in their annual report? Why, instead, use a private company?

http://www.bearfactsspecialistreport.com/Specialist%20System%20Articles/Who%20Owns%20America.doc

“On June 24, 1971, Senator Metcalf asked “Who Owns America?” and entered into the Congressional Record the “Secret Nominee List,” which gives the corporate code names used by American companies to hide there identity of stockholders from the public. He began his remarks ask follows:

Aftco, Byeco, Cadco, Bebco, Ertco, Fivco, Forco, Gepco, Ninco, Octoco, Oneco, Quinco, Sevco, Sixco, Tenco, Treco, Twoco . . . may sound like a space age counting system. In reality, each is part of the corporate code. Each of these names is a nominee, a front name, used by the Prudential Insurance Company of America to hide some of its interests.

Use of nominees, also known in the securities trade as “street names” or “straws” to hide beneficial ownership is a common corporate practice today.

How does one find out that Aftco is really Prudential, that Kane & Company is really Chase Manhattan Bank, that Cede & Company is the Stock Clearing Corporation, which is a wholly owned subsidiary of the New York Stock Exchange?

The answer is simple if you are a select insider. The answer is much more difficult or impossible to find out if you are an outsider, even a party to a case in which corporate ownership is an important issue.

Many answers are found in the “nominee list.” The American Society of Corporate Secretaries, 9 Rockefeller Plaza, New York, N.Y. 10020 publishes it. The executive director of the society was John S. Black, Jr.

The managing editor of a string of suburban newspapers, W.J. Elvin III, of Globe Newspapers, Vienna, Va. asked the society for a copy of the “Nominee List.” His request was denied. Mr. Elvin was told that distribution is limited to the membership.

Mr. Melvin then asked for a copy of the society’s membership list. That request too was denied. Its distribution was also limited to the membership he was told.

At the request of Senator Metcalf the American Society of Corporate Secretaries promptly furnished him with a copy of its February 1971, edition of the “Nominee List” The information in this publication, nowhere else available to the best of my knowledge, belongs in the public domain. The press, counsel for the public and, indeed Government regulators and administrators as well as the Congress and the public generally need to know who owns America.”

If I’m not mistaken being a “limited purpose trust company” forces it to act through “nominees” in certain legal situations. The next time you talk to a bank regulator or SEC staff attorney have him explain how “central counterparties” operate in a clearance and settlement system based upon the legal concept of “novation” and you’ll probably get a blank stare which is just what abusive naked short sellers want. Do you want to know who the true genius is that can explain every tiny nuance of the clearance and settlement system and how the DTCC is “wired’? It’s Bernie Madoff. The “Madoff exemption” he authored was brilliant in allowing abusive naked short selling market makers to bypass the “Uptick rule” in effect at the time. He’s the guy that brought the International Clearing Agency and folded it into the NSCC. Those with the superior knowledge of a system like our DTCC-administered clearance and settlement system can and will run circles around investors and regulators.

Every securities law has a gray zone around it. If you link together the gray zones of laws “A” thru “Z” then the fraudsters will opine that “technically” we’re not breaking any laws. When you look at the trip from A to Z directly it is clearly a heinous form of fraud. Either way it is an “artifice to defraud” no matter how clever it was constructed. Rule 10b-5 and the new 10b-21 clearly dictate that these activies are “fraudulent”. Now if we can get the DOJ educated then they can provide the truly meaningful deterrence that the a “captured” regulator like the SEC can’t. One fact that holds true is that it really is silly for a billionaire to be hanging out in jail.

http://www.thebailoutgame.us/

It dates back at least to 1971 (http://www.bearfactsspecialistreport.com/Specialist%20System%20Articles/Who%20Owns%20America.doc)
long before the DTC, DTCC or NSCC even existed.

The reason the question is important is if it is a non profit, then who runs it and what is its charter? If it is a for profit partnership, is there any lien against the shares other than by the beneficial owners?

What is the domicile?

It’s easy to do hand waving and say “oh it’s just the alter ego of the DTC”, but if that’s true, why doesn’t it show up on a company search? It’s not the DTC doing business as another name as in that case, it would show up in the annual report.

Isn’t it strange that the actual owner of most bonds and equity in the country is anonymously controlled?

My belief is it is probably owned by the same people who owned the NYSE before it went public, which makes me wonder if there is any counterparty risk with them being the actual owner of my shares.

The predecessor company was the “stock clearing corporation” and its not that easy to get information on that one, either, other than it was privately owned by the NYSE, which itself was privately owned.

Part of the issue here is that 17 A mandates the “transfer of ownership” during a transaction otherwise it’s a “wash sale”. The person representing any corporation entrusted to monitor for any “counterfeiting” issues is the company’s transfer agent and registrar. These guys are intentionally blinded because all they see is that “CEDE and Co.” owns perhaps 85% of all of the shares.

Recall that in a crime as obvious as refusing to deliver that which you sell you need to operate in the dark. “Darkness” is brought about by the “anonymous pooling” of shares, having CEDE and Co. act as the legal owner, SBP activity, blinding of the transfer agent and registrar, having the DTC acting as the “custodian”, having the NSCC act as the “qualified control location”, having the DTC act as the official “depository” for shares, not showing which MM bought and sold from which MM during a transaction, unregulated hedge funds operating out of tax havens with strict banking secrecy laws, brokers refusing to file “SARs” reports, etc.

The first glimpse of “light” in this “black box” we call the DTCC was seen by Dr. Leslie Boni from the University of New Mexico in 2002 while acting for the SEC as a visiting economics scholar researching Reg SHO issues. She reported finding surprising levels of “intentional” or “strategic delivery failures” all over the place.

Dr. DeCosta is completely correct, but in most cases it is indirect. To clarify, over 90% of the brokerages go through a middle man, before getting to the DTC.

Often, tremendous hanky panky takes place at this middle man (Adler Coleman, Refco, MJK Clearing bankruptcies come to mind) long before the post netting fails the SEC admits to knowing about.

If your brokerage isn’t listed as a participant, then the DTC considers the middle man (clearing brokerage) the beneficial owner, not your brokerage.

http://www.dtcc.com/customer/directories/dtc/dtc.php

Your citing of 15c3-3 is very astute but of course the crooks on Wall Street found a way to circumvent its obvious attempt to protect the customers of brokerage firms and the circumvention is once again carried out by our friends at the DTCC. Rule 15c3-3 is referred to as the “CPR” or “customer protection rule”. The intent was to mandate that the buying b/d go out and proactively take “possession or control” of all fully paid for securities. This makes sense because the buying b/d just took a commission as an “agent” which gave rise to a fiduciary duty of care. The least it can do is to go out and take possession of that which its customer just paid for.

Over the years I’ve written extensively on how Wall Street bypasses this rule. It has to do with a two-lettered word and the word is “OR”. The buying b/d must take “possession OR control”. It has an option. Possession is the real McCoy. The buying b/d goes out and gets “possession” of that which its client bought. “Control” is a vastly different matter. “Control” can be achieved by keeping shares at one of 12 locations on Wall Street referred to as “qualified control locations”. Approximately 98% of Wall Street b/ds use the DTCC as their “qualified control location”.

The intent of this crucial “customer protection rule” was for the buying b/d to go out and take physical possession or control “OR” to keep the shares of the purchaser at a “qualified control location” THAT WOULD DO IT FOR HIM. The mandate for a “qualified control location” is to proactively go out and take “physical possession” of the securities purchased by its “participants” that count on it to attain compliance with the CPR.

The DTCC in no way, shape or form proactively goes out and takes “physical possession” of that which its participants relying on it to attain compliance with the CPR purchase. They act 180-degrees antipodal to that. Instead of taking possession of securities they allow their abusive participants to crank out “securities entitlements” like crazy just opposite to the intent of the CPR. By definition you cannot “take possession” of an “accounting measure/IOU” referring to the presence of an FTD i.e. a “securities entitlement”. The FTD is the result of this particular “qualified control location” NOT taking physical possession of that which its participant relying on it to attain compliance with the CPR recently purchased. The granting of compliance with the CPR to the participants of the NSCC when the “qualified control location” is secretly undermining the intended protective effects of the CPR is unconscionable. When the “qualified control location” behaving this way is also a “securities cop” known as an SRO or “self-regulatory organization” and when the financial benefits of this malfeasance is bestowed upon the “participants/owners” of this SRO then you’re obviously witnessing criminal behavior of a very heinous nature.

The clearing brokerages provide them with statements implying that the shares are there when they aren’t as they lend the shares from their inventory (the clearing brokerage is the beneficial owner from the DTC’s point of view) to other introducing brokerages that are short.

My interpretation of this is that there is a reserve bank account somewhere for each brokerage.. from which one could readily tell the value of all securities that had not been delivered… It wouldn’t matter if there were ex-clearing deals, the money has to be put in the reserve account.

!!! THIS IS FRAUD !!!

They couldn’t borrow money at high interest rates, so their solution was to borrow $2 trillion from their customers at low interest rates, lie to them and tell them they are lending it to the government?

Treasuries interest rates are set in an auction, so all this extra BS treasury sales pushes the interest down, ripping off Joe Taxpayer.

Someone needs to go to jail over this.

Fails to deliver of stock can be complicated to understand and is easy to blame on the company, but fails to deliver of government securities are easy to understand.

Take a minute and email your representative and demand they investigate why the taxpayer is being ripped off.

https://writerep.house.gov/writerep/welcome.shtml

http://investorprotectioncoalition.org/files/Euromoney_Magazine_FTD_Treasuries.pdf

“Following the collapse of Lehman Brothers in September, fails to deliver among the 17 primary dealers in the US treasury market have rocketed to more than $2 trillion over a period of weeks and still lie above $1.3 trillion.”