Michael Milken, 60,000 Deaths, and the Story of Dendreon (Chapter 15 of 15)


    What follows is PART 15 of a 15-PART series. Soon, we will publish the full 15-part story as a single document.

    Click here to read PART 1

    Click here to read PART 2

    Click here to read PART 3

    Click here to read PART 4

    Click here to read PART 5

    Click here to read PART 6

    Click here to read PART 7

    Click here to read PART 8

    Click here to read PART 9

    Click here to read PART 10

    Click here to read PART 11

    Click here to read PART 12

    Click here to read PART 13

    Click here to read PART 14

    Where we left off, we had learned that on March 29, 2007, an FDA advisory panel had overwhelmingly voted to approve Provenge, a prostate cancer vaccine developed by Dendreon.  As a result, most financial analysts and investors believed that Dendreon had a promising future. However, ten hedge funds (out of a universe of 11,500 hedge funds) held large numbers of Dendreon put options (bets against the company), suggesting they expected that Dendreon would be derailed. At least seven of those hedge funds can be tied to Michael Milken or his close associates.

    We had also learned that Milken himself stood to profit if Dendreon were to experience  problems receiving FDA approval. This is because Milken was the early financier and principal deal maker for ProQuest Investments, a fund that (along with an affiliate) controlled a company called Novacea, which was one of Dendreon’s competitors in the race to produce a new treatment for prostate cancer. Meanwhile, Lindsay Rosenwald (a Milken crony who once helped run a Mafia-linked brokerage called D.H. Blair, which specialized in pumping and dumping fake biotech companies) controlled Cougar Biotechnology, which was Dendreon’s second competitor in the race to develop a treatment for prostate cancer. And hedge funds affiliated with Milken or his close associates were heavily invested in Cell Genesys, which was Dendreon’s third competitor.

    We had learned further that Milken’s “philanthropic” outfit, the Prostate Cancer Foundation supported Novacea, Cougar and Cell Genesys. The Prostate Cancer Foundation’s support for these companies preceded announcements that they had signed massive deals with large pharmaceutical companies. In the cases of Novacea and Cell Genesys, those deals were soon cancelled on the news that their treatments were ineffective, and the companies’ investors quickly dumped their stock. This fact, combined with other evidence, suggests that the Prostate Cancer Foundation was supporting what amounted to sophisticated “pump and dump” schemes.

    Meanwhile, the Prostate Cancer Foundation snubbed its nose at Dendreon. And in April, 2007, Dr. Howard Scher, who was an executive and director of Milken’s investment fund, ProQuest, and the chairman of the Prostate Cancer Foundation’s “Therapeutic Consortium”, spearheaded an unprecedented lobbying effort to convince the FDA to reject Dendreon’s treatment – the first time in history that the FDA had gone against an advisory panel’s recommendation to approve a drug for terminally ill patients. This lobbying effort had the support of government officials who have ties to Michael Milken.

    In the days before and after the lobbying effort, Dendreon was trashed by a few captured journalists – most notably, CNBC’s Jim Cramer — and was also subjected to a blistering attack by naked short sellers who illegally flooded the market with millions of phantom shares to help drive down the company’s stock price. This criminal naked short selling continued intermittently for much of the next two years, while the SEC did nothing, and while other events conspired to hobble Dendreon, a company that had completed multiple clinical trials that strongly indicated that its product, Provenge, was capable of lengthening the lives of tens of thousands of men with prostate cancer.

    Amazingly, the SEC will not reveal the names of the naked short sellers. As it says on its website, to release information about (illegal) naked short selling would be to reveal the (criminal) hedge funds’ “proprietary trading strategies.”

    * * * * * * * *

    When Dendreon’s FDA application was derailed simultaneously with a naked short selling attack that flooded the market with tens of millions of phantom shares, Dendreon’s supporters went berserk. They sent the government hundreds of letters complaining about the naked short selling and the apparent machinations of Michael Milken’s associates. After that, all but one of the ten hedge fund managers ceased to own “put options” in Dendreon.

    However, the naked short selling continued pretty much unabated for two years. And in April 2009, Dendreon was once again on the SEC’s “Reg  Sho” list of companies whose stock was “failing to deliver” in excessive quantities.  Dendreon stayed on that list even after the company’s CEO announced that results of an Independent Monitoring Committee study of 500 patients were “unambiguous in nature…a clear hit” for Provenge.

    After the CEO’s announcement, Dendreon’s stock, which had been as low as $4 weeks earlier, rose to the mid-20s. Then, on April 28, 2009, just hours before Dendreon was to present this “unambiguous” data to an all-important meeting of the American Urological Association, the now legendary Yahoo! message board post appeared, warning of  a “BEAR RAID” that was to occur at precisely 12:30pm Central time. Right on cue, Dendreon’s stock tanked 65% in matter of 75 seconds (to $7), within minutes of the moment predicted by that message.

    Within hours after that amazing crash, Nasdaq announced that it had investigated the matter and decided to let the trades stand. This was quite remarkable, given that it would have been impossible for the exchange to determine the identity of that message board poster and sort through the trading data in such a short period of time. It is all the more remarkable considering that this “BEAR RAID” was most likely the work of naked short selling criminals.

    At any rate, it is likely that short sellers, recognizing that it was now going to be more difficult to prevent Dendreon from getting FDA approval, used the opportunity of that sharp price drop to cover their short positions. Some short sellers might also have used the opportunity to buy shares, hoping to cash in on the bonanza that was to follow. After the “BEAR RAID,” Dendreon’s stock price quickly rose above $27.

    The night after the “BEAR  RAID”, CNBC’s Jim Cramer (who has begun a “crusade” against the crime of naked short selling in an effort to distance himself from his previous efforts to cover up the crime of naked short selling) said “I’m not qualified to talk about Dendreon.” This was just two weeks after Cramer had screamed that Dendreon had no chance of receiving FDA approval. Now, he was no longer commenting on Dendreon’s chances, but he noted,  “I am a big believer in taking profits when I see a short squeeze. So I am going to recommend taking profits.”

    Some people clearly did take profits. After Cramer’s comment, the stock started to fall, and by May 8, it was at $19. Then the buying started again. Quite possibly, some of the hedge funds that had been short selling Dendreon used the dip to $19 to purchase still more Dendreon shares. After May 8, the stock rose back up to around $25, which is approximately where it remains today. When SEC filings for this period are in, it will be interesting to see which hedge funds bought shares.

    But it will remain impossible to know who the criminal short sellers were. As far as the SEC is concerned, that is a big secret –  “proprietary trading strategies.”

    * * * * * * * *

    After Dendreon reported its data to the American Urological Association –data that showed almost precisely what the data showed two years earlier (that is, that Provenge was safe, and that it lengthened survival times while greatly improving the quality of life for end-stage prostate cancer patients who would otherwise be subjected to the misery of chemotherapy) — Milken’s Prostate Cancer Foundation, which had long shunned Dendreon while Milken’s allies maneuvered to derail it, finally concluded that it was time to say something positive about Provenge.

    “The PCF is delighted to see evidence of increased patient survival from Provenge,” the Milken “philanthropic” foundation said in a press release. “We share the analysis of Dr. Philip Kantoff, a leader in the PCF Clinical Therapy Consortium…and a principal investigator of the Provenge Phase III clinical study. The results validate 16 years of modern research to harness a patient’s own immune system to fight their prostate cancer and prolong their lives…”

    The Prostate Cancer Foundation continued: “The PCF first provided funding to Dr. Eric Small…to support clinical research around measuring immune responses in patients treated with Provenge…”

    In other words, Milken’s “philanthropy” hadn’t spent two years ignoring, and in some cases trying to quash Dendreon’s treatment. In fact, the Prostate Cancer Foundation had supported Dendreon all along!

    This is nonsense. What the Prostate Cancer Foundation did not mention is that Dr. Philip Kantoff, the physician mentioned in the press release, was on the advisory board of Cougar Biotechnology, the company that Milken’s “philanthropic” foundation was promoting as a better alternative to Dendreon.  Moreover, Dr. Kantoff was one of the few physicians to publicly cast doubts on Provenge. He was never able to say that Provenge did not work, but when talking to the press at the time of the FDA advisory panel meeting in 2007, he was dismissive, or at least confused.

    “I didn’t think [Provenge] had a snowball’s chance in hell of working,” Dr. Kantoff told Forbes magazine’s Matthew Herper, the journalist who went to lengths to argue against FDA approval. “I’m still skeptical, but I think there’s something going on here.” Kantoff suggested that Provenge could be a “slam dunk,” but maybe the trial size was too small. Left unmentioned was the fact the FDA had regularly approved treatments for dying patients when relatively small trials had shown such stunning results.

    As for Dr. Small, he too was on the advisory board of Cougar Biotechnology. The Prostate Cancer Foundation did indeed give him funding to measure immune responses in patients treated with Provenge, but it is not at all clear that Milken’s “philanthropic” outfit was keen to see Dr. Small’s study yield positive results. When the study did yield positive results, Dr. Scher, the chairman of the Prostate Cancer Foundation’s Therapeutic Consortium (referred to in the above press release as the “Clinical Therapy Consortium”), spun them as negative results.

    In his letter to the FDA (the one that quickly and mysteriously ended up in the hands of The Cancer Letter), Dr. Scher quoted Dr. Small as saying the following: “In summary, this study suggests that while sipuleucel-T fell short of demonstrating a statistically significant difference in TTP, it may provide a survival advantage to asymptomatic [prostate cancer] patients.” Dr. Small had not written the word “may” in italics. That was Dr. Scher’s improvisation, part of his effort to convince the world that absolute “proof” of efficacy was needed for FDA approval.

    As both Dr. Small and Dr. Scher knew, the “gold standard” for physicians, and the federally mandated standard for drug approval, is “survival” — “substantial evidence” that a treatment may help patients live longer. Perhaps Dr. Small felt constrained in challenging Dr. Scher’s misuse of his study. Perhaps he also felt uncomfortable about joining Dr. Scher, who was, after all, the powerful chairman of Milken’s Therapeutic Consortium, at the meeting of the FDA advisory panel that voted on Provenge in March 2007.

    Dr. Small was supposed to speak on behalf of Provenge at that panel. Perhaps this concerned the folks at the Prostate Cancer Foundation. Either way, Dr. Small was a no-show at the panel that day.

    He apologized – something about a hitch in his travel plans.

    * * * * * * * *

    In May 2009, while Milken’s Prostate Cancer Foundation was rewriting history, Milken’s hedge fund crony, Steve Cohen, who was one of those seven hedge fund managers who had bet big against Dendreon after the advisory panel meeting in 2007, reached out to Care-to-Live, the grass-roots organization that had done so much to highlight the connections among Milken’s “philanthropy,” Milken’s investments, and Dendreon’s travails

    On May 19, one of Care-to-Live’s founders received an email from an employee of CR Intrinsic Investors, which is one of Steve Cohen’s hedge funds.  “I’m an investor in biotechnology and pharmaceutical companies and I’m interested in understanding the patients perspective on Provenge and any other therapies in development…,” the email began. “Would you or someone from Care-to-Live be available speak with me…? I have spoken to a number of academic thought leaders, but I’d like to better understand what the patients want…”

    And by the way, “I’m happy to provide compensation for time spent speaking with me if that is of interest.”

    Milken-affiliated hedge funds already have analysts and journalists regurgitating their party line on command. They also have doctors on the payroll. Might as well put the troublemakers on the payroll, too.

    * * * * * * * *

    Or perhaps Cohen is genuinely thinking about investing in Dendreon. Perhaps he already has. The intentions of this network remain a matter of some speculation.

    Much of this speculation focuses on Dmitry Balyasny, the Russian “whiz kid.” As recently as March of this year, when they filed their last SEC documents, Balyasny’s hedge fund, Visium, held around 900,000  call options in Dendreon. Simultaneously, the hedge fund owned 860,000 put options. It is possible that Balyasny and his associate, Jacob Gottleib, were implementing a split-strike pricing strategy – selling out of the money calls and buying out of the money puts. The effect is to create a large synthetic short position.

    SEC documents show that during much of the past two years, Balyasny’s funds also owned large numbers of Dendreon shares. These could have been shares that they bought to cover short positions. Or it could be that they owned shares to gather proxy votes and put pressure on Dendreon’s management to act in ways that might not be  good for the company.

    Dendreon’s latest Schedule 14-A, filed on April 30, showed that Balyasny (remember, Balyasny’s other fund was previously one of the seven hedge funds with large  bets against Dendreon) had become one of Dendreon’s largest shareholders, with a 5.5% stake in the company. Another major shareholder was Capital Ventures International, the unit of Susquehanna that did the PIPEs deal with Dendreon. Meanwhile, Joseph Edelman, the hedge fund manager who was employed in 2007 by Lindsay Rosenwald, formerly of the Mafia-connected D.H. Blair, has bought at least 2 million Dendreon shares.

    In addition to those purchases, many of the Milken network hedge funds that bought Dendreon’s convertible bonds now have the capability to convert, so  they, too, might soon count themselves among Dendreon’s largest shareholders. Altogether, this network may already control (or have the ability to convert into control of) as much as 30% of the company.

    It is possible that this network is planning to seize control of Dendreon by stealth. This was the modus operandi of the Milken network in the 1980s. As most every book on Milken recounts, affiliated investors (some combination of Milken, Ivan Boesky, Carl Icahn, Princeton-Newport, John Mulheren,  and others) would each buy, say, 4.9% or 9.8% of a company without declaring themselves to be affiliated investors. In some cases, Milken would “park” stock (e.g. Princeton would secretly buy stock on Milken’s behalf) in order to conceal that he had any ownership at all.

    By secretly holding large blocks of shares, the network was able to acquire controlling stakes while bypassing regulatory requirements to declare such positions. Besides putting them in a position to manipulate prices, Milken and friends then put pressure on companies’ managements by quietly letting it be known that they had, as a group, a controlling number of proxy votes.

    If Milken’s friends come to control Dendreon, Milken’s “philanthropic” foundation will no doubt continue to articulate its new position of being “delighted” that the data shows that Dendreon’s treatment is safe and effective (which is the same thing the data showed two years and 60,000 American deaths ago). And if the Milken network takes over Dendreon, perhaps Michael Milken will, in the name of “philanthropy,” convince his government minions to grant approval to Provenge, so that it can be administered to the patients who so desperately need it.

    But that should not cause us to ignore the ordeal that Dendreon has endured during these past few years. And we should demand an end to a status quo which lets Wall Street miscreants, cheats, and manipulators (and not free markets) decide which companies survive unmolested, and which will be crippled or killed off entirely.

    But it is not surprising that criminals see fit to maim public companies.

    Consider that it is impossible to buy life insurance on another person’s life. The legal principle has developed that one can only insure something in which one has “an insurable interest.” But imagine that this were not the case. Imagine if it were possible for people to buy insurance on other people’s lives. One can see that there might evolve a type of criminal who would buy life insurance on the lives of others, and then arrange for those people to die.

    One can even imagine that, as society wised up to this practice of buying life insurance and then manipulating outcomes, such criminals would evolve new tactics towards the same end. For example, the criminals might target newborn babies in hospitals, because babies are vulnerable, and it would be difficult for anyone to know for certain whether they were dying naturally, or as a result of criminals manipulating outcomes.

    One could even imagine that the most sophisticated of these criminals would come to target newborn babies who were already sick, because manipulating their medical outcomes in order to cause their deaths would leave the slightest statistical footprint possible.

    In our society one cannot buy life insurance on another person, but one can buy “life insurance” on a company: that is, one can make a bet that a company will fail, and collect on that bet when the company dies. It is the contention of Deep Capture that there are criminals who take out life insurance policies against companies, and then manipulate their outcomes so as to collect on those policies.

    And just as we can understand the logic of criminals focusing on newborn babies, so too can we understand why the financial criminals have learned to focus on small, early-stage public companies. And to extend the morbid metaphor one last step: just as the criminals might focus on newborns who are already sick, because their outcomes are already in the most doubt (making the criminal manipulations hardest to spot), so too have the financial criminals learned to focus not just on early-stage public companies, but on early stage public companies working in the field of biotechnology.

    That is because in biotechnology the difficulties in valuing a company are at their greatest. There is often little to no revenue.  The idea behind the company may be nothing more than the theory of a scientist. No one knows whether it will work. If it works, no one knows how long it will take to prove that it works. And even if it can be proven to work, no one knows how long it will take to clear all the legal and regulatory hurdles it will face. Such companies are favored targets for manipulators because it is easy to manipulate the truth when no one knows the truth, and whatever truth there is lies behind so many veils.

    In the case of Dendreon , the truth was hard to miss. It was more than a company with a blockbuster treatment. It was the first company in decades to develop a medicine that could truly revolutionize the way that doctors treat cancer. The company had gathered its data, and the data was conclusive (to a 95% confidence level): Provenge was safe and effective. A panel of experts assembled by the FDA had declared that the treatment should be approved.

    So when naked short sellers attacked, and the treatment was derailed, it was obvious that there had been foul play. Hundreds of concerned citizens took it upon themselves to investigate, and document, the footprints of the miscreants. As a result we have been able to present a highly discernible, if admittedly imperfect, picture of their trail.

    But we must ask: How many other small biotech companies have been victimized in less obvious ways? How many companies were like the babies in our morbid metaphor — snuffed out before they could demonstrate their potential; killed by criminal naked short sellers and their captured accomplices (journalists, regulators, doctors) who successfully pled innocence, saying the companies died because they were sick or weak? And how many of those murdered companies, weak or not, had medicines that could eventually have improved health and saved lives?

    Our morbid metaphor, you see, is not entirely metaphor. Real people have died.

    In answer to the question of how many people have died, we know only from the data that abusive and illegal short selling has affected many hundreds of small biotech companies with all manner of medicines. We know that the vast majority of those companies are now gone, and that some number of them, if left to the rigours of the market, but not to the whims of criminal short sellers, would have one day delivered their medicines to patients.

    But, of course, we do not know who the criminal short sellers are. According to the Securities and Exchange Commission, that is a big secret – “proprietary trading strategies.”

    THE END

    * * * * * * * *

    Note: The original draft of this story incorrectly stated that BAM Capital was affiliated with Dmitry Balyasny’s Balyasny Asset Management. Having mistaken BAM Capital with Balyasny’s fund, I aslo suggested in the original draft of this story that Balyasny had aquired more than ten percent of Dendreon’s shares in the Spring of 2009. This was incorrect. Balyasny’s Visium hedge fund had aquired 5.5% of Dendreon’s shares. I regret the error.

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    76 Responses to “Michael Milken, 60,000 Deaths, and the Story of Dendreon (Chapter 15 of 15)”

    1. bbhindyou says:

      We need to stop trusting those who are in positions of authority.
      They do nothing for the people they are supposed to serve.
      The only people who matter to them are those who pay them with money stolen from us.
      The only way to stop it is to take control of all of our own assets ourselfs.
      Do not trust anyone with anything of yours.
      They will use it to rob you and others.
      We have the proof.
      Pull all certificates’expose their system and be responsible for our own fates and futures.
      Time to grow up.
      Daddy is not acting in our interests.

    2. huck says:

      So Mark, when will the evidence be presented to the Department of Justice? When will Patrick connect his legal team with some survivors, to begin class action law suits against our friends?

      • K.F. Fay says:

        It’s sad knowing it’s probably large corporate drug company’s killing the little innovative cures just to keep their current not so good drugs running the line keeping it cheap for them. I was invested in a little company called TCPI (Techincal Chemicals Products Inc.) that had a handheld meter that would test blood sugar without poking yourself. Diabetics who have to constantly poke their fingers to draw blood eventually become sore just testing their levels. The original owner that took the company public was pushed out and the stock was taken over by a bunch of crooks who naked shorted it out of existence. Now Bayer is starting to use the technology from the little company or that’s what I was told. They took the shell and sold it out as a makeover your kitchen company and it’s now down the tubes too. I wrote them and warned them about what was about to happen to them but never got a response back from them. I suspect they thought I was a nut. I’ve sure been called that hundreds of times since 1998. I recognized something wrong watching volume trading while I was out of work years ago and a few old timers familiar with the market helped me figure out what was going on. At the time they too thought I was lulu but now realize I was right on. If I can see this, why can’t the experts at the SEC/DTCC and our high paid Congressmen see it??? Maybe they got their blinders on. Most likely they are green. JMO

        • Large drug companies are not “killing the little innovative cures” ……..because they need them to survive. About 90% of BMY’s Pharma sales are from licensed/acquired assets. They depend on the smaller companies and there assets for their own survival and get frustrated when they see corners being cut and data being hyped.

    3. NOYBIZNIZ says:

      Please publish the full 15 chapters as a complete document as soon as possible. I have several people (including some high profile individuals who raise millions of dollars for cancer research) who are very interested in this story and who want to share it with others. I also have a substantial list of people compiled who will be receiving copies.

      Thank you for your work on this issue. Please direct your efforts to correlating the activities of this cabal in the abusive naked short selling of many of the other companies that have appeared on the RegSHO list over the past two years.

      Thank you again. I do not think I could ever express how much I appreciate the work you have done and the enlightenment that you have provided.

    4. kyoto27 says:

      Mark,

      Was it Dr Kantoff, or Bristol-Myers Squibb’s Robert Schwartz who made the comment: “I don’t believe the compound has a snowball’s chance in hell of getting approved” ?

      The San Francisco Chronicle’s Bernadette Tansey wrote the following story Friday, March 30, 2007:

      “I don’t believe the compound has a snowball’s chance in hell of getting approved,” said Robert Schwartz, senior director of oncology licensing at Bristol-Myers Squibb. “The FDA will be setting a bad precedent if it approves a drug that missed all clinical endpoints.” Schwartz oversees research on additives that might boost the performance of cancer vaccines.

      Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/03/30/BUGDTOTGSK18.DTL#ixzz0MJPzoyNy

      Perhaps bigger question:

      Why/how did BMY’s executive know there was no chance in hell?
      Also puts the BMY/Medarex deal into an interesting light as Bristol-Myers will be acquiring the treatment ipilimumab, an immunotherapy that is currently only in Phase III development. Obviously the folks at BMY think that this “compound” does have more than a snowball’s chance in hell of getting approved vs a compound like Provenge that had two Phase III developments under its belt, along with positive survival data.

      Yes, Mark, if only there was a pattern, and if only hedge funds would stop eating our young –to push the morbid metaphor even further. Chapter 15 should hopefully not signal the end of this fight…even if we all are a little ‘punch drunk.’ Bravo Mark and Pat!!!

    5. akcje says:

      _

      Mitchell, as I said a few times before, you only help to discredit legitimate claims of shenanigans, unfair markets and ineptitude of both FDA and SEC.

      Time and again you appear (or pretend?) to be incredibly ignorant of simple stock trading strategies. You quote a part of some fund’s position and make claims of their goals which have no basis in the position that you quote. (You are also oblivious of some other positions they could have in the same stock or using this stock as a part of a larger position in a group of stocks).

      In this example (one of many!) you say: “Balyasny’s hedge funds […] held around 3 million put options in Dendreon. Simultaneously, these hedge funds owned an almost equal number of call options. [….] The effect is to create a large synthetic short position. ”

      You just love to use the word “short” don’t you? Unfortunately the position you describe is not a “synthetic short”. It is a typical straddle or strangle position in a biotech stock which is before a binary event like an FDA decision or phase-III trial completion. You expect that the stock will make a very large move either up or down, depending on the big news. You will presumably loose money paid on one position, but make much more on the other one.

      In this case it could very simply explain how they ended up owning shares of DnDn after the great outcome of the Impact trial. None of your mysteries needed.

      But you choose to follow with this utter nonsense:

      “Balyasny’s funds also owned large numbers of Dendreon shares. These could have been shares that they bought to cover short positions.”

      It seems that you don’t even understand what a short position is and what “covering” it means!!
      Let me explain, like to a child: If you are short a share, and then you buy a share to cover your short, you _do_not_ end up owning a share.

      = = = =
      Now, back to Balyasny and similar characters. You are arguing: If he has a short position it is a proof of his evil motivation, and then if he has a long position it also proves evil motivation. Well, Balyasny may be evil, but proofs like yours are not exactly convincing, except to the choir.

      • Jeff says:

        akcje,

        You point out minor flaws (if indeed they actually are) and use them to cast doubt on the overall story. That’s like pointing out a tree that’s a bit too tall, and trying to deny that it’s part of a massive forest.

        Your apparent sympathy for those being exposed here leads one to question your motives.

        Perhaps you’re just anal about having every detail exactly correct, and if so, OK, you’d make a great editor. Just don’t deny the forest.

        Or perhaps you are simply expousing the noble American principle that one should be presumed innocent until proven guilty. Well, it’s rather difficult to prove someone guilty when none of those in positions of authority or enforcement have the integrity or the balls to actually charge the apparent miscreants with any crimes, isn’t it?

        So, take this expose for what it’s worth – an overall description of a vast interlinked conspiracy to steal the wealth of public companies from the investing public, while sacrificing the promise and potential benefits those companies represent.

        You can’t really deny the overall picture, can you?

        • Jeff says:

          “expousing”?? Of course, should be “espousing”. Sorry ’bout that.

        • akcje says:

          _
          Jeff > Just don’t deny the forest.

          1. Provenge approval process was screwed up badly by SEC, allowing people with numerous disclosed and undisclosed conflicts of interest to take major part in the decision making.
          2. FDA should have a process for conditional approval of drugs for deadly diseases, esp. if the drugs have shown to be quite safe and there are few or no good alternatives.
          3. The current regulations of the stock market give many unfair privileges to a small selected group of players. And SEC is doing a horribly poor job of enforcing the existing regulations to control large players and insiders.
          4. SEC allows for the naked shorting to take place, even though it would be quite simple to stop it entirely.
          Furthermore, in today’s markets there are very good argument to disallow _any_ stock shorting, naked or not. The common arguments in support of shorting (price discovery, liquidity, etc…) are weak in comparison.

          If you by the “forest” you mean the above, then not only I don’t deny it, but said this many times.

          _

          Jeff > take this expose for what it’s worth – an overall description of a vast interlinked conspiracy to steal the wealth of public companies from the investing public,

          But here we differ fundamentally. There is no “vast interlinked conspiracy” . I have no doubt that there are many dishonest fund owners and managers. And some small conspiracies. But they don’t form a vast united conspiracy. They often outplay and steal from each other. And of course they all love SEC which can’t control them and which gives them extra privileges over small traders.

          What we have is many people with vested interest in keeping the current mess. The existing bureaucracy also quite naturally resists any changes which call for more transparency and better regulations and checks. And there is plenty musical chair hopping between the funds and the bureaucracy which is supposed to control it. Just like between FDA and big pharma.

          On top of it all we have our elected Congress. Some members are corrupted the others just not very bright. And even the few smart and relatively honest ones don’t seem to understand the need for transparency and simplicity. The convoluted laws they create inevitably allow the un-foreseen negatives to outweigh the intended improvements.

          Too cleanup all this mess is perhaps an impossible task. A single vast conspiracy would be a much easier target. But inventing this non-existent vast conspiracy only helps to make the real task of cleaning up the mess harder. It distracts the attention from the real problems and solutions to the imaginary ones.

          = = =

          Jeff > Perhaps you’re just anal about having every detail exactly correct

          No, it is not about some minor details. Mitchell, time and again builds his case on an apparent lack of understanding of the stock trading. It doesn’t help that he only knows very incomplete stock positions of the funds involved. And then he makes some absurd arguments about those positions.

          Mitchell’s method is to throw darts in all directions at everything that moves. Sure, you may hit some deserving targets this way. But we know no more than we knew before. Except perhaps more about who worked in the same company, and who is whose father in law.

      • Sarge says:

        I am certainly not by any standard a “sophisticated investor”, nor do I claim to have superior knowledge about the finer details of large position strategies, but Mr. “akcje”, this explanation of yours has definitely confused me:

        “You just love to use the word ‘short’ don’t you? Unfortunately the position you describe is not a ‘synthetic short’. It is a typical straddle or strangle position in a biotech stock which is before a binary event like an FDA decision or phase-III trial completion. You expect that the stock will make a very large move either up or down, depending on the big news. You will presumably loose (sic) money paid on one position, but make much more on the other one.”

        The part I am having the most trouble following is the very last sentence. How is it mathematically possible to hold two opposing positions on the same security and expect to make a profit from one of those two positions? Assuming certain aspects for the sake of argument (that position sizes are equal, that commissions being paid to execute orders are equal, etc), isn’t this the exact same thing as having no position at all? If the stock rises in value, wouldn’t the losses from the ‘short’ position you held in the example above be the exact same amount as the gains made from a ‘long’ position of equal size (regardless of how large the overall movement ended up being)?

        I can only think of one possible explanation/answer to this question, and that is:

        As soon as the position holder was able to confirm the direction of movement, the opposing position could then be closed while the other position was left open to continue its move, until it is finally closed out in profit (with the profits made hopefully being large enough to cover the losses from the opposing position which was held prior).

        But here is where I am having trouble with the explanation you posted. My understanding has always been that when you are properly “straddling the news”, you do not actually hold any position (be it long or short), instead you use a combination of options contracts and limit orders (specifically buy and sell limit orders) to establish your intended position on either side of the stock’s current price (while limiting your overall exposure). This way, the only negative outcome for the person establishing the position would be the possibility that any limit orders will be executed with some slippage (or possibly not executed at all). This method allows an investor to control risk (and exposure) by limiting losses to the cost of the options contracts and the commissions paid to the broker. In the method you explained, the overall risks include slippage (or the possibility of not having a limit order executed), but more importantly they also include the inevitable losses you will face from one of your two positions as the stock moves and you are frantically trying to reach your broker in order to close out the position that is now out of the money.

        It doesn’t make sense to me that an investor (or “hedge” fund, especially when you take into consideration the definition of the word “hedge”) would actually establish any real position prior to a major news event, unless that investor had prior knowledge of the actual news. When you take into consideration that the possibility for losses of a losing ‘long’ position is limited to the amount of money you originally invested (or the margin you have established), whereas the losses from a losing ‘short’ position can leave you owing money far above and beyond the cost of your initial investment, your explanation of a “typical straddle or strangle position” just does not make any sense to me. Again, taking into consideration the definition of the word “hedge”, I certainly would not think that a “hedge fund” was properly “hedging” if they were following your explanation above and not the method I have explained here.

        While I can appreciate your contrarian view of Mr. Mitchell’s work, and can also appreciate the fact that you have moved farther away from the typical ad hominem attack seen by most of the opposition for this issue, I cannot accept your explanation of a “typical straddle or strangle position”.

        • akcje says:

          _
          Sarge > How is it mathematically possible to hold two opposing positions on the same security and expect to make a profit from one of those two positions?

          A simple answer is “leverage”. Your costs (aka potential loses) are finite, but potential gain is unlimited.

          This is of course true for a simple long call position but also for a straddle (or strangle) where you buy that long call but also buy a put. In this case you risk loosing both, and balso reduce your potential gain on the call by the extra cost of the put. But you have an additional chance of making positive if the stock tanks more than your combined costs were

          You were thinking of holding exactly the same position both long and short, but a straddle or strangle is different. Read more on options like: “Profit From Earnings Surprises With Straddles And Strangles” in Investopedia.com, or
          888options.com
          cboe.com/LearnCenter/courses.aspx
          optionseducation.org

          But you need only some basic knowledge to see that most of the scenarios pictured by Mitchell in his 15 chapters were either completely bogus, like the one I pointed here, or they are just one of many possible scenarios, and he selectively picks what suits him the best.

          Sarge > My understanding has always been that when you are properly “straddling the news”, you do not actually hold any position (be it long or short),

          Well, your understanding was always wrong, but that’s OK. Since you are not writing 15 part articles pretending to know and teach others how things work.

          Most of the people don’t trade options and have little interest and understanding of these. Which is why you often see the off-the wall crazy scenarios pictured on bulletin boards (and by our Mitchell :-) which fantasize some strange stock manipulation every time a stock moves a bit down, or doesn’t move, when volume is large, or why volume is small, etc…

          There is in fact plenty of stock manipulation, and SEC also gives unfair legal advantage to selected traders. But these kind of ignorant screams and fantasy scenarios only help to hide the real problems among all the fake wolf cries.

          • Reader says:

            As a random internet reader interested in Dendreon and with experience in investing, I have to say that I noticed the same thing about the story in both points immediately as I read them.

            The equal call and put holding is a very basic option trading strategy and the comments that go along with it are completely off base – this is just a matter of fact. It’s not a synthetic short.

            Likewise, you do not acquire shares for covering a short position, again this is just a matter of fact.

            Now the problem is that the author is extremely discredited when he makes comments like the ones above, which even an amateur options trader would know are incorrect.

            I would hate to see poison like this ruin an otherwise great piece of investigative work. The story still makes perfect sense, but those comments need to be removed less they invalidate the author’s authority on the subject.

    6. Don says:

      akcje,, Just who are you, one of the Milken friends..If so declare it…Othere wise take a hike…………….Our maybe you would like to meet and talk about Milken and friends…

    7. al says:

      On a sort-of-related note: On the few occasions that I have watched Jim Cramer’s show, he frequently mentions his disclaimers before touting any stock that is owned by his “charitable trust”.

      Considering the philanthropy angle being played by Milken et.al. in this current drama, I have to wonder if Cramer’s “charitable trust” is anything of a charity at all, and if the Wall Street Scum are now trying to play the non-profit/charity angle in order to continue business as usual (eg, screw the small investor, manipulate the markets).

      Reminds me a bit of the local neighborhood Mafioso type, that used to park a truck on the street, and pass out free turkeys to the locals; attempting to create the facade of the good citizen, so that there would be plenty of “character witnesses” to stand in his defense when the Feds came callin’… its hard to slap the cuffs on a criminal when the entire neighborhood comes out to cry foul. Similarly and on a larger scale, Milken, Cramer, et al will stand behind their philanthropy/charity and will have plenty of defenders crying foul if they are called to account for their crimes.

    8. Fran says:

      Absolutely phenomenal courage for your reporting these atrocities. On behalf of myself who has witnessed this manipulation for, oh, maybe six years and for the real victims, the prostate cancer-ridden who wept watching their hopes being dashed, thank you. As for the other ongoing trials in this remarkable treatment for breast, colon, other cancers which had to be scrapped due to the attempted destruction of this company, may the cartel be damned. Again thank you for your expose.

    9. hangthemall says:

      any ass who would defend anyone in this story should be locked up with the rest of these thugs.. Thanks Mark for informing the rest of the world on just how Bad the SEC is and out of control the US markets are.

    10. Don says:

      All of these clowns should be removed from the planet..End of story.

    11. The Dude Abides says:

      There is an egregious factual error in this last segment, which otherwise is quite eye-opening. Dr Small was NOT supposed to be on the FDA advisory panel on 3/29/07. He instead was scheduled to PRESENT PROVENGE’S CASE before the panel on behalf of Dendreon. The company had been planning their presentation before the FDA panel for a year, and Dr Small was going to be a crucial part of the presentation, perhaps even the single most important person on Dendreon’s side that day. Instead, the airline supposedly canceled his scheduled flight, and he was unable to catch another one. Mr Mitchell, you should immediately correct this factual error, as it undoubtedly will be used by those on the other side to discredit your entire eye-opening series…and that would be regrettable.

    12. student says:

      To be fair.. akcje did make a reasonably good point about the synthetic short and strangle option strategy. From what Mitchell wrote, it seems more like it is a strangle than a synthetic short.

      It may seem that this is a small mistake, but not necessarily, since one strategy supports a very different story to the other. After reading the story here, I personally am more convinced about foul play by the hedge fund network than not, but it would certainly make the story more credible if some of the claims do not have mistakes like the above, since again, one wrong assumption can lead to a very different story to another. It makes one think what other claims are not accurate in the story.

      Having said that.. again, I’m more convinced by the story than not.. if only for the reason that there are some strong “accusations” here.. and if they’re false, could lead to a serious lawsuit, which we have not seen…

    13. t. tucker says:

      Is the following short interest report more evidence of the killing and maiming of vital and important biotechs? Would they stoop so low as to try to prevent a vaccine for the pandemic flu?

      Vical Incorporated – Common Stock

      Settlement Date Short Interest Percent Change Average Daily Share Volume Days to Cover
      15-Jul-09 2,507,612 171.72% 891,812 2.81
      30-Jun-09 922,883 7.44% 1,978,421 1.00
      15-Jun-09 858,967 -7.72% 990,226 1.00
      29-May-09 930,798 16.10% 830,313 1.12
      15-May-09 801,707 5.49% 236,662 3.39
      30-Apr-09 760,000 -2.25% 182,622 4.16
      15-Apr-09 777,479 2.30% 32,121 24.20
      30-Apr-09 760,000 -2.25% 182,622 4.16
      15-Apr-09 777,479 -0.84% 32,121 24.20
      31-Mar-09 784,062 -0.82% 28,174 27.83
      13-Mar-09 790,562 -5.01% 44,670 17.70
      27-Feb-09 832,259 13.08% 48,292 17.23
      13-Feb-09 735,979 -1.19% 49,853 14.76
      30-Jan-09 744,830 4.87% 34,112 21.83
      15-Jan-09 710,269 3.49% 66,623 10.66
      31-Dec-08 686,308 -12.45% 64,734 10.60
      15-Dec-08 783,905 2.16% 69,665 11.25
      28-Nov-08 767,330 5.33% 117,257 6.54
      14-Nov-08 728,523 -1.21% 45,817 15.90
      31-Oct-08 737,414 -46.12% 47,127 15.65
      15-Oct-08 1,368,708 -9.29% 89,838 15.24
      30-Sep-08 1,508,930 -0.01% 86,801 17.38
      15-Sep-08 1,509,096 -3.24% 55,223 27.33
      29-Aug-08 1,559,691 -12.04% 29,753 52.42
      15-Aug-08 1,773,131 -3.19% 68,670 25.82
      31-Jul-08 1,831,484 -6.59% 88,594 20.67
      15-Jul-08 1,960,600 -1.10% 42,280 46.37
      30-Jun-08 1,982,471 59.30% 100,795 19.67
      13-Jun-08 1,244,495 0.20% 42,389 29.36
      30-May-08 1,242,067 -2.93% 59,080 21.02
      15-May-08 1,279,544 3.51% 69,404 18.44
      30-Apr-08 1,236,186 3.26% 27,077 45.65
      15-Apr-08 1,197,183 -0.94% 43,560 27.48
      31-Mar-08 1,208,508 44.17% 50,448 23.96

      http://www.nasdaqtrader.com/Trader.aspx?id=ShortInterest

      and then there is this interesting article from Seeking Alpha.
      ==========
      What’s the Delay In Support for Vical? / Seeking Alpha

      Excerpt:

      “The Wall Street Journal’s “Swine Flu Prevention Takes on New Urgency” reports that Sanofi, Novartis, Glaxo and CSL are only yielding 30% of the active ingredient typically produced with seasonal flu.

      Vical’s DNA-based vaccine produced 100% protection in preclinical trials with 2 doses and 75% protection with 1 dose. Vical developed its vaccine within weeks of receiving samples and the genetic coding from the government under a Cooperative Research and Development Agreement (CRADA) with the U.S. Naval Medical Research Center [NMRC]. Vical is now waiting for funding from the Navy to begin clinical trials.

      The key Vical difference is its vaccine is a DNA plasmid rather than a killed or weakened virus. Production cycles are measured in weeks rather than months, and Vical already has large scale cGMP manufacturing capability.”

      http://seekingalpha.com/article/151366-what-s-the-delay-in-support-for-vical?source=email

    14. Jeff says:

      Reply to akcje:

      Some questions for you regarding your last response:

      1. WHY was the approval process screwed up so badly by the FDA?
      2. The FDA actually does have a process for conditional approval as described several times by Mark. WHO was responsible for circumventing the process?
      3. WHO are the “small selected group of players”, and WHY is the SEC “doing a horribly poor job of enforcing the existing regulations to control large players and insiders?”
      4. And WHY doesn’t the SEC act to stop NSS?

      I believe DeepCapture and Mark’s Dendreon story have provided logical, consistent, and to a large degee, verifiable answers to those questions, but that’s apparently what you refuse to accept.

      Do you have a better explanation? How do you explain away all the connections between these people and their apparent coordinated actions, ie, the massive shorting of DNDN by (only) all of these Milken-connected hedge funds when approval of Provenge looked like a slam dunk, the Milken connections with the very members of the FDA panel that derailed the approval, and the Milken connections to the competing companies that stood to lose value on the approval of Provenge. Can you deny that that is very suspicious and perhaps deserving of formal investigation, considering the amount of money they could presumably have stolen if Mark is correct? It seems to me there’s enough smoke here to assume that the forest is on fire!

      Here’s perhaps a better analogy: The way I see it, Mark has drawn perhaps a hundred or so dots in the DNDN story, and then drawn lines between and among those dots, using in most cases publicly verifiable information. The picture that emerges is that of a vast conspiracy (call it small if you wish, size is relative, though this may a small part of the biggest financial crime in history) of criminals (some of them already convicted for similar crimes) stealing the wealth of public companies (in this case DNDN) in plain view of corrupt or totally incompetent regulators and law enforcers. Oh yeah, then throw in the ties to organized crime figures. All the dots and lines may not be drawn perfectly, but I believe the overall picture is clear.

      • akcje says:

        _

        Jeff > I believe DeepCapture and Mark’s Dendreon story have provided logical, consistent, and to a large degee, verifiable answers to those questions

        And I see it as anything but this. I see an incoherent conspiracy theory, complete with imagined mafia death treats, and all the hedge fund crooks playing like one happy orchestra just to destroy Dendreon. Other than “who knew whom” Mitchell added nothing to the story. His stock trading arguments are based on fantasies not on the market.

        And the entire story is distorted by Byrne’s hate of naked shorting. The worshipers of DeepCapture seem to think that crooks of the Wall Street are somehow all on the short side of all stock trades.

        _

        Jeff > Can you deny that that is very suspicious and perhaps deserving of formal investigation

        Several items in Provenge approval process certainly should be followed up on and investigated. FDA has tightened its COI rules after the Provenge panel, but most likely still inadequate. The insidious stuff going on in the FDA “business” is most likely not criminal. We need to come up with a much better way to organize FDA, so that it attracts more smart and honest people rather than career bureaucrats and those making money from being at the same time insiders at the industry and FDA.

        SEC and the stock market are badly in a need of a major cleanup. Today’s technology allows every share to be uniquely identified and tracked. It can be done without violating reasonable privacy expectations. We can easily create a market where true liquidity is maximized without any need for Market Makers, Specialists, Supplemental Liquidity Providers, and other privileged bunch.

      • akcje says:

        _

        Jeff > I believe DeepCapture and Mark’s Dendreon story have provided logical, consistent, and to a large degee, verifiable answers to those questions

        And I see it as anything but this. I see an incoherent conspiracy theory, complete with imagined mafia death treats, and all the hedge fund crooks playing like one happy orchestra just to destroy Dendreon. Other than who knew whom Mitchell added nothing to the story. His stock trading arguments are based on fantasies not on the market.

        And the entire story is distorted by Byrne’s hate of naked shorting. The worshipers of DeepCapture seem to think that crooks of the Wall Street are somehow all on the short side of all stock trades.

        _

        Jeff > Can you deny that that is very suspicious and perhaps deserving of formal investigation

        Several items in Provenge approval process certainly should be followed up on and investigated. FDA has tightened its COI rules after the Provenge panel, but most likely still inadequate. Most of the insidious stuff going on in the FDA “business” is most likely not criminal. We need to come up with a much better way to organize FDA, so that it attracts more smart and honest people rather than career bureaucrats and those making money from being at the same time insiders at the industry and FDA.

        SEC and the stock market are badly in a need of a major cleanup. Today’s technology allows every share to be uniquely identified and tracked. It can be done without any major violation of expected privacy. We can easily create a market where true liquidity is maximized without any need for Market Makers, Specialists, Supplemental Liquidity Providers, and other privileged bunch.

    15. Anonymous says:

      The SEC can’t guarantee the accuracy of data released under the freedom of information act?

      http://www.sec.gov/foia/docs/failsdata.htm

      “We cannot guarantee that the data will be posted by a particular date. We cannot guarantee the accuracy of the data.”

    16. captain margarine says:

      akjce raises potentially valid points, but he also creepily accuses Mark Mitchell of “beating up on his own mother”

      The flag is “red”

    17. Sarge says:

      Mark, this whole thing reads like a badly written and seedy “B” movie, you have certainly outdone yourself! Although I must admit to having had to go back through and re-read a large portion due to the large amount of different names and associated relationships, I don’t see how it could have been put together any differently. Bravo!

    18. Anonymous says:

      The DTC and Fed Reserve should be dismantled.

      The Federal Reserve — the quasi-autonomous body that controls the US’s money supply — is a “Ponzi scheme” that created “bubble after bubble” in the US economy and needs to be held accountable for its actions, says Eliot Spitzer, the former governor and attorney-general of New York.

      Advocating in favor of a House bill to audit the Federal Reserve, Spitzer said: “The Federal Reserve has benefited for decades from the notion that it is quasi-autonomous, it’s supposed to be independent. Let me tell you a dirty secret: The Fed has done an absolutely disastrous job since [former Fed Chairman] Paul Volcker left.

    19. kddublin says:

      Bravo!!

      Way to blow the lid off of this sordid story.

      Thank you Deep Capture team for a job well done.

      Now in honor of their hard work on this story, please share it with others and be sure to send it to your local representative.

    20. K.F. Fay says:

      How many of these company’s are tied into Hillary Clinton’s family that owns pharm companies? It would be nice instead of just hearing about the crimes yet still being helpless to stop all the fraud. If we had an answer or a plan maybe enough people would jump on board and help out. I’ve written letters until I’m blue in the face since well before 1998 and still 11 years later the story continues with protection from the law. There’s only one way for this to happen and that means a great deal of our Congress are tied up in this. I wonder how many Swiss bank accounts they aren’t disclosing belong to our representatives.

      With regards to our new health care rulings we need a majority of the mass public to DEMAND they have the same plan and figure a way to over ride the recent decision they are exempt from the plan.

      My Son said the new plans are taking older people into consideration and are deciding it’s a waste of funds to treat them and the solution to the problem was just to give them pain meds and let them die. I wonder if their (Congress/Senator’s/President had to live with the same terms if this would be their solution to coverage for the elderly.

      Then to top it off the DEA steps in the doctor’s offices and demands they treat the patients like drug felons and constantly drug test you and then sending you a bill for over $200 that the insurance company doesn’t pay. So we’re going to monitor the pain medicine that is at least supposed to help the elderly who they figure would be cheaper to treat with pain meds and let them go and then they won’t even allow them the pain meds.

      What have we done to our self? We need to vote independent on the next election and throw off the whole mass mess. If we could get a strong support of voters to vote totally away from BOTH parties maybe then someone up there would start to get the message that we are not happy with their policies and procedures destroying our life.

      Legalize drugs, tax them and use the money to pay for GREAT heath insurance coverage. Use the extra to pay on our national debt. It is a far cry better than leaving them illegal for the drug cartels to earn billions/trillions of untaxed dollars allowing them the ability to purchase weapons to use against us. We would have a huge savings just from the funds we use to sponsor the drug war effort. We all know it only goes the the drug dealers and crooked politicians anyway so why waste the money? We’d most likely have less drug use if we’d get these illegals out of here who can now afford to buy up 3 or more houses just to use as fronts to brew their meth and hook up our children before they even get out of high school. Dumb them down and let it carry on for a few more generations and we’re going to find ourself on the road to no where. I don’t agree with using drugs but what they are doing now isn’t working and an 8 year old child can buy drugs if they want them anyway. Why not legalize them and then monitor the use better?

      We should also demand the SEC/DTCC publish the numbers of naked shorted shares in all stocks. I don’t care if it does put people at an advantage. The crooks have had their day long enough to cover by now and if they haven’t done it then they better get covering while they can. I’m sick of all this. If a person whose not even stock market smart can figure this out then don’t tell me the persons in charge have no clue. DEMAND A REAL CHANGE TODAY.

      • harveydawabbitt says:

        voting is a waste of time.

        the solution to our problems is….

        We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness….

    21. Tiny Tim says:

      I think it’s obvious to all that AKCjoe is doing what any good stock basher on the message boards does: find a small thread that might not be accurate, and change the focus to whether that “might not” point is correct or incorrect, finishing with a dismissal or by ignoring all the logical and well-documented points that are verifiably accurate.

      This is how Wall Street dealt with naked short selling for years. It’s also how the SEC dealt with it. Delivery failures “might” be due to the dog eating the certificate or grandma losing it. True, but the preponderance of evidence in the FOIA data shows deliberate massive manipulation.

      So our friend attempts to spin a yarn that denigrates Mark’s story based on “might/might not” arguments (it could be a strangle, could be hedging, and also could be rank manipulation) reminiscent of Roddy Boyd’s spinning of his father’s position (it might all be innocent), which fell apart when we learned the “innocent” coincidence had taken place on still more milken-crony involved biotechs. True, when pee hits your head it could be rain, but most are smart enough to recognize the difference. Apparently Joe isn’t, and the many chapters meticulously detailing the interconnected scheming of the miscreants does nothing to convince him, as he conveniently ignores the compelling connections, preferring to place blame on faceless entities like the FDA and the SEC. Joe, the point of the series is to expose the names of the people doing the manipulation, not do a Cramer-esque “the SEC needs to do more to stop manipulation” softball throw, which is really what your summary is.

      We now have sufficient information to decide who is more credible here, the anonymous commenter or the former Time and CJR journalist who’s put his reputation on the line exposing this and who could easily be sued if any material portion of it was incorrect. So save your breath. I don’t think the DOJ is really going to care much about argued hypotheses regarding nuances of what trading does and doesn’t constitute manipulation, especially when the SEC deliberately keeps all facts from being known. You have no more hard info than Mark does on whether his allegations are correct or not; you’re simply spinning the few factual question marks or logical leaps as idiocy. It’s pretty clear to me who’s being idiotic here.

      Save the arguments of everything being a wild-eyed conspiracy theory for the courtrooms. I think that was essentially milken’s last defense as well, right? He was an innocent man, doing little or nothing wrong, trying to make a buck, and all the ugly allegations of stock parking, manipulation, felony violations of virtually every law associated with the market, were all nonsense. Didn’t work so well then, hopefully will work even worse this time around. I just hope we get to see a grand jury get a hold of this soon.

      • akcje says:

        _
        Tiny Tim > change the focus

        Actually it’s DeepCapture that is changing focus away from the Provenge medical trials results and a clear failure of FDA to timely facilitate access to Provenge for those that need it and can afford it. DC is changing focus to the favorite Byrne’s topic of naked short selling. They imply that FDA has failed to approve Provenge in 2007 in order to help hedge funds to make money on the short side. But they have failed to show any evidence of it.

        _

        You have no more hard info than Mark does on whether his allegations are correct or not;

        Correct. I have zero hard info on this. And mark has also provided zero hard evidence.

        _

        Tiny Tim > when pee hits your head it could be rain, but most are smart enough to recognize the difference.

        You must be speaking from experience. Don’t spend so much time with your head in a deep cesspool.

        • huck says:

          The “hard info” will be obtained in the discovery process, weed hopper. little stevie cohen, milkman, et. al. are the “you” that will have their heads in an unsavory spot soon. They will stall, before they fall………

    22. hangthemall says:

      Its bail before jail so you better not fail, plain and simply.. get the bus and round them up,, Lets hope the can play handball the prison game

    23. Curt says:

      Mark, the assumption that you can not buy insurance on another person is false. As Clark Howard has reported on his consumer website clarkhoward.com – the banks have been doing this for years on their own employees, without any employee knowledge. I invite you to look into it further, but for now you have earned a deserved break.

      I hope that people with the ability to prosecute this are going to do so. Naked Shorting must be abolished, period. Those in this case that can be tied to manipulation must be jailed, their stock FORFEITED back to DNDN to benefit the other shareholders that probably suffered at the their hands.

      Thank you Mark – and I too look forward to a single PDF that I can use to ask each of my elected Congressmen what they PLAN to do about this.

    24. sam says:

      Lets see:

      Corrupt fronting philanthropic organizations
      Corrupt Wall Street hedge funds
      Corrupt Brokers
      Corrupt Govt agency empowered to protect investors
      Corrupt Govt agency empowered to protect health of citizens
      Corrupt media
      Corrupt Congress
      Apathetic law enforcement
      Apathetic elected officials
      Apathetic public

      Think Tom Brokaw will write a book about our time being the “greatest generation”?

    25. Jeff says:

      akcje:

      akcje (reply to Tiny Tim) > “They imply that FDA has failed to approve Provenge in 2007 in order to help hedge funds to make money on the short side. But they have failed to show any evidence of it.” …. “Correct. I have zero hard info on this. And mark has also provided zero hard evidence.”

      Perhaps at least partially true, but remember that Mitchell’s Dendreon piece is not a court case … it’s an article. We can only hope that the time will come when all of the evidence that does exist will find it’s way to a courtroom.

      akcje > “And I see it as anything but this. I see an incoherent conspiracy theory, complete with imagined mafia death treats, and all the hedge fund crooks playing like one happy orchestra just to destroy Dendreon.”

      But you failed to answer my main question: “How do you explain away all the connections between these people and their apparent coordinated actions, ie, the massive shorting of DNDN by (only) all of these Milken-connected hedge funds when approval of Provenge looked like a slam dunk, the Milken connections with the very members of the FDA panel that derailed the approval, and the Milken connections to the competing companies that stood to lose value on the approval of Provenge”? (Note: I said “massive shorting”, but should have said “massive put buying”. Because of SEC obfuscation, the “shorting” is necessarily speculative.)

      So what is YOUR explanation? All coincidence? They just got lucky? Their stars and planets in alignment? God answered their devout prayers? Get real … open your eyes and connect the dots.

      Every one of those points, I trust, is verifiable. Ignore everything else in the 15 chapters if you wish, these points alone are enough to justify investigation.

      • akcje says:

        _
        Jeff > remember that Mitchell’s Dendreon piece is not a court case …

        Sure. But it consists mostly of two threads. One is the well known (at least on DnDn boards) FDA 2007 decision apparently driven to a large extend by conflicts of interest and their inability to provide conditional approvals with stringent follow ups. (There were some changes to their regulations later on in both COI requirements and conditional approvals) Mitchell has shown nothing to convince me that COIs in this case were driven by the hedge funds. The connections between the known prostate cancer researchers and the Milken prostate foundation are to be expected of course. They prove nothing. It is just more likely that the funds shorting DnDn were influenced by these doctors opinion. And Mitchell provides nothing to show otherwise.

        Jeff > “How do you explain away all the connections between these people and their apparent coordinated actions, ie, the massive shorting of DNDN by (only) all of these Milken-connected hedge funds

        Connections are trivial. These people work in the same financial business. Many have worked in the same funds at one time or other and have met. It is to be expected. Milken was a large figure and you should expect that many hedge funds insiders know or met him or worked with him. I’m sure you will find people connected to Milken among the funds that were long DnDn. Would it mean that Milken coordinated a pumping scheme for Dendreon stock?

        No indication of “coordinated” shorting was provided by Mitchell. Don’t forget that there is some heard mentality among the traders. And this could be a much simpler scenario.

        There _could_ of course be some conspiring-coordination, but nothing Mitchell wrote convinces me. And if these particular accusations are false, they distract from real issues with SEC and FDA.

        Note, that the naked shorting has been dismissed often precisely because the Byrne’s campaign gave it an aura of insanity. His Overstock was a money loosing company which have been first pumped up and it’s stock ballooned to unsustainable levels. So shorting it was a reasonable thing (I’ve also tried but could not get shares to borrow at the time). This is of course is no excuse for naked shorts in his company! But the obvious huge overvaluation of his company made the whole thing easily dismissed by many.

        There is little doubt that there are quite a few crooks in this business, but if you pick wrong cases you end up helping them to get away.

        _

        Jeff > open your eyes and connect the dots.

        When you cover a piece of paper with hundreds of dots, you can connect these dots into almost any pattern/picture you wish. Mitchell has simply picked a pattern which excites a lot of people… :-)

        • huck says:

          How about this “dot”. You sound like an attorney, for the scum, trying out a half hearted defense theory…… Discovery IS a fine thing. rocker has tried to STALL discovery for years…. Ultimately, the sand will run out of the hourglass though. Hopefully THAT scum will still be alive so he can pay, instead of having his estate cough over the ill gotten gains……..

    26. Tiny Tim says:

      AKcj, at least you admit that your alternative hypothesis, that it is all innocent hedging, has zero basis in hard data or fact.

      So we weigh the 15 chapters of connections between the various hedge funds and milken, and the ruthless campaign to destroy the company’s delivery of a revolutionary new cancer drug so that milken’s alternative sham solutions can generate profits for the manipulator investors behind them, and Mark’s well supported theory, versus your theory that it is all a coincidence, and the put/call positions are benevolent hedging.

      We have a rogue’s gallery of mob-connected slimeballs who are bed partners of milken’s, for which you have offered no rebuttal or refutation, or we have your vision where that’s all “conspiracy” noise and the whole gang is all coincidental or irrelavent, and the stock positions are just normal hedging or God’s unknowable plan.

      I think perhaps you should go work at Time for a while, then at CJR, and hone some journalistic chops, and after a decade or so of doing it then put your name on an alternative hypothesis or defense. Until then, you read like what you are, a nameless, faceless entity desperately scrambling to attempt to sew the seeds of doubt, any doubt, and attack Mark’s fine work. That you do so for some motive is clear. That you imagine that readers are so naive as to read Mitchell’s piece and then be swayed by your feeble and transparent ploy is asinine. But keep up the hard work. I can’t imagine that we’ve heard the last of you or some other similarly inclined anonymous writer with astoundingly similar perspective.

    27. sean says:

      Curt, I believe what you are referring to is Key employee insurance and is not the same as Mark is talking about. That insurance is place if a Key employee passes, what the cost of replacing him would be. The company after placing this insurance would have to attempt to kill the employee for this to be the same.

    28. Joe Blow says:

      ackje is a hedge-fund operative. And a bit of a dolt- because he used the same moniker for years when bashing AVNR. He hasn’t been to the AVNR Yahoo board in some time though- imo, because his bosses- the Milken Cabal- have taken controlling interest of AVNR. ProQuest- 9.9% Clarus Ventures/MPM, etc etc etc.

    29. iStandUp says:

      Dr. Jim DeCosta,

      What is your opinion about the new proposal by 7 U.S. Senators?

      ————–

      Here is a key paragraph in the Senators letter:

      “We urge the SEC to consider crafting a rule that prohibits short sales that do not first acquire a “hard locate” of specified stock shares. The rule should also

      (1) define the required elements of the short seller’s demonstrable legal right for timely receipt of the decremented shares from the lender, which attaches to the evidence of a unique confirmation number;
      (2) impose an equivalent (or even stronger pre-borrow) requirement on short sales that do not use a “hard locate” system; and
      (3) impose tough penalties on the executing broker for a short seller who fails to deliver stocks at settlement.

      We further request that the SEC report to us on whether it has sufficient authority to enforce compliance with such a DTCC system, as well as to require periodic audits of the DTCC system by the SEC, including public reports of brokers guilty of multiple violations. Such rules should sharply curtail if not end naked short selling. Most importantly, the SEC would finally have an enforceable system.”

      See the complete letter signed by 7 Senators here:

      ( http://kaufman.senate.gov/press/press_releases/release/?id=58553367-af70-47f7-8308-d9ab25ae0842 )

      I think this is part of the proposal is critically important:

      “to require periodic audits of the DTCC system by the SEC, including public reports of brokers guilty of multiple violations.”

      The DTCC proposed this new hard locate system, but I do not think they are in favor of “periodic audits of the DTCC system by the SEC, including public reports of brokers guilty of multiple violations.”

      I think this proposed system is a step in the right direction, but as pointed out by Tom above, all the loopholes would have to be closed to make it airtight.

    30. sean says:

      Think they are reading this blog? I do!!!

      SEC Takes Steps to Curtail Abusive Short Sales and Increase Market Transparency
      SEC Takes Steps to Curtail Abusive Short Sales and Increase Market Transparency
      FOR IMMEDIATE RELEASE
      2009-172
      Washington, D.C., July 27, 2009 — The Securities and Exchange Commission today announced several actions that would protect against abusive short sales and make more short sale information available to the public.

      “Today’s actions demonstrate the Commission’s determination to address short selling abuses while at the same time increasing public disclosure of short selling activities that affect our markets,” said SEC Chairman Mary Schapiro.

      First, the Commission made permanent an interim final temporary rule, Rule 204T, that seeks to reduce the potential for abusive “naked” short selling in the securities market. The new rule, Rule 204, requires broker-dealers to promptly purchase or borrow securities to deliver on a short sale. The temporary rule, approved by the SEC in the fall of 2008, was set to expire on July 31.

      ——————————————————————————–

      Additional Materials
      Rule 204: Amendments to Regulation SHO (Release No. 34-60388)

      ——————————————————————————–

      Second, the Commission and its staff are working together with several self-regulatory organizations (SRO) to make short sale volume and transaction data available through the SRO Web sites. This effort will result in a substantial increase over the amount of information presently required by another temporary rule, known as Temporary 10a-3T. That rule, which will expire on August 1, applies only to certain institutional money managers and does not require public disclosure.

      Apart from these measures, the Commission is continuing to actively consider proposals on a short sale price test and circuit breaker restrictions.

      Third, the Commission intends to hold a public roundtable on September 30 to discuss securities lending, pre-borrowing, and possible additional short sale disclosures. The roundtable will consider, among other topics, the potential impact of a program requiring short sellers to pre-borrow their securities, possibly on a pilot basis, and adding a short sale indicator to the tapes to which transactions are reported for exchange-listed securities.

      Overview
      Short selling often can play an important role in the market for a variety of reasons, including contributing to efficient price discovery, mitigating market bubbles, increasing market liquidity, promoting capital formation, facilitating hedging and other risk management activities, and importantly, limiting upward market manipulations. There are, however, circumstances in which short selling can be used as a tool to manipulate the market.

      “Naked” Short Sales: In a “naked” short sale the investor sells shares “short” without first having borrowed them. Such a transaction is permitted because there is no legal requirement that a short seller actually borrow the shares before effecting a short sale.

      But, before effecting a short sale, Rule 204T requires that the broker-dealer, as opposed to the seller, “locate” an entity that the broker reasonably believes can deliver the shares within three days after the trade — what’s known as T+3. Also, if reasonable, a broker-dealer may rely on a short seller’s assurance that the short seller has located his or her own lender that can deliver shares in time for settlement.

      “Fails-to-deliver”: If an investor or its broker-dealer does not deliver shares by T+3, a “failure to deliver” occurs. Where an investor or its broker-dealer neither locates nor delivers shares, a “naked” short sale has occurred.

      A “fail to deliver” can occur for legitimate reasons, such as mechanical errors or processing delays. Further, a “fail to deliver” could occur as a result of a long sale — that is the typical buy-sell transaction — as well as a short sale.

      “Fails to deliver”, such as fails resulting from potentially abusive “naked” short selling, may have a negative effect on shareholders, potentially depriving them of the benefits of ownership such as voting and lending. They also may create a misleading impression of the market for an issuer’s securities.

      Adopting Regulation SHO: Due to its concerns regarding persistent “fails to deliver” and potentially abusive “naked” short selling, the Commission adopted Regulation SHO, which became effective in early 2005. This regulation imposes, among other things, the requirement that broker-dealers locate a source of borrowable shares prior to selling short.

      In addition, it requires that firms that clear and settle trades must purchase shares to close out these “fails to deliver” within a certain time frame, 13 days. This “close-out” requirement only applies to certain equity securities with large and persistent “fails to deliver,” known as threshold securities.

      The requirement included two major exceptions: the so-called “grandfather” and “options market maker” exceptions. Both of these exceptions provided that certain “fails to deliver” in threshold securities never had to be closed out. The Commission eliminated both exceptions in August 2007 and September 2008, respectively.

      Making Permanent A Rule to Curtail Naked Short Selling
      Adopting Rule 204: The Commission has made permanent a temporary rule that was approved in 2008 in response to continuing concerns regarding “fails to deliver” and potentially abusive “naked” short selling. In particular, temporary Rule 204T made it a violation of Regulation SHO and imposes penalties if a clearing firm:

      does not purchase or borrow shares to close-out a “fail to deliver”
      resulting from a short sale in any equity security
      by no later than the beginning of trading on the day after the fail first occurs (T+4).
      Cutting Down Failures to Deliver: An analysis conducted by the SEC’s Office of Economic Analysis, which followed the adoption of the close-out requirement of Rule 204T and the elimination of the “options market maker” exception, showed the number of “fails” declined significantly.

      For example, since the fall of 2008, fails to deliver in all equity securities has decreased by approximately 57 percent and the average daily number of threshold list securities has declined from a high of approximately 582 securities in July 2008 to 63 in March 2009.

      Due to the success of these measures in furthering the Commission’s goals of reducing fails to deliver and addressing potentially abusive “naked” short selling, the Commission has made permanent the requirements of Rule 204T with only limited modifications to address commenters’ operational concerns.

      Increasing Transparency Around Short Sales
      In the fall of 2008, the Commission also adopted a short sale reporting interim rule, Rule 10a-3T. The rule requires certain market participants to provide short sale and short position information to the Commission.

      The Commission made the rule temporary so that it could evaluate whether the benefits from the data justified the costs associated with the rule.

      Instead of renewing the rule, the Commission and its staff, together with SROs, are working to substantially increase the public availability of short sale-related information through a series of other actions. These actions should provide a wealth of information to the Commission, other regulators, investors, analysts, academics, and the media.

      Specifically, the Commission and its staff are working together with several SROs in the following areas:

      Daily Publication of Short Sale Volume Information. It is expected in the next few weeks that the SROs will begin publishing on their Web sites the aggregate short selling volume in each individual equity security for that day.

      Disclosure of Short Sale Transaction Information. It is expected in the next few weeks that the SROs will begin publishing on their Web sites on a one-month delayed basis information regarding individual short sale transactions in all exchange-listed equity securities.

      Twice Monthly Disclosure of Fails Data. It is expected in the next few weeks that the Commission will enhance the publication on its Web site of fails to deliver data so that fails to deliver information is provided twice per month and for all equity securities, regardless of the fails level. For current fails to deliver information, see http://www.sec.gov/foia/docs/failsdata.htm.

      Hosting a Roundtable
      Finally, the Commission also is examining whether additional measures are needed to further enhance market quality and transparency, as well as address short selling abuses.

      As part of its examination, the Commission intends to hold a public roundtable on Sept. 30, 2009, to solicit the views of investors, issuers, financial services firms, self-regulatory organizations and the academic community regarding a variety of trading and market related practices. The roundtable will focus on issues related to securities lending, pre-borrowing, and possible additional short sale disclosures.

      The roundtable panelists will consider, among other things, additional means to foster transparency, such as adding a short sale indicator to the tapes to which transactions are reported for exchange-listed securities, and requiring public disclosure of individual large short positions. Panelists will also consider whether it would be appropriate to impose a pre-borrow or enhanced “locate” requirement on short sellers, potentially on a pilot basis. Additionally, panelists will discuss issues related to securities lending such as compensation arrangements, disclosure practices, and methods of collateral and cash-reinvestment.

      # # #

      http://www.sec.gov/news/press/2009/2009-172.htm

      • Jeff says:

        Best news I’ve heard on this issue from the SEC! Disappointing to see nothing about going after past and current abusers.

        Patrick:

        1. Would you kindly give us your opinion on the effectiveness of these proposals in solving the problem?

        2. To what extent, if any, does this address the alternate methods of NSS you’ve described (“the iceberg itself”). Is there any way to control that?

        3. Is there any way that you and/or your supportive academics and experts could participate on the SEC’s proposed roundtable? I think we all (with the exception of a few unnamed posters) would feel much more confident in the final outcome if that were the case.

    31. Anonymous says:

      The SEC provides continuous net settlement fails data under the freedom of information act.

      http://www.sec.gov/foia/docs/failsdata.htm

      For example, the June data shows Overstock had fails of 10,185 shares.

      20090630|690370101|OSTK|10185|OVERSTOCK COM INC DEL|12.15

      What do these data mean? While first of all, the continuous net settlement system nets by 98% which means the real fail to generate this is at least 50 times bigger or 509,250 shares. This is at the level of the clients of the NSCC which are all clearing brokerages.

      The half million in fails at the clearing brokerages is after netting at the clearing brokerages. The level of netting is unknown, but that half million would have to be multiplied by another multiplier to get the true fails data.

      Here’s the problem. The regulators are only being told the 10,185 number, which sounds so trivial that it sounds like there isn’t a problem. It’s the old game of obfuscation.

    32. kevin says:

      The same people behind the DTCC.

      For thinking Americans who understand that the Fed is no more “Federal” than Federal Express, this is an attempt to put lipstick on a pig.

      As reported in:

      http://www.globalresearch.ca/index.php?context=va&aid=10489

      “1. The Fed is privately owned.

      Its shareholders are private banks. In fact, 100% of its shareholders are private banks. None of its stock is owned by the government.”

      “3. The Fed generates profits for its shareholders.”

      “The interest on bonds acquired with its newly-issued Federal Reserve Notes pays the Fed’s operating expenses plus a guaranteed 6% return to its banker shareholders. A mere 6% a year may not be considered a profit in the world of Wall Street high finance, but most businesses that manage to cover all their expenses and give their shareholders a guaranteed 6% return are considered “for profit” corporations.”

      “In addition to this guaranteed 6%, the banks will now be getting interest from the taxpayers on their “reserves.” The basic reserve requirement set by the Federal Reserve is 10%. The website of the Federal Reserve Bank of New York explains that as money is redeposited and relent throughout the banking system, this 10% held in “reserve” can be fanned into ten times that sum in loans; that is, $10,000 in reserves becomes $100,000 in loans. Federal Reserve Statistical Release H.8 puts the total “loans and leases in bank credit” as of September 24, 2008 at $7,049 billion. Ten percent of that is $700 billion. That means we the taxpayers will be paying interest to the banks on at least $700 billion annually – this so that the banks can retain the reserves to accumulate interest on ten times that sum in loans.”

      “The banks earn these returns from the taxpayers for the privilege of having the banks’ interests protected by an all-powerful independent private central bank, even when those interests may be opposed to the taxpayers’ — for example, when the banks use their special status as private money creators to fund speculative derivative schemes that threaten to collapse the U.S. economy. Among other special benefits, banks and other financial institutions (but not other corporations) can borrow at the low Fed funds rate of about 2%. They can then turn around and put this money into 30-year Treasury bonds at 4.5%, earning an immediate 2.5% from the taxpayers, just by virtue of their position as favored banks. A long list of banks (but not other corporations) is also now protected from the short selling that can crash the price of other stocks. “

    33. Dr. Jim DeCosta says:

      istandup,

      My suggested solutions and the reasoning behind each one is 112 pages long so this is going to be a very macroscopic overview. I do think the 7 senators are on the right track in some regards. As an absolute minimum these 6 policies have to be part of any abusive naked short selling market reforms:

      1) Any party accessing the “bona fide market maker exemption” from performing pre-borrows or “locates” before making admittedly naked short sales must label the sale as “short sale exempt” and prove that he is truly acting in a bona fide MM capacity by posting a bid at 98% of the share price level of his naked short sale for an equal amount of shares as he is naked short selling.
      2) Firm decrementing pre-borrows must be made by all parties not accessing the bona fide MM exemption. (“hard locates” don’t cut it)
      3) “Ex-clearing arrangements” done to postpone the “prompt settlement” of all transactions are forbidden. (The “unless” clause of 15c6-1 needs to be rescinded)
      4) The power to execute buy-ins needs to be transferred away from the NSCC and handed to an unconflicted party with access to the number and age of FTDs.
      5) The NSCC’s SBP program needs to be done away with stat.
      6) The number of readily sellable share price depressing “security entitlements” resulting from both FTDs and NSCC SBP “borrows” needs to be made public as per the ’33 “Disclosure Act” as there is absolutely nothing more “material” to the prognosis for an investment in a corporation.

    34. ginger says:

      For some reason the comments have gone out of sequence…

      AMMASS’ recent comment is dated July 25 2009 and the one before it by Dr. Jim is dated July 27 2009.

    35. iStandUp says:

      Sean,

      Thanks for the SEC news release…

      The first two paragraphs of the SEC “Overview” are quite interesting:

      “Overview
      Short selling often can play an important role in the market for a variety of reasons, including contributing to efficient price discovery, mitigating market bubbles, increasing market liquidity, promoting capital formation, facilitating hedging and other risk management activities, and importantly, limiting upward market manipulations. There are, however, circumstances in which short selling can be used as a tool to manipulate the market.

      “Naked” Short Sales: In a “naked” short sale the investor sells shares “short” without first having borrowed them. Such a transaction is permitted because there is no legal requirement that a short seller actually borrow the shares before effecting a short sale.”

      The reference to “manipulation” through SHORTING is mentioned in the first paragraph about Shorting, instead of under the second paragraph about “Naked” [Counterfeit] Short Sales.

      This makes it clear to me that the SEC is continuing to act as good defense lawyers for their Wall Street fraternity brothers, and of course they know that they will be blackballed from the financial industry if they actually STOP Naked Counterfeit Short Selling – they do not want to miss out on those multi-million dollar lawyer jobs after they leave the SEC.

      In the second paragraph, it looks like the SEC openly states that it is NOT A CRIME to engage in “Naked Counterfeit Short Selling”

      “Such a transaction is permitted because there is no legal requirement that a short seller actually borrow the shares before effecting a short sale.”

      Dr. Jim DeCosta you stated this legal fact some time ago, and now the SEC is openly acknowledging that it is not ILLEGAL to Sell What you Do NOT Own and Do NOT Borrow –

      >>> Naked Counterfeit Short Selling is LEGAL in the UNITED STATES.

      This is the problem, the SEC, the Wall Street Cops, say it is LEGAL to commit FRAUD upon the unsuspecting retail investor.

      Maybe we can use this admission?

    36. clearthinker says:

      Until we get a rule and a hard locate and borrow, the new rule means that people can still day-trade-carpet-bomb.

      I also want ex-clearing cleaned up, and CNS. It is an EMBARRASSMENT that we have to BEG our regulators for this stuff….mind boggling

    37. ww2player says:

      CNBC is having a reputation building session for Milken tonight at 9:00. Seeing as he is such a activist for health care he is obvious the best choice to have on their show. What interesting timing…

      What a freakin joke!! FBI Please investigate the hell outta CNBC and their so called “Journalists”.

    38. ron doc says:

      Don,t you get it?

      These Milken criminal pals all consider them selves as part of a elite group who should and will have total power over all the weaker serfs, us, right down to the live or die choices they feel they have the right to make for us. Since we are just the useless ones to them anyway except for the wealth they can grab while they allow us just enough money to eat with, for the time being.

    39. akcje says:

      __

      Jim DeCosta > Any party accessing the “bona fide market maker exemption” from performing pre-borrows or “locates”

      Forget it. You are already agreeing to perpetuate the special deals SEC provides for selected few.

      There is no need at all for _any_ special trading privileges for Market Makers. Anybody can have simultaneous bid and ask posted on an exchange and be de facto a market maker. If the current Market Makers pull out of the market when they loose the privilege of scalping us, it’s just fine. In some stocks the spread may occasionally increase with fewer traders, but so what. I can still place my limit order. If it has a better chance of being filled by a Market Maker today, it is only because Market Maker has extra privileged flow order information which tells him that I’ve placed an order which would be likely picked up by others anyway.

      As far as shorting, none of these proposals go far enough. They still leave unnecessary obfuscations and loopholes. Every single stock can have a unique ID and it’s ownership can be registered within microseconds of a changing ownership transaction. Nobody would be allowed to make a regular sell of a share they don’t own. If we decide to allow certain amount of shorting, then the following rules can be easily enforced.

      Proposal-1:

      a) A share has to be pre-borrowed before shorting. The exact ID of the share is registered, so the same share can not be shorted again and again, as apparently the current mechanism and SEC allows for.

      b) Put a limit on how many shares can be short as a percentage of all shares. I believe it should be set to less than 40% , but I’m willing to bargain on this one :-). Perhaps the number should be different for different groups/types of companies?

      Proposal-2:
      Allow shorting but at no time more than say 40% of all shares. If the number is reached, the new short orders will be rejected untill some will cover bringing the total under the limit.
      This is it! No need to borrow! Just limit the total!
      Nobody cares if naked or in pajamas .
      If a company has A outstanding shares and S shorted shares then a voting right of each share becomes simply = A/(A+S) .
      Example: If a company has 25% of stock shorted then each share has 0.8 of a vote.

      In either prop-1 and prop-2 the shorts still pay out dividends if the company does.

    40. Tar&FeatherThem says:

      Why is MM now a featured player by CNBC in the Healthcare reform movemnet. A captured network? Let the investigation begin.

    41. Congratulations to the people of Delaware who have a real mover and shaker amongst them. This cowboy pushed and pulled for what the SEC will not do.

      The lack of leadership coming from the SEC on the total ban of naked short selling by requiring a “hard-locate” and preborrow requirement is business as usual for the fat cats on Wall Street and around the world. The likes of Milken and Cohen and their ilk are open for business to do what they do best, push the envelope to continue the business of their bear raids.

      Why the SEC is holding a roundtable to discuss naked short selling in the next 60 days is almost unfathomable, but then it is the SEC and you can ask any Madoff client about how effective they are in acting on all of the information at hand to combat the fraud and crime in naked short selling.

      I sure hope the boys from DeepCapture.com are invited to sit with Ms. Shapiro of the SEC at the roundtable. She may learn a thing or two if she really cares.

    42. Dr. Jim DeCosta says:

      Istandup,

      Technically the SEC’s comment re: the legality of naked short selling isn’t inaccurate but it is 100% misrepresentative. It is 100% legal for a truly “bona fide” MM to sell nonexistent shares into a buy order in order to “inject liquidity” when there are order imbalances of buy orders dwarfing sell orders. This is the universally abused “bona fide MM exemption”. The thing is that a truly bona fide MM will then cover any pre-established naked short position ON THE VERY NEXT DOWNTICK as sell orders dwarf buy orders. This is when the crooked MMs that ILLEGALLY accessed the bona fide MM exemption are nowhere to be found. Why? Because at the NSCC you can naked short sell all day long and all they ask you to do is to collateralize the monetary value of your naked short position on a daily marked to market basis. This is referred to as “collateralization versus payment” or “CVP”. It is100% illegal in that the “prompt settlement” of securities transactions as mandated by Section 17 A of the ’34 Act necessitates “delivery versus payment” or “DVP” so do almost all other clearance an settlement systems on the planet EXCEPT OURS. Both BIS and IOSCO in their November of 2004 recommendations to “central counterparties” warned us about straying from DVP.

      With CVP there is a readily accessible self-fulfilling prophecy accessible to the crooks. As the readily sellable share price depressing “security entitlements” that are induced to be issued by each and every FTD and NSCC SBP “borrow” accumulate invisibly the share price tanks as do the “collateralization requirements”. This results in the money of the investor flowing to the parties that sell nonexistent shares and refuse to ever deliver that which they sell. In a CVP system the only solution is to execute “buy-ins” when the seller of shares absolutely refuses to deliver that which it sold but the NSCC management that are the employees of the crooks doing the naked short selling have accumulated 15 of the 16 sources of empowerment to execute buy-ins and they have the audacity to plead to be “powerless” to execute buy-ins when their bosses misbehave.

    43. Dude Abides,

      Yes, you are right, Dr. Small was supposed to participate in the advisory panel meeting, but he was not supposed to vote. I regret the error, and have changed the paragraph to make it accurate. Thanks very much for spotting the error. If anyone else spots other errors (inevitably there will be some in a story of this length, and we are a small staff, not blessed with teams of fact checkers), please do let me know.

      If you prefer to contact me privately, my email is mmitchell@deepcapture.com

    44. Dear All,

      Another word of thanks to the many people who have done so much to get the word out. I am overwhelmed by the reaction to this story and wish I could do more than write this measly note to express my gratitude to those who have been sending letters and keeping the discussion going on the message boards.

      I think we’re showing that we don’t have to be The Wall Street Journal or CNBC to rock the boat. In fact, it’s better that we’re NOT the Wall Street Journal or CNBC – I think they have rules against rocking the boat.

      Revolutions have sprung from humbler origins. Keep it up!

      Mark Mitchell

    45. Akcje,

      Because you seem to be among the only people who questions my intentions, and because you are among the most avid posters on Deep Capture, I will respond to your latest comments.

      Every Wall Street veteran I have spoken to says that the SEC filings appear to suggest that Balyasny and Visium (which is Balysasny’s fund, though he does not declare that in most of his SEC filings) were, as of March 2007, implementing a split-strike strategy. A split-strike is, as you know, a synthetic short position. Of course, as I have stated repeatedly in the story, it is impossible to know with absolute certainty. But we can make educated guess that have a high probability of being accurate. From other information I have, I am quite confident in saying that Balyasny was, one way or another, net short Dendreon as of March 31, 2007 – two days after the advisory panel voted in Dendreon’s favor.

      From SEC filings, we can identify only ten hedge funds (out of a universe of 11,500 hedge funds) that seemed to have placed large bets against Dendreon as of March 31, 2007. These bets were utterly counterintuitive given the fantastic news of the advisory panel vote. And these bets were immensely prescient given the fact that Dendreon was subsequently derailed by people tied to Milken. Therefore, it is significant that at least seven of those ten hedge funds (including Balyasny’s) can be shown to be part of a tight network that is tied in innumerable ways to Michael Milken or his closest associates. Hedge funds in this network routinely target the same stocks at precisely the same times. Many of them employ, in key positions, former top traders of SAC Capital, run by Steve Cohen, who was investigated for trading on inside information provided to him by Milken’s shop, and is well known for building a nationwide trading network by maintaining relationships with his former employees. The companies targeted by these hedge funds are routinely victimized by illegal naked short selling. Many of the hedge funds in this network have been implicated in multiple cases of abusive short selling. And many of them (including a hedge fund for which Balyasny was the top earner) have ties to a network of Mafia-affiliated brokerages that was targeted by the FBI in the 1990s.

      My story seeks to describe this network and the ties that bind certain Wall Street miscreants. You suggest that all I have done is tell readers who so-and-so’s father in law is. I maintain that it is highly relevant that a hedge fund manager in the network is the son-in-law of the man who founded the most notorious, Mafia-affiliated brokerage on Wall Street (a brokerage that was indicted on 173-counts and famous for pumping and dumping fake biotech companies); that this son-in-law helped run that Mafia-affiliated brokerage; that the president of that Mafia affiliated brokerage was Michael Milken’s former national sales manager; that this son-in-law is a close business associate of Michael Milken; that this son-in-law was the controlling shareholder of a biotech company promoted by Michael Milken’s “philanthropy;” and that a trader working for this son-in-law was simultaneously hammering Dendreon. You call that a “conspiracy theory.” I call it a collection of interesting facts. Readers can make of them what they want.

      However, I have attempted to do more than describe various ties to Milken. I have very close friends who have worked for Milken. Some of these people are the most honest people I have ever known. One of them has been a mentor to me. I certainly do not mean to suggest that any person is guilty only by reason of their association with Milken. However, I do think some of Milken’s closest associates are bad actors – people with documented records of market miscreancy. I believe it is worth noting that those bad actors seem to collaborate. And I think it is worth noting the extraordinary coincidence of seven hedge funds with ties to Milken and the bad actors being among the only hedge funds on the planet placing big bets against Dendreon just before Dendreon was derailed by Milken’s philanthropy and by government employees with financial ties to Milken. I think it is also worth noting the extraordinary coincidence that many of those same hedge funds (including Balyasny’s) were meanwhile heavily invested (no fancy options strategies here – just straight share purchases) in dubious, competing companies that were promoted by Milken’s philanthropy right before those companies announced (not quite honestly) that they had sealed massive deals – deals that were dependent on Dendreon’s derailment; deals that were subsequently cancelled when it was learned that the companies’ prostate cancer treatments were actually killing people.

      Honestly, Akcje, I welcome your comments on this story. The more debate there is, the closer we can get to the truth. I encourage you to continue posting, but I’ll tell you that it seems a bit disingenuous when you zero in on facts of little importance, ignore the big picture, and make blanket statements that “Mitchell just doesn’t understand markets and trading” without offering anything that might increase our understanding. These tactics of debate (obfuscation) come straight from the miscreants’ handbook, which perhaps explains why so many people here seem to believe that you are employed by the miscreants themselves.

      However, if you are not tied to the bad guys, I would like to dispel that misconception by stating definitively that you are a straight-shooter who merely has a different point of view. Moreover, I would like to better understand your point of view, and perhaps help you to better understand mine. Therefore, I have a proposal. It is that you contact me by private email and let me know who you are, and how to reach you. You have my word, here in writing, that I will not reveal your identity to anyone – not my Deep Capture colleagues; not my family; not anyone. And you have my word, here in writing, that if I discover that you are not employed by the miscreants, I will post a comment asking people to stop suggesting that you are. It does not serve my purposes to have false accusations leveled on this site.

      Assuming you are operating in good faith – that you are merely a fellow who has taken an avid interest in this story – this is your chance to prove it. And if you prove it, your arguments (about which you are apparently passionate, judging by the thousands of words you have posted here) will be taken more seriously.

      Just an offer – I try to be helpful. Of course, if you don’t contact me, your detractors will be left to their assumptions.

      My email: mmitchell@deepcapture.com

      • akcje says:

        _
        Mark Mitchell > you seem to be among the only people who questions my intentions,

        I do _not_ question your intentions. I believe you have good intentions. What I question is your article. Both the approach and it’s end effects. This kind of writing gets you a following of the conspiracy freaks and those that are already 100% convinced that every stock move against their position is a sure sign of manipulation.

        But at the same time you distract from the need for a major overhaul of the stock market workings. You get people bogged in the details of who slept with whom. This is interesting gossipy stuff and I grant you, that _if_ crimes were committed it could aid in collecting the evidence. But without any evidence of actual crimes it only helps to dilute the efforts for real changes.

        The current half-hearted attempts to control naked short selling are a good example. They try to address only the semi-illegal naked shorting and still inadequately. Instead, the entire shorting problem should be addressed.

        How come nobody insists on a major, common sense (OK, “my” common sense) rule: “No shorting is allowed if the total number of shorted shares exceeds 10% of all shares. (The “10%” is just an example of what the allowed maximum should be). This would take care of the major damage shorting makes to fledging companies in a need to refinance.
        No _any_ shorting, naked, pajamas clad, borrowed shares, etc… until the total of shorted shares drops below the allowed max.

        Similarly the entire discussion on the uptick or other rules limiting shorting seems to ignore the arguments which are given for shorting in the first place. One of the main arguments for shorting is that it helps “price discovery”. But obviously, on days when a stock is diving down, not much “discovery” by shorting is needed. It seems that it was already discovered to be overpriced… There are really no good arguments for shorting when PPS has dropped more than say 2% in the day, or more than 5% in past week for example.

        – – –

        Of course an even simpler step would be to get rid of all stock shorting. The arguments for it are mostly bogus anyway. Options offer opportunity to bet on downward stock movement anyway! Allowing shorting in combination with options offers plenty of opportunity for the stock manipulation.

        – – –

        Mark Mitchell > Every Wall Street veteran I have spoken to says that the SEC filings appear to suggest that Balyasny and Visium […] were, as of March 2007, implementing a split-strike strategy. A split-strike is, as you know, a synthetic short position.

        You wrote: “held around 3 million put options in Dendreon. Simultaneously, these hedge funds owned an almost equal number of call options”

        Uhhhh. It seems, you simply made a small mistake here. You meant “…Simultaneously, these hedge funds were __short__ an almost equal number of call options”.
        You kind of indicated it in the following statement but it slipped by me. Sorry.

        – – –

        Mark Mitchell > Balyasny was, one way or another, net short Dendreon as of March 31, 2007 – two days after the advisory panel voted in Dendreon’s favor.

        Mark Mitchell > From SEC filings, we can identify only ten hedge funds (out of a universe of 11,500 hedge funds) that seemed to have placed large bets against Dendreon as of March 31, 2007. These bets were utterly counterintuitive given the fantastic news of the advisory panel vote.

        You keep repeating this “ten out of 11,500). How many funds would you expect to invest (long or short) in one small biotech? What’s the average? Tell us why “only ten” should be surprising.

        It would be much more interesting to know who was short big way _before_ the Panel, _before_ March 30, 2007
        Going short after the Panel was _not_ “utterly counterintuitive”. PPS shot up on the Panel news and on the short squeeze. And Provenge was still not approved, and in view of many not a slam dunk. Even though I was long DnDn and quite sure it’ll be approved, I bought some puts a couple of times (for a day and a swing trade) in that “overpriced” period. So it was not “counterintuitive” to me. It was not “counterintuitive” to the Dendreon’s CEO who sold a lot of his shares at $15. And not to many other longs who sold their shares at the post-Panel days of high PPS.

        The risk a huge loss was much greater to those who shorted before the panel, in the $4-5 range. Were those the same funds?

        I know it’s hard to get the data on shorts out of SEC. But when you have no access to supportive data, don’t throw in any data just to have something. Again, it will convince only those already believing that the world is run by “cartel” “cabal”, etc…

        – – –

        Mark Mitchell > I have very close friends who have worked for Milken.

        Now, this explains a lot. The cat is out of a bag…
        Are trying now to implicate yourself and your close friends? :-)
        (For those dense among your readers, this was meant as a joke.)

        – – –
        – – –

        You may want to decide if you want DeepCapture to remain a place where groupies can get their daily fix of conspiracy confirmations. Or if you want to propose and affect real changes. Like to make stock market more fair to all traders, and less of a playfield for unscrupulous.

        If you want to affect a change you have to convince other people than followers.

        The real problem with today’s stock market trading and rules, is not so much illegal trading and conspiracies, but legal or borderline legal opportunities for a few large players to take advantage of the rest. Also, in a well designed electronic market SEC would not need expensive audits to detect that Madoff’s claimed gains didn’t match his nonexistent trades….

        – – –
        – – –
        – – –

        Mark Mitchell > if I discover that you are not employed by the miscreants, I will post a comment asking people to stop suggesting that you are.

        No need to. I’m not really hurt by those, that accuse me of being: lawyer, paid basher, hedge fund employee, hedge fund manager, Adam Feuerstein, Cramer, Milken, Milken’s lawyer,… just to name a few of my discovered “identities”.

        I’m not employed by anybody, but what if I’m just a natural miscreant. Had to double check in a dictionary:
        ” An infidel; a heretic.” Well, I’m sorry I have to plead guilty under this definition.
        “An evildoer; a villain”. To the faithful anybody different is evil… I’m not quite sure how your knowing my last name will change it?

        I’m not a big fun of the anonymous aliases on bulletin boards but switched to one some years ago when number of unbalanced and hateful posters grew on the net. Kind of like one of your followers here ( Don: “YOU MURDERING BASTARD” ; “You are on my shit list..I pray I can speak with you in person” ; )

        Anyway, I’ll probably contact you by email. I don’t really care much what the faithful but thoughtless think on who I am. But since you do use your full name, I kind of owe it to you too.

        = = = = = = = = = =
        = = = = = = = = = =

        For a good summary of Provenge saga see these post on DnDn board:
        http://tinyurl.com/ocyan-281878
        http://tinyurl.com/ocyan-283030

        I’ve seen enough to convince me that several individuals cooperated and coordinated their efforts to prevent approval of Provenge in 2007. They had official role in FDA proceedings despite having clear conflicts of interest, some disclosed to FDA and some undisclosed.

        But the use of word “conspiracy” could be overused. “Conspiracy” implies an agreement with an illegal intent or committing a crime. In a bad system like FDA a lot of bad stuff can be done without even being illegal. The emotional arguments that delaying Provenge approval is a crime because it caused some people do die several month sooner are unlikely to hold in a court. Many wrong, unethical and immoral actions are very legal. Perhaps withholding COI from FDA could turn out illegal?

        (disclosure: I’m not a lawyer, despite being “accused of it here, among many other things : – )

        = = = =

        = =
        ref: http://www.theoptionsguide.com/synthetic-short-stock-split-strikes.aspx , http://www.theoptionsguide.com/synthetic-short-stock.aspx

    46. captain margarine says:

      “These tactics of debate (obfuscation) come straight from the miscreants’ handbook, which perhaps explains why so many people here seem to believe that you are employed by the miscreants themselves.”

      I think it was the “I hear Mark Mitchell beats up on his own mother” comments that did it for me.

    47. Patchie says:

      Okay, I must start with the caveat that I feel for Senator Dodd in his finding out that he has Prostrate Cancer as I do not wish ill health on anyone. That being said, is it not ironic that Dodd has done little in his position on the Senate Banking Committee to address the abuses of hedge funds and shortings and yet one of the companies these funds tried to destroy is working on a medical breakthrough to cure Prostrate Cancer?

      Dodd has been approached many times regarding naked shorting, many times regarding hedge fund abuses, and many times regarding media supporting their abuses.

    48. g2nosis says:

      Thanks, Mark. Great journalism!

    49. So, Mark , did akcje contact you and is he legit; ie, not a member or representative of the NSS conspiracy?

    50. ravenseye says:

      Medifast, Inc. et al v. Minkow et al
      Plaintiffs: Medifast, Inc. and Bradley MacDonald
      Defendants: Barry Minkow, Fraud Discovery Institute, Inc., Robert L. Fitzpatrick, Tracy Coenen, Sequence, Inc., William Lobdell, iBuisness Reporting and Zeeyourself

      Case Number: 3:2010cv00382
      Filed: February 17, 2010

      Court: California Southern District Court
      Office: San Diego Office [ Court Info ]
      County: XX US, Outside State
      Presiding Judge: Judge Janis L. Sammartino
      Referring Judge: Magistrate Judge William McCurine Jr.

      Nature of Suit: Torts – Injury – Assault, Libel, and Slander
      Cause: 28:1331 Fed. Question: Personal Injury
      Jurisdiction: Diversity
      Jury Demanded By: Plaintiff
      http://dockets.justia.com/docket/court-casdce/case_no-3:2010cv00382/case_id-316424/

      Business
      Ex-con now walks a financial tightrope
      By Cary Spivak of the Journal Sentinel
      Posted: April 3, 2010
      http://www.jsonline.com/business/89852612.html
      …Coenen said she knew three years ago when she linked up with Minkow that she was putting her reputation, and that of her one-person company, Sequence Inc., at risk. She is one of the targets of a $270 million lawsuit filed in February against Minkow, Lobdell and others by Medifast Inc., which the institute investigated….

      …Coenen admits she feels a little queasy about Minkow’s stock market activities.

      “It tends to raise questions about our work,” Coenen said.

      She said she personally does not short the stocks of companies she investigates for Minkow, though he has invited her to do so….

      …Lobdell, the former L.A. Times reporter hired by Minkow, edits the fraud institute’s iBusinessReporting. Lobdell notes on that Web site’s home page that his site is funded by the institute, which gets its money “in part, by short selling the stock of companies that it thoroughly investigates and deems fraudulent and/or lacking a sustainable business model.”

      Lobdell said he personally shorted the stock of InterOil Corp., a Houston company that iBusinessReporting has examined. InterOil said in a statement that Lobdell’s reports, including one about a bankruptcy case involving a company controlled by Inter-Oil’s CEO, “was timed to benefit recent short selling activities.”

      Lobdell said he shorted the stock in part because of the criticism he’s received since going to work for Minkow. “I’m getting hammered anyway,” Lobdell said. “I don’t think it makes any difference  . . . whether it’s Barry shorting the stock and paying me or me just doing it myself.”

      Bob SteeleiBusinessReporting, an expert on media ethics now at DePauw University in Indiana, was stunned that an editor on a reporting Web site would not see the ethical issue.

      Lobdell is a “person with a financial stake in the company, so it raises real questions about fairness,” Steele said. “I’m astonished that he would not see it as a problem.”…

      read the article linked above for the rest

    51. OptionsTrader says:

      This is one of the funniest things I’ve ever seen. First off, this entire story about Balyasny and Milken is just completely hilarious. BAM Capital, as show to be the holder of Dendreon, is not Balyasny. It was a Long Volatility hedge fund, created by partners R. Berman and H Mintz, (BAM stands for B (erman) A(nd) M(intz). Mintz was, at one point, the single biggest options trader in ALL of the biotechnology space. As a matter of fact, BAM lost a considerable amount of money when DNDN shares fell when it wasnt approved, because they were net short stock(but not deltas, meaning they were synthetically FLAT, or had no position betting if prices would rise or fall), and were BOUGHT IN by the clearing house at that time. Being bought in is the process by which short stock is no longer borrowable (usually due to the fact that who ever was lending the stock to be shorted now wants to sell and close their long position). BAM LOST A HUGE SUM OF MONEY.

      The reason why BAM, which again, I cant say this without laughing, isnt Balyasny and has nothing to do with any of those other hedge funds, SAC, etc… the reason why bam became such a huge holder, was because through providing liquidty to major options players and banks, BAMs trader would buy puts sell calls and buy stock, and then lend the stock out at a higher percentage rebate than was priced in the options market at that time. This entire story and “exposing naked short sellers” story is complete nonsense, it is made up like a good spy novel or jason bourne movie.

      You have really send an incredible amount of time inventing something that never happened, and this article here clearly demonstrates your lack of knowledge, especially considering that you think that BAM Capital is Balyasny, when in fact, Balyasny never had any significant interest in Dendreon puts, calls, and stock. Morons!!!!!!!

    52. AMMASS says:

      July 25, 2009 at 2:03 pm
      Mark Mitchell,
      At the end of the evening DNDN C/C on 3/29/07 ,Joel SENDEK of Lazard mumbled that “this is not the way we heard it was going down ” or words to that effect(i.e. the AC of the FDA’s favorable vote on Provenge and therefore its expected Approval.) All I want to know is “who” it was that Sendek was refering to when he blurted -out that we were told differently wrt the AC vote. WAS it Pazdur or someone else at the FDA ,perhaps von Ecshenbach ,or perhaps MILKEN who got his info from von Ecshenbach and then passed it on to his consortium of NSS HFs? THIS is really important and must be investigated if not a supoena issued to Sendek to get the ANSWER,for that will bring this entire conspiricy home, and resolved imho.
      AMMASS

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