Evidence suggests that Bernard Madoff, the “prominent” Wall Street operator and former chairman of the NASDAQ stock market, had ties to the Russian Mafia, Moscow-based oligarchs, and the Genovese organized crime family.
And, as reported by Deep Capture and Reuters, Madoff did not just orchestrate a $50 billion Ponzi scheme. He was also the principal architect of SEC rules that made it easier for “naked” short sellers to manufacture phantom stock and destroy public companies – a factor in the near total collapse of the American financial system.
* * * * * * * *
I don’t know why, but this seems like a good time to tell you a little about my personal history. Along the way, I’ll mention a murder, two suicides (or “suicides”), a punch in the face, a generous bribe, three Armani suits in bar, and a “prominent” billionaire who might know something about a death threat and a Russian matryoshka doll.
But actually, this story isn’t about me. It’s about Patrick Byrne, the fellow who got me into this mess.
* * * * * * * *
The story, like so many others, begins on August 12, 2005 – the day that Patrick Byrne, the CEO of Overstock.com and future reporter for Deep Capture (a leading investigative news outfit), delivered a famous conference call presentation entitled, “The Miscreants Ball.”
To the 500 Wall Street honchos who listened in to this conference call, Patrick said that a network of miscreants was using a variety of tactics – including naked short selling (phantom stock) – to destroy public companies for profit. He said this scheme had the potential to crash the financial markets, but that the SEC did nothing because the SEC had been compromised – or “captured” – by unsavory operators on Wall Street.
Patrick added that he believed the scheme’s mastermind — “just call him the Sith Lord” — was a “famous criminal from the 1980s.”
In January 2006, I was working as an editor for the Columbia Journalism Review, a well-respected ( if somewhat dowdy) magazine devoted to media criticism. Patrick had claimed that some prominent journalists were “corrupt” and were working with prominent hedge funds to cover up the naked short selling scandal, so I called to discuss.
Patrick picked up the phone and said: “Chasing this story will take you down a rabbit hole with no end.” He said that the story had it all – diabolical billionaires, phantom stock, dishonest journalists, crooked lawyers, black box organizations on Wall Street, and a crime that could very well cause a meltdown of our financial system.
Not only that, Patrick said, but “the Mafia is involved, too.”
Well, Patrick seemed basically sane. I decided to write a story about the basically sane CEO who was fighting the media on an important financial issue while harboring some eccentric notions about the Mafia.
I figured it would take a week.
* * * * * * * *
Months later, my desk was buried under evidence of short seller miscreancy, I had done nothing but investigate this story since the day I first called Patrick, and I had just gone to a topless club to meet a self-professed mobster who told me all about a stockbroker who had peddled phantom shares for the Russian Mafia and the Genovese organized crime family.
The stockbroker had taken a bullet to the head – execution-style. And the mobster said he knew who did it.
* * * * * * * *
By this time, Patrick had long-since amended his “Sith Lord” analogy to say that the short selling schemes probably had multiple masterminds with a shared ideology – “like Al Queda.”
Be that as it may, my investigation now had two areas of focus. The first was the Mafia. The second was a network of crooked journalists, investors, short sellers, and scoundrels – a great many of whom were connected in important ways to two famous criminals or their associates.
The famous criminals were Michael Milken and Ivan Boesky.
In the 1980s, Milken and Boesky were among the most “prominent” investors in America. They were also the main protagonists in what James B. Stewart, a Pulitzer Prize winning reporter for The Wall Street Journal, later called “the greatest criminal conspiracy the financial world has ever known.”
In 1989, Milken was indicted on 98 counts of securities fraud and racketeering. He did some time in prison. Upon his release, he revved up a public relations machine that was as effective as it was ruthless (Milken’s detractors had their reputations torn to shreds).
Nowadays, the press generally refers to Milken as a “prominent philanthropist.” Often, he is hailed as the “junk bond king” – a financial “genius” who “fueled economic growth” and “built great companies” by “revolutionizing” the market for high-yield debt (junk bonds).
Boesky, who helped Milken destroy great companies, was indicted on several counts of securities fraud and stock manipulation. After his release from prison, in the early 1990s, he reportedly went to Moscow to build relationships with the Russian oligarchs who were then looting the former Soviet Union.
After that, nobody heard much from Boesky.
* * * * * * * *
In the spring of 2006, I doubted that Milken or Boesky had committed any wrong-doing since the 1980s. But it was clear that many of the people in their network were up to their same old tricks – destroying public companies for profit.
I did not think that Milken or Boesky worked for the Mafia – that would be crazy. But it was clear that the Mafia was destroying public companies for profit. And it was clear that a surprising number of people in the Milken-Boesky network did have ties to the Mafia.
At any rate, the “prominent investors” in this network seemed to have many schemes.
Sometimes they seized a public company, fattened it with debt, stripped out its assets, pocketed its cash, and then killed the company off. This is what mobsters used to call a “bust-out.” In the old days, it was neighborhood wiseguys taking over local restaurants. In the 1980s, Milken and his crowd introduced the technique to the world of high-finance.
Other times, the “prominent investor” thugs acquired large stakes in a company. Then the thugs suggested to the company that they would go away only if the company were to buy back its shares at a hefty premium. In the 1980s, the Milken crowd referred to this as “greenmail.” Mobsters called it “blackmail” or “protection money.”
In still other cases, the “prominent investors” attacked the companies from the outside, employing tactics – threats, harassment, extortion – that seem straight from the Mafia playbook.
Whatever the specifics of the scheme, it was often the case that “prominent” short sellers who were tied to the “prominent investors” would eventually converged on the target companies and use a variety of equally abusive tactics either to destroy the companies or put them on the defensive.
While I do not have SEC data going back to the 1980s, the data for more recent years shows that most of the companies attacked by this network were also victimized by abusive naked short selling.
That is, somebody sold massive amounts of the companies’ stock and “failed to deliver” it for days, weeks, months – or even years – at a time.
* * * * * * * *
So back in 2006, I had begun to ask a lot of questions.
That’s when I had a strange encounter with three dudes in Armani suits.
The encounter occurred on a Thursday evening in a quiet, neighborhood dive bar, around the corner from my apartment, near Columbia University in New York – a neighborhood that does not often attract men in Armani suits. I was alone, having a beer and reading a book about Wall Street.
The Armani suits entered the bar and sat down next to me.
“Whatcha reading?” one said.
When I told him, he asked: “Anything in there about Ivan Boesky?”
“Yes,” I said, “he’s mentioned”
“Haven’t read it,” the man said.
He was silent for a few minutes. Then he laughed and announced that, by the way, he used to work for Ivan Boesky’s family. He said Boesky “is a real asshole – thinks he has so much money he can do what he wants. Hell, he might have killed people, for all I know…Heh.”
Armani shook his head. Then he said, “Hey, I got to tell you a funny story.”
This turned out to be a long and convoluted tale, the gist being that a fellow had wandered into the ladies underwear department at Saks Fifth Avenue. Apparently, this fellow thought it would be a good idea to peek into a dressing room where a lady was trying on a new pair of panties. But the lady’s husband caught the fellow and the husband happened to be packing some high-caliber weaponry, so he blew the fellow’s brains out, and now there was a big mess in the ladies underwear department.
“The guy was a pervert,” said Armani. “You know what I mean? There are some things you keep your nose out of. I would have killed the guy, too.”
With that, Armani stood up and said he was pleased to have met me.
I asked for his name. He said, “It’s John — John from Saks Fifth Avenue.”
And then he and his friends were out the door. The other two guys hadn’t said a word. None of them had bought drinks or shown any other reason for having entered the bar.
This occurred shortly after I began asking my first serious questions about Boesky. I had just met with a CNBC public relations man and I had told him that I was conducting a full-scale investigation of Boesky, and was interested in knowing more about Boesky’s ties to CNBC reporter Jim Cramer. I had determined that most of the journalists who were deliberately blowing smoke over the naked short selling issue were connected to Cramer. These included four of the five founding editors of TheStreet.com, Cramer’s online financial news publication.
Cramer, a former hedge fund manager, had planned to work out of Boesky’s offices in the 1980s. When Boesky was indicted, Cramer worked instead with Michael Steinhardt, whose biggest initial investors were Boesky, Marc Rich (later charged with tax evasion and illegal trading with Iran), Marty Peretz (co-founder, with Cramer, of TheStreet.com) and the Genovese organized crime family.
Steinhardt’s father, Sol “Red” Steinhardt, spent several years in Sing-Sing prison after he was a convicted by a New York prosecutor who described him as “the biggest Mafia fence in America.”
Also at this time, a central target of my investigation was a hedge fund called SAC Capital, colloquially known as “Sak.” That, of course, is somewhat different from “Saks Fifth Avenue.” It seemed doubtful to me that either Boesky or SAC Capital had sent the Armani-suits to threaten me.
Possibly, I thought, Armani had misrepresented his relationship with Boesky and Saks Fifth Avenue. Perhaps Armani worked for people who were concerned that I had begun investigating that execution-style murder.
Either that, or this was just one of those weird coincidences and there really was a former Boesky employee who’d found work in the brain-splattered ladies underwear department at Saks Fifth Avenue.
* * * * * * * *
My investigation continued and sometime later – on Halloween, 2006 – a guy sat down next to me at a book store. He said he’d seen me with one of my closest relatives (he was specific, but I’d rather not name the relative) and he thought I needed to be more concerned about the safety of this relative.
He said he didn’t mean to be intrusive, but he knew how hard it was to take care of relatives and he just wanted everyone to be safe.
Then another guy sat down at a nearby table, and slammed down a book. On the front cover of this book, in big bold letters, it said: “MAFIA.”
I became paranoid enough to retreat to the back of the book store. I told one of the clerks about the two guys, and I called some colleagues, who offered to send the police.
As soon as I hung up, one of the guys came up to me, smiled, and said he hoped that he hadn’t upset me. Then he left.
I told my friends not to call the police. It was probably just a strange coincidence.
Two years later, as my investigation deepened, I began receiving Internet messages from Sam Antar, a convicted felon who orchestrated the famous fraud at Crazy Eddie, the electronics retailer. In an upcoming story, I will describe Antar’s relationship with Michael Milken. I will also tell you more about the $250,000 in cash that Antar delivered to a Milken-funded entrepreneur who orchestrated a massive fraud with the Genovese organized crime family.
For now, though, I’ll just say that Antar’s messages to me have not been friendly.
In one, he wrote, “Mitchell: Do you remember what happened last Halloween?”
I had spent the previous Halloween interviewing Rotarians in Oklahoma about their Halloween canned food drive. The Halloween before that, I was in a book store where there was either a strange coincidence or a veiled death threat.
I sent Antar an email, asking what he meant. He did not reply.
* * * * * * * *
In November 2006, one of the hedge fund managers I was investigating appeared in my office and announced that he had become the primary financial backer of my department at the Columbia Journalism Review. Traditionally, the Columbia Journalism Review (a not-for-profit magazine) had been funded by large philanthropic foundations – not by hedge fund managers who were under investigation by the Columbia Journalism Review.
But now my salary would depend entirely on the beneficence of this hedge fund.
The hedge fund was called Kingsford Capital, and in upcoming stories, I will tell you more about this hedge fund.
I’ll tell you about Kingsford’s ties to naked short sellers.
I will tell you about the large sums of money that were offered to other journalists who had been working the naked short selling story.
I will tell you why it is significant that one of Kingsford Capital’s managers was Cory Johnson – a founding editor, along with Jim Cramer and the other dishonest journalists I was investigating, of TheStreet.com.
I will publish emails that shed light on Kingsford’s relationship with hedge funds that are tied to both SAC Capital and Michael Steinhardt, Cramer’s former office-mate.
In still other stories, I’ll tell you more about Steinhardt and his partners’ ties to the Genovese Mafia, Ivan Boesky, an angry Russian hooker, and a man who wanted the world to believe that he was dead.
I will also tell you about the former Genovese Mafia soldier who told a former manager of SAC Capital that he could make one of the manager’s business associates disappear in the Nevada desert. And I’ll tell you that the man who volunteered to commit this murder had once been hired to put a dead fish and a bullet hole in the car of a journalist who was investigating one of Michael Milken’s closest friends.
I’ll tell you all about it in upcoming stories.
But let me stress that I have no idea who was responsible for the strange things that occurred in 2006. That is to say, I know that Kingsford bribed the Columbia Journalism Review.
But as for the other strange occurrences – all I can say is that they were strange.
* * * * * * * *
Two days after I learned that Kingsford Capital and its cronies would be paying my salary while I finished my exposé on Kingsford Capital and its cronies, I had dinner with an economist who was exploring the naked short selling problem.
On my way home, I stopped in a café around the corner from my apartment. As I was putting on my coat to leave the cafe, a man grabbed me from behind and forcefully escorted me to the sidewalk. Outside, there were two more guys – not big guys, just regular looking fellows. They grabbed me, and the first guy delivered a single powerful punch to my eye.
I was stunned. When I finally held up my fists, the three men laughed and embraced me in a bear hug. Then they virtually carried me to the front stoop of my apartment, which was a block away. It seemed as if they knew that I lived there.
After brushing off my lapel, they said they were very sorry. They said they hoped I wasn’t offended, it wouldn’t happen again, but they were there for my own good – and, please, just “stay away from your Irish Mafia friend.”
Then they were gone. It all happened in about three minutes.
It occurred to me that this might have been just a random act of violence. It also occurred to me that the thugs might have bungled the message – that they had meant to say, “Just stay away from the Mafia and your Irish friend.”
Patrick Byrne (full name: Patrick Michael Xavier Byrne), with whom I was working extensively on the naked short selling story, is Irish. In interviews I had conducted for the story, many people had commented on Patrick’s Irishness. (In some Wall Street circles, it seems to be common for people to refer to others’ ethnicity – “Byrne, he’s an Irish guy, right?” or “The stock loan business, that’s the Italians.”)
In any case, I went to work the next day with a black eye. I said it was “just a bar fight.”
A woman in my office told me she thought it was “really cool” that I had been in a bar fight.
Later, Sam Antar, the convicted felon, posted an Internet message asking whether I “had ever been forcefully escorted out of a public building.”
As this had happened only once, I sent Antar an email asking if he was referring to the thugs who’d ambushed me in a café.
Antar did not answer my question. Instead, he quickly proceeded to write a blog saying that he had just received information that I had been “forcefully escorted out of the Columbia Journalism Review.”
* * * * * * * *
During the fall of 2006, Patrick Byrne had some strange experiences as well.
Somebody broke into Patrick’s home, and soon after, somebody broke into the home of a woman who was Patrick’s girlfriend at the time. Then somebody threw a pair of metal gardening shears through the window of the girlfriend’s restaurant.
Around the same time, Patrick’s then-girlfriend discovered that for some mysterious reason, her phone records were being sent to the home of a Russian man working for Goldman Sachs Execution and Clearing (formerly Spear, Leeds, and Kellogg – in its day, one of the most egregious naked short selling outfits on the Street).
I asked Goldman Sachs about this. I was told that the bank had investigated thoroughly and found no reason to believe that the Russian man, Elliot Faivinov, had obtained the phone records. (For anyone interested, the phone company can confirm that he did receive the phone records.)
At any rate, I have since learned that Goldman Sachs became a large donor to the Columbia Journalism Review sometime not long after Kingsford Capital announced that it would be paying my salary. Wall Street has never been so devoted to the dowdy world of media criticism.
As if all of this were not enough, one day in the fall of 2006, U.S. Senator Orrin Hatch invited Patrick to his home. As soon as Patrick entered the lobby of the apartment building, the Senator pulled him aside and said that he had credible information that Patrick’s life was in danger.
“You are up against some really nasty, vicious people,” the Senator said, “They will not hesitate to kill you.”
* * * * * * * *
Patrick kept on fighting.
As for me, I’d been investigating the Mafia, there’d been an execution-style murder, now there were these strange incidents, which might have been nothing, but getting beat up kind of freaked me out, and now I was staying up all night, squinting at my computer through my punched-in eye (which was black and blue, full of puss and swollen shut), trying to finish a story about a scandal involving the people who would now be directly paying my salary.
And so, maybe it isn’t all that surprising what happened next, which is that I snapped.
I couldn’t work anymore. I checked-out.
In the middle of November, a week or so after getting the Kingsford news, but still on perfectly good terms with my editors, I quit my job, and walked out the door.
Within a few days, I had shut down my New York apartment, and was on a plane to Chicago, where I planned to take some time off.
I had told my editor that I thought I might be killed. But I never specified, and I didn’t make an issue of the Kingsford Capital bribe until later. So I am hopeful that the good people at the Columbia Journalism Review never really knew that they were taking tainted money.
That said, my questions about this have gone unanswered.
* * * * * * * *
A few weeks later, Patrick accepted an invitation to meet an offshore investor in a greasy spoon diner in Long Island. They had never met, but over the previous year the man had fed Patrick bits and pieces of information about the workings of the phantom stock scam. The hope was that the man might have something more to say in person.
But that day at the diner, all he had was a message.
“I’ll make this quick,” the businessman said, with two other witnesses present. “I have a message for you from Russia. The message is, ‘We are about to kill you. We are about to kill you.’ Patrick, they are going to kill you. If you do not stop this crusade, they will kill you. Normally they’d have already hurt someone close to you as a warning, but you’re so weird, they don’t know how you’d react.”
In a later phone conversation with an associate of Patrick’s the man described how he received this message. He said he returned home one night and his wife told him there was a package on his desk. “And there was a beautiful little box, and inside was a matryoshka.”
Matryoshkas are those lacquered Russian dolls – the kind with multiple dolls of decreasing size inside of them.
“And I opened up the last matryoshka,” said the man, “and inside is an `F’ with a cross on it — which is from Felix…”
* * * * * * * *
A year later, I was working for a charitable service organization. Patrick called me to catch up. Pretty quickly, he was suggesting to me that I quit my job and return to the naked short selling story.
I thought about shopping the story around to magazines, but I never did. There was no way that the story could be told in a few magazine pages.
Moreover, the story represented the joint efforts of myself, Patrick, reporter Judd Bagley and many independent, volunteer researchers. This was an unprecedented collaboration, and it occurred to me that if this collaboration were to continue — as Deep Capture, the website — it could put the major news organizations to shame.
So I wrote the story – our story, filled with hard facts about a scandal.
The story that I wrote was not a magazine story. It was not a news story. It was 69 pages long, and it was “The Story of Deep Capture.”
But that was only half the story. There is much more.
For example, you do not yet know the name of the famous billionaire who might be able to tell us more about Felix, his matryoshka doll, the Russian Mafia, and the Genovese organized crime family.
* * * * * * * *
* * * * * * * *
Mark Mitchell is a reporter for DeepCapture.com. He has previously held writing and editing positions with the Wall Street Journal editorial page, Time Magazine in Asia, the Far Eastern Economic Review, and the Columbia Journalism Review. Email: mitch0033@gmail.com
If this article concerns you, and you wish to help, then:
1) email it to a dozen friends;
2) go here for additional suggestions: “So You Say You Want a Revolution?“
Mark, you Patrick and Judd have my respect and admiration for what you are binging to light.You are a courageous crew!
May God protect you in your efforts.Lots of people need your help in trying to stop this massive crime in motion, right in frount of all our so called Government protectors and regulators.
It starts to make one wonder if any of the so called “law enforcement ledgends” we hear about stopping the “bad guys” in past times were are just myths. Maybe the Elliot Ness storys like the Elliot Spitzer tales were just that and we really have no “good guys” in any of our law enforcement agencys. Maybe the FBI,DOJ are just like the SEC in that they are just there to give cover for the bad ones that are ripping us all off.I hope not but see nothing in this crime to make me think anything else.
It looks like most Congressmen and Senators are corrupted and don’t care what happens to those they are supposed to serve.
Yesterday a friend of mine called our Congressmans office and asked to meek with our Rep. about NSS and was told that he was too forceful in his demands that the good Congressman talk with him about this problem that is taking the retirement and savings of so many of the people he represents. The Aide said that he would not see this fellow about NSS and when the Aide was told the Congressman was supposed to work for the people, not the people were working for the Congressman, the Aide replied that she was “sorry that he felt that way”….guess they just work to fill the pockets sewn to the pants they wear.
Mark -are there any elected officials who have seen this? Are they also in fear of their lives?
Sorry for my poor spelling and writing.
Mark,
Bless each of you and may God keep you safe. I knew this was bigger than imaginable and I also knew why our protectors were a part of the problem or turned a blind eye to the problem. Now is the time for our new Commander in Chief of Change to direct our military to rid the USA and others of the terrorist sitting in our back yards. Forget the congressmen, forget the senators…put the responsibility directly on our elected President. If he is unwilling to see this through, then we need to start educating our fine military folks on what is truly happening and being covered up. We all have a stake in this and we all need to stand up. Alert the commanders to you local military bases…spread the word…
R101
WOW! Sorry Patrick, I know you know him, but if you have Senator Hatch’s ear you need to speak with him. He was just on the Glen Beck Fox News show (no link yet) and gave a extreemly lame excuse for voting for the tax cheat, and former Fed Governor Timothy Geithner as Treasury Sec.
According to Hatch the problem is so big and Geithner is the ONLY one smart enough to save us all.
May God in his mercy help us because no one in Government seems honest enough or wise enough to do a thing.
WOW!!!!
Senator Orrin Hatch delivering a ‘Death Threat’ message to Dr. Byrne.
Criminals dispatching Senators to do their
handywork!
Only in Amerika.
Our tax dollars hard at work.
The rabbit hole ends in Chinussia.
This story lacks credibility for one reason. Mr. Mitchell wrote that Marc Rich was a convicted felon. He never was convicted of anything, simply because he fled to Switzerland to avoid prosecution, and, of course, was later pardoned, thanks in no small part to Michael Steinhardt.
Surely, any researcher worth his salt would know this.
I am no fan of Fat Mike, nor Jimbo, nor Crazy Eddie. Just trying to set the record straight.
Another thing: I have the NY Times news archives. Surely if someone was whacked in Saks Fifth Avenue it would have made the news, and the NY Times news archive goes back to 1851.
Nothing about anyone getting shot at Saks Fifth Avenue. Nada. Gar nicht.
Jim-
Either you are being sarcastic or you need to brush up on your reading comprehension.
MM & PB-
Keep fighting the good fight!
MJK Clearing failed on September 11, 2001 and 175,000 customer accounts had to be bailed out.
http://www.businessweek.com/magazine/content/03_19/b3832095_mz020.htm
I think if you follow the trail of characters associated to this failure, you will help expose some of the rest of the conspiracy.
It was taken down by Valerie Redhorse of Native Nations and Adnan Khasshogi, the international arms dealer with a public company Genesis Intermedia.
Valerie Redhorse was THE FORMER OFFICE MANAGER OF MICHAEL MILKEN.
Although guilty of stock fraud, Adnan has worked with every government since the Nixon administration, most recently working with Richard Perle in 2003 prior to the invasion of Iraq.
His sister is Dodi Fayed’s mother. He was involved in the Iran Contra affair and was heavily involved with the corrupt BCCI.
As you start following these crooks, you get pulled down a rabbit hole that involves much more than naked shorting. These are BAD people.
HOLD ON A SECOND.
ORRIN Hatch, come on. Lets get real here, the mafia, rissuian goons, milliken, boesky, lets get some perspective.
This reads like a nickel dime piece of fiction .
If you were indeed a threat, you’d be dead. If this was indeed a MAfia connected story, you’d all be sucking nevada desert sand before you took your last breath 6 ft. under.
These guys killed a President and a few others and got away with and now, you want me to take this garbage seriously.
If what you are saying is true, you’d be dead. If what you are saying is true , and lets see, if you uncovered this, I’d bet you any amount that the CIA , the FBI, and whatever other acronym you can find knows about it.
If what you are saying is true, these acronyms would have taken action. If what you say is true then the whole political apparatus, you know the own dishing out Trillions of your money, is corrupted to its core, including the president.
If what you say is true, we’d have evidence of it .
So far, the best evidence is that its not true. Naked short selling is a fabrication, market manipulation is false, inside trading does not exist. Politicians are sqeaky clean.
Sir, you are creating a falsehood. Show me the action and I will believe you. Orrin hatch, lol, come on man
There’s an investigation after each clearing failure to see why the customers’ assets don’t exist. That’s when the cast of characters becomes exposed.
How about this one (Refco) that was brought down by Yasser Arafat’s casino…
http://www.rgm.com/articles/refco4.html
LOL-Hey Jim, the next time the world rotates by, would you mind getting on?
Or Adler Coleman, that held 50,000 customer accounts and was shuttered by the mob.
http://www.nydailynews.com/archives/money/1995/03/02/1995-03-02_thousands_of_investors_put_o.html
MJK Clearing, Michael Milken and black ops.
http://www.onthecanvas.com/body_politic.htm
Stunned, and J.L…
You are late to the party… Orrin Hatch told Patrick to go public with this. Orrin Hatch is nobody’s delivery person.
So, Jim, you’re the Doubting Thomas of the group. Look around you, there, Sparky.
The SEC missed a 50billion dollar, about to be 100 billion dollar scam. But they fine some poor guy 10,000, and ban him from the business for scratching his ass before lunch. We’ve lost two major Investment Banks. The Country teeters on bankruptcy, as does Western Europe, because some hedgefunds levered CDO’s, created vs houses overvalued by a multiple of their true worth collapsed to their true (non)value. Everyday, that pitbull watchdog known as the SEC finds another 400,000,000 dollar Ponzi they couldn’t find last month. SEC Watchdogs routinely block investigations of Wall St. fatcats, and land cushy 6 figure jobs at the lawfirms represtenting the targets.
Yeah, you’re right. Mitchell’s making this all up. What a loon.
I guess Saks Fifth Avenue managed to keep this shooting out of the news. Much like management at the Latin Quarter tried to hustle Plaxico Burress out of the club with nobody the wiser. Maybe the NY Times, which is in cahoots with Boesky and Milken and Fat Mike and Mr. Pink and Bernie the Goniff, took the story out of its archives.
If some of this stuff could be documented I could be a believer.
Somehow, the Plaxico story came out.
I lived a lot of it. Believe it. The shooting in Saks is an example. It probably never happened. He’s saying, “keep it up, I’ll kill you.” A lot of the rest of it I’ve known all along. Wake up, Pal. Smell the coffee. Or not. We’ve got critical mass.
http://www.marketrap.com/article/view_article/9148/strange-occurrences-and-a-story-about-naked-short-selling
Mark,
As I read your story, I could feel the fear those goons tried to permanently embed within your mind.
Thankfully for America, you finally stood up to these fear tactics and let the world know about this.
I think some readers above have missed the point of the stories told by those goons. The point of the stories told to you was NOT to tell the truth – their purpose was to instill fear in your mind so that you would not reveal what you knew.
The fact that there may be no truth in the story told you about a person being killed at SACs, I mean in Saks Fifth Avenue, WAS NOT THE POINT.
The POINT of the story(s) was to instill fear in your mind, just as, the punch was meant to instill fear. And of course their attempts to be “nice” was also a lie.
Thank your Mark to pushing through that palpable fear to let us know what happened.
This one needs no comment.
Steve A Cohen = SAC
http://dealbreaker.com/2009/01/steve-cohen-dominating-toilet.php
I do not know first hand if Marc Rich was convicted of a crime, but the following information on the Internet says he was convicted.
And let me see….
If someone is said to be “pardoned,” my understanding of the English Language is that this person had to be previously “convicted” of something before they can be “pardoned”. Jim, is this not correct?
“Marc Rich
* Born: 18 December 1934
* Birthplace: Antwerp, Belgium
* Best Known As: Fugitive pardoned by President Clinton
Businessman Marc Rich was convicted in U.S. federal court in 1983 of tax evasion, racketeering, and other charges related to Rich’s oil deals with Iran during a U.S. embargo. Rich sought asylum in Switzerland. His ex-wife Denise Rich continued to live in the United States, where she was an active supporter of the Democratic Party and contributed money to the presidential library fund of Bill Clinton and to the 2000 Senate campaign of Hillary Clinton. Marc Rich was one of more than 100 people President Clinton pardoned just before leaving office in January of 2001. Rich’s pardon prompted a public outcry and Congressional investigations into whether the pardon was given in return for Denise Rich’s political contributions.”
( http://www.answers.com/topic/marc-rich )
Jim just doesn’t get it or maybe he does and IS one of the bad guys!
Jim,
First of all I never saw where Mark verified this but it was said to him. Second, Is NY the only place where Saks Fifth Avenue is?
Saks Incorporated | Our Stores | Saks Fifth Avenue
With 53 locations across the United States,
Try the other 52 news locations since you missed the point of that conversation. Let us know how the 53 other locations and newspaper hunts for this story go.
R101
Jim does remind me of another poster…usually shows up on boards defending his name,,,Sam Antar? I guess the article hit a nerve. Be prepared for his cronies to arrive as well.
here are some common threads:
milken
prostate cancer foundation
proquest investments
dr howard scher
fda
fda panels
hedge funds (including one mentioned in this article)
brean murray
analyst jonathan aschcoff
short interest
naked shorting
many will know…many wont but it fits right in with many of your posts on this site.
Jim, try reading for comprehension next time.
1) The Saks story was told by the guy in the Armani suit, not by Mark Mitchell. It was an allegory (get our your dictionary).
2) If Marc Rich wasn’t a criminal, then why did he seek and receive a Presidential pardon?
http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=21595
“Rich’s companies pled guilty to 78 counts and paid over $150 million, while Rich and Green remained fugitives. Attempts at extradition failed.
If that is your reason for dismissing this story as lacking credibility, then you can continue to live your life of blissful ignorance. We understand… some people are just afraid of rabbit holes.
To Mark, Judd, and Dr. Byrne, please keep up the great work! I, for one, can’t wait to read more details and see more evidence!
Mark,
In light of all the news that has surfaced recently involving Madff and the current band of scammers with the mafia has opened the eyes of the public, news, and law enforcement because they have to show they are doing something anfd that the mafia is not running the country.You and Patrick have done the right and courageous thing by coming forward and telling your story. Why do I feel that Sammy and Jimmy are writing their hearts out here to discredit you. If only there were a pattern. Stay safe.
Rtway
Let’s just see how long it takes before someone on high does something about all of this blatant corruption. Based on the letter below “Plausible Deniability ” is no longer an option.
http://www.cmkmdiamondsinc.com/documents/shelby_ltr.pdf
Sean,
I am thinking many of those on high as you call it are part of the problem not a solution Judging by how these so called regulators and senate and congressional leaders over seeing the areas of our financial markets…Take Charles Schumer, he was a paid Madoff whore, and is totally shocked with all of this. I am beginning to think this whole government by the people for the people and of the people was nothing more than a smokescreen just as the division of the parties to keep the sheeple preoccupied while being robbed.
R101
You really saved my skin with this inmforaiton. Thanks!
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Compelling.
Bulls charge
Bears attack
Pigs get slaughtered
Chickens get plucked
Sheep get fleeced
Reporter 101 I think we are about to be suprised beyond belief…just leave it at that for now. I have that feeling in my bunions!!LOL!!! Somehow somewhere somebody in high places with morals is looking into this. We can not be all bad.. can we?
Orrin Hatch told Patrick to go public with this. Orrin Hatch is nobody’s delivery person.
Really, he’s sucking on your tit for years, took an oath of office and, he isn’t a delivery boy.
Unmask yourself anon, me thinks you and Orrin represent the cowards of America.
istandup,
we all get the story and the book slamming with the title MAFIA.
We’ve all watched mafia movies, hell some of us even lived in their midst.
Whats not believable is that people are walking around spinning these tales.
Whats not believable is that if this story holds water, then the corruption touches all levels of government including the Presidents office and no one sees fit to raise a flag.
Surely there is at least a handful of brave souls who believe in the country enough to take a stand.
Again, JFK may be the litmus test. Let us not forget that as late as 1978, it was agreed a conspiracy did exist, but nothing was done by it.
If this were true, I would compare the reaction to be similar to an alien landing on the planet, everything would stop.
But then again, TARP money is being used to warehouse oil in tankers in an effort to manipualte the price of oil.
UGH what a sick country.
Thanks very much for your continuing brave and powerful work, Mark.
This is all very interesting. Remember how Patrick quoted Ghandi at the conclusion of one of his presentations? It was something to the effect that in all social movements, first they ignore you, then they laugh at you, then they fight you, then you win. Judging from the increasing number of mocking and contentious comment posts here, some raising red herring arguments (Saks Fifth Avenue), we are getting to the “then they fight you” stage. Progress!
When will all of this appear in book form? Your assertions of specific things to come say enough is known to make this expose’ a winner, especially published as non-fiction. I want a copy as soon as it becomes available!
thanks to SEC doing nothing look at outcome
Thanks Patrick and Mark your doing the right thing People losing Job over Naked short selling,, Naked Short sellers should face same end
AXED DAD SLAUGHTERS FAMILY
Ervin Antonio Lupoe and wife Ana with their five kids, including two sets of twins. Lupoe shot them and himself yesterday after he and Ana lost their hospital jobs. .
I am now wondering if the billionaire who you have yet to name is sitting in his penthouse on house arrest? As he stated himself, “I am not like Wallstreet, I AM Wallstreet.”
R101
Noybizniz:
You’re the one needing lessons in reading comprehension. I never said Marc Rich isn’t a criminal. He is, and I believe he’s responsible for attempting to corner the oil markets last year. What I said is that he wasn’t convicted. That’s a fact. Get it through your thick skull. Richard Nixon wasn’t convicted of anything either, and was also pardoned.
As for the guy in the Armani suit, he was quoted as saying there was a murder in Saks Fifth Avenue. That’s not an allegory. Again, I never said Mark Mitchell said that.
I’m glad, however, that Mitchell spelled the name of Vincent “Jimmy Blue Eyes” Alo correctly, rather than referring to him as “Jimmy Blue Eyes” Aiello, meaning that his knowledge of Michael Steinhardt is limited to what Steinhardt (ghost) wrote in “No Bull,” which somehow confused this dapper don with a movie star.
Whatever crimes David Rocker, Jim Cramer, and David Einhorn committed (and I believe they committed many, as I am familiar with the Allied Capital story), this story, with its Lyndon LaRoucheian overtones, doesn’t do those bad guys justice.
Jim, you are not very bright, are you?. Have you ever heard of convictions “in absentia”?
Rich was the target of a 65-count indictment for various crimes, including trading with Iran amid the American hostage crisis and tax evasion. He was convicted in absentia on 51 counts.
Those darn facts. Pesky things….
And, for the life of me, I can’t imagine how you could be so dense as to think that the purpose of they guy in the Armani suit telling the tale of the Saks Fifth Avenue (which, technically speaking, would not be a “murder” even if it were true… but why bother chasing after figments of some gangster’s imagination?) And you still need to learn the definition of allegory.
You’re throwing out Red Herrings. If you really believed Rocker, Cramer, Einhorn, et al were guilty, you would not be trying to disparage and undermine the efforts of those who seek to shed light on their illegal actions).
Correction:
And, for the life of me, I can’t imagine how you could be so dense as to think that the purpose of they guy in the Armani suit telling the tale of the Saks Fifth Avenue was anything but an attempt to issue a veiled threat.
Noybizniz,
You are absolutely correct. He was convicted in absentia. A president can only pardon federal charges. Had he been charged with state crimes there would have not been a pardon by Bill Clinton.
R101
i believe all this but not enough stress or evidence regarding banks and their hedge funds selling fake shares although it REAL and REALLY REAL !
banks since 2000 or even before went on to massive counterfeiting of stocks as the easy bubble money was over.
of course many banks are thre victims of it themselbes being naked shorted by OTHER banks ah ah !
i don’t laugh though because all this is killing the economy! for years !!!
a ton of bankers managers should be jailed and aggessive electronic control of what is going on in the market needs to be installed
but will obama dare to face these crooks and the mafia etc ? …
this is financial war between nations also.
since everybody has nukes other means are required !
Jim,
As in “Mad Money” Cramer?
Attacking the messenger seems to be your modus operandi. You seem more concerned with Mark’s journalistic ability ( trying to discredit it) than the message. What do you think about Jim Cramer as a party to this fiasco? You have made it known how you feel about the other players already.
R101
To those doubters, THE EARTH IS FLAT.
Furrealz? That’s marvleously good to know.
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Eventually a whistle-blower insider will surface with personal testimony and/or documented evidence of the scam. This may be someone who just wants to repent or do the right thing, or someone forced into it by a plea bargain (like maybe Madoff).
I hope the Feds squeeze Madoff and offer hime a deal in exchange for complete cooperation and naming of names and explaining hoe the Market Maker exception (the “Madoff rule”) allowed the destruction of capital.
Well without someone circumventing the earth we have only “theory”.
Let these allegations be proved in a court of law and you will have no doubt.
What is painfully obvious, neither the CIA . FBI, Homeland Security seem to take this issue seriously.
Dr. Jim DeCosta,
We need a pictorial illustration of this COUNTERFEIT MACHINE you just described to educate Congress and the public!!!
Do you have the ability to this or have someone that can do this for you?
This illustration should entitled:
WALL STREET’S COUNTERFEIT MACHINE
iStandup…
http://www.businessjive.com/nss.aspx
Ginger,
I do not see anything at this link except the player. huuuum. Any idea what the problem might be?
Thats some crazy shit !
I wouldnt be afraid of the Genovese family ..their useless .
Its the Rizzuto’s (6th family) that control the Mafia worldwide .
One of the incidents that I found particularly telling in all this is when Patrick was invited to Washington several years ago now by none other than the then sitting Chairman of the Senate Banking Committee the Honorable Richard Shelby. What transpired in that meeting told me all I really needed to know about any of this… Remember that? Every time I watch that guy on CSPAN mumbling away about why America doesen’t need auto makers while he gives hundreds of billions of your money to his #1 contributor Citibank (486,000) How ridiculous does it have to get but I’m sure we will have a ways to go. I will predict that just like the journalist who have exited the scene in the last few months that some of these politicians will begin to retire and signal the beginning of the bad end for all of this and that will be the sign.
Of late, I have been working to educate the Military Veterans who have lost commrades to this issue because politicians are so corrupt that they could not even find a way to even protect one stock (Force Protection) from being naked shorted fron 24 to 4. It was just another stock to be wrecked by the cabal… Consequently soldiers died in Hummers when they could have maybe lived in MRAP vehicles. This little Hornet’s nest is beginning to finally buzzzzz .
Are these Hedge Fund Managers, Journalists, aand Politicians not traitors to our country and as evil as any Muslem Terrorist group ever thought about being? They certainly have been a lot more effective. Or is it because they were raised here and are for the most part white from Ivy league schools that they are exempt from being economic terrorists.
The biggest problem we are facing is a lack of interest by anyone in the mainstream media to ever ask tough questions or connect more than two dots…
Keep up the good work and I’ll keep looking for Rambo.
Warren Buffet endorsed Obama’s campaign – can Patrick pull any favors through his friend Warren to make sure Obama completely understands this issue?
i stand up,
Maybe somebody with some artistic talent can lend a hand but here’s the best educational tool I’ve come up with. Picture a bunch of “rivers” of FTDs flowing into the top “FTD pool” which force it to overflow.
THE SELF-PROPAGATING “CASCADE OF CORRUPTION” ACCESSIBLE IN A CLEARANCE AND SETTLEMENT SYSTEM FOUNDED UPON “COLLATERALIZATION VERSUS PAYMENT” (CVP)
When a party sells shares they can either deliver them in a timely manner or fail to deliver them in a timely manner. If delivery “in good form” is made then the trade legally “settles”. This is referred to as “delivery versus payment” or “DVP”.
In a clearance and settlement system illegally utilizing a foundation based upon mere “collateralization versus payment” or “CVP” the “failures to deliver” (FTDs) resulting from a failed delivery obligation can overflow from the top “pool” of a “cascade of corruption”.
What are the various “tributaries” that flow into this top “FTD pool”? FTDs can flow from “ex-clearing arrangements”, from “desking” done at trading desks, from the NSCC’s “Automated stock borrow program” or “SBP”, from the NSCC “C” sub accounts, from abusive market makers (MMs) illegally accessing their exemption from making pre-borrows or “locates” before making admittedly naked short sales, etc. There are many rivers that flow into the top “FTD pool” and virtual monsoons of flooding can easily be induced by abusive naked short sellers working in concert.
Flowing down from this overflowing “FTD pool” will be the readily sellable “securities entitlements” that all FTDs procreate. Since “securities entitlements” are readily sellable then from their accumulation in the share structure of a corporation will “flow” lower share prices by definition. Flowing down from the overflowing “lower share prices pool” we arrive at a bifurcation of the flow. To one side will be the flow of the investor’s money to the party refusing delivery. This flow goes into a pool with a pump in it that allows the parties refusing to deliver that which they sold to take these ill-gotten profits and pump them back up to the top where they can make yet more short sales leading to yet more FTDs to occupy and overflow from the top “FTD pool” of the cascade to augment the overall flow. The greater the flow generated results in the greater the profits at the bifurcation the next time around.
To the other side of the bifurcation will flow the “extra” shares needing to be issued by a yet to be positive cash flow corporation FORCED to sell more “shares” to fund its fixed monthly burn rate than it otherwise would have had to in the absence of the prior share price manipulation downwards. These flow into a pool without a pump. From this pool overflow yet lower share prices associated with this “extra” dilution. This time, however, the dilution is cause by “extra” legitimate “shares” instead of mere “securities entitlements” resulting from FTDs.
These lower share prices results in yet another bifurcation involving the flow of ill-gotten profits associated with decreased collateralization requirements (associated with mere CVP) into another pool with a pump in it that leads back to the pool of FTDs at the top of the cascade. Once again the other side of the bifurcation leads to yet lower share prices which leads to yet another bifurcation.
As you can see this cascade is self-propagating and continues until the corporation under attack is dead from the dilutional effects of both the “extra” real shares and the readily sellable “securities entitlements”. The ability to use the money “stolen” from investors to establish and collateralize yet more FTDs represents a form of “self-generated” leverage leading to augmented flow rates. This “self-generated leverage” then leads to the self-fulfilling prophecy that once targeted these corporations, the investments made therein and the jobs they provide have been basically preordained to die an early death.
Small investors do not have the resources to pay the price of admission into the area on Wall Street featuring this self-leveraging “cascade of corruption”. The price of admission necessitates the capability to provide massive amounts of “order flow” to the DTCC “participants” that built and service the “cascade”. But once invited all one must do is simply refuse to deliver that which you sell and place your FTDs into the top “FTD pool” and you can take advantage of all of this free flowing of investor money into the wallets of those that simply refuse to deliver that which they sell. What could be easier?
As one can see every time the share price drops there is a bifurcation in the water flow which creates a pay day to those that refuse to deliver that which they sell. Those invited to this cascade can take these profits at each bifurcation or simply let the profits roll and allow them to be pumped back to the top which augments the flow of the cascade.
Participants often invite co-conspirators to take part in the festivities which also serves to augment the flow rate for all concerned.
In a clearance and settlement system based on CVP invited guests need only collateralize the monetary value of their failed delivery obligations in a daily marked to market manner and as the share price predictably drops from overinflating the “supply” of readily sellable “shares” plus the “supply” of readily sellable “securities entitlements” so too do the collateralization requirements.
In a clearance and settlement system based upon “delivery versus payment” or “DVP” there are no “cascades of corruption” available to access as FTDs are either not allowed or quickly bought-in shortly after their creation.
What are the structural components of this “cascade”? First of all you need a clearance and settlement system based on CVP? This may take a while to construct because you need to get a lot of corrupt practices incorporated into the rules and regulation of your particular “registered clearing agency”. You need to sneak through any new corrupt rules at a time when the SEC is napping or in a manner wherein you baffle them with complexity that they don’t understand. Once these corrupt rules are in place you have it made in the shade because the SEC is not allowed to add to or abrogate (delete from) the rules and regulations of any “registered clearing agency”/”sacred cow”. Why? I have no idea because the 7 “Securities Acts” expressly forbid any “registered clearing agency” from having any rules that are not in alignment with the tenets of these 7 “Securities Acts”.
What other components can serve to fortify these “cascades”? Self-replenishing “stock borrow programs” like the NSCC’s SBP are very helpful as are policies allowing the brokerage firms not getting delivery of that which their clients sold to sit around and wait for the “eventual” delivery of the missing shares. The “anonymous pooling” of shares is helpful as is having the “registered clearing agency” involved acting as the legal “custodian” of shares, the “qualified control location” of choice for compliance with 15c3-3, the “legal/nominal/record” owner of all shares, the “central counter party” to all trades that is mysteriously subject to bouts of “powerlessness” when the financial interests of the owners of the “RCA” are jeopardized, etc.
Is this “cascade of corruption” available only to powerful Wall Street players? Oh no. It is available to any financial terrorist that wants to take down any U.S. corporation that it looks upon as a threat or impediment to its own ideologies.
How does one combat these “cascades of corruption”? You reconvert your clearance and settlement system back to DVP as mandated by Section 17 A of the ’34 Exchange Act that mandates the “prompt settlement” of all securities transactions. “Settlement” is basically defined as “good form delivery” versus payment or “DVP”.
When the NSCC has the audacity to plead to be “powerless” to buy-in delivery failures despite 15 (F-I-F-T-E-E-N) separate reasons why they have all of the power in the world to do so then FTDs need to be forbidden. If the seller of securities hints that delivery of that which he is selling is just a day or two behind schedule then let’s just wait that day or two before those securities arrive and are in place for being delivered by T+3. If the seller was lying then you just prevented a fraud and provided “investor protection and market integrity” which is the congressional mandate of the SEC.
What do we do when those that are accustomed to accessing this “cascade of corruption” cry out that we won’t be able to inject all of this wonderful liquidity that we are used to injecting? You tell them that U.S. citizens are tired of having their investments drown in all of this theoretically beneficial “liquidity” they provide.
Who are the financial beneficiaries of these “cascades of corruption”? They are the DTCC participants and their typically unregulated hedge fund “guests” capable of amassing and collateralizing gigantic naked short positions. As the share price of the corporations under attack predictably plunge so too do the collateralization requirements and thus the investment funds of unknowing U.S. citizens will flow into the wallets of these securities fraudsters despite the fact that they continually refuse to deliver that which they sell. This self-fulfilling prophecy is available in any clearance and settlement system that has been hijacked by its owners and “participants” and converted over to a foundation based on mere “collateralization versus payment”.
Imagine this scenario: your neighbor is on his way to purchase some savings bonds and you ask him to buy you $5,000 worth to save you the trip. He takes your money and gives it to his bookie to bet on speculative football games, then tells you he bought it and he’ll hold the certificate for you. He even gives you a paper receipt. You find out. Would you go to the police?
Imagine this scenario: your brokerage recommends you purchase some treasury bonds and you ask him to buy you $5,000,000 worth. He takes your money and gives it to his back office to bet on speculative derivative trades, then tells you he bought it and he’ll hold the certificate for you. He even gives you a paper confirmation statement, implying he is holding the certificate. You find out. Would you go to the police?
17 brokerages are taking trillions of dollars from investors, telling them they are buying bonds, then keeping it for risky derivatives bets instead. Isn’t this fraud on two levels? Not only is the investor ripped off, but the government is suckered into paying too much interest on the debt.
http://www.google.com/search?hl=en&q=fail+to+deliver+bonds&btnG=Search&meta=
Sounds like a reprise of James B. Stewart’s story, Den of Thieves. Miliken, Boesky, Siegel, and Levine are back in the saddle with a new bunch of boiler room financial wranglers. Some things never change.
As the legendary Al Capone put it . . .
“It’s a racket. Those stock market guys are crooked.”
http://cryptogon.com/?p=5965
I just posted the bond fraud links here.
http://www.projectcensored.org/censorship/nominate/
again, people don’t realize how BANKS (yes dirty banks killing eachothers and screaming like babies for billions from governments!) sell FAKE shares of tons of companies. it’s EASY for them, they are and control the SYSTEM, electronic system.
a little story also: Lehman was naked short nd short on tons of companies and had to somehow cover some positions or risk being INSPECTED (like JPM killed BSTEARNS which did a lot of dirt for it). then LEH called GSACHS for help to get some cash to cover but GS said : f off.
this comes from a rich finish investor… who incidently lost a ton through Kaufting scandal (another madoff like scandal: they promised 8% annual return on deposits while in europe it was around 1-2% ah ah) but they burned, screwed up like Madoff (nowit’s Lybians who will take the pieces of Kaufting!).
So back to banks, those NAZIS are selling and selling fake shares or even (KBC) selling their own shares and fake shares 2 weeks ago as their toxics was much bigger than thought,crashing their own bank stock price! but when you need cash, you sell yr mother and put yr daughters on the street as hookers.
it’s that bad…
One of the things that I find obscene is that if a company is a bad company, they think it justifies taking REAL investor cash and keeping it, giving the investor nothing in return. Who gives them the right to make that decision.
Take a CMKX or an Enron – real money went into those companies and the brokerages happily took that money, then deleted the IOU’s from the investors’ statements without giving them anything in return.
This perverse logic gives them the incentive to not just hurt companies, but to kill them so the IOU is never honored.
A big naked short once bragged to me that since he doesn’t close the transaction by buying in, he doesn’t have to pay capital gains tax as technically the trade is still pending.
This is a scam with so many victims from the investors, to the companies, to the employees, to the IRS, to the taxpayer.
A scenario I often see happen is that the investors of a scam company turf the management and bring in a real business and professional management team and they are shocked the share price won’t recover.
They can’t understand why that even with improved fundamentals, they remain cellar boxed.
Never though about the tax issue… I think if this was brought to the attention of the right IRS officials, they would want their cut of the pie too, and would see to it that laws are either changed or re-interpreted (as the case may be) to open up any avenue that increases revenue. This would, if nothing else, make it less profitable for those who naked short, and possibly expose some to audits. As ruthless and criminal as the naked shorts are, I think I would rather be up against them, than the IRS.
al,
In a perfect world, yes. Don’t forget tax dodging Geithner is confirmed as new Treasury Secretary. (Boss of the IRS). Much of this happened under his watch-or turned head. Who would take this on seems to be the Billion $ question. Maybe Madoff himself will squeal like a pig….
R101
I don’t think the tax is owing. Since the transaction doesn’t complete, there is no actual gain.
The short has use of the cash, because he’s only got to put up the lower “marked to market” amount which is $0 in this case, but technically, he still owes someone a share and isn’t the owner of the money yet.
No capital gain, no tax.
THE CONCEPT OF A “TRADE GUARANTEE” OR “TRADE SETTLEMENT GUARANTEE”
Most clearance and settlement systems worldwide utilize “central counterparties” or “CCPs” to both streamline the clearance and settlement processes and to mitigate undue risk. In the U.S. the NSCC division of the DTCC interjects itself in between the buyer and seller involved in a trade and becomes the buyer to the seller and the seller to the buyer. They have the incredible power to “discharge” the delivery obligations of their participants selling shares as long as they “assume” and “execute on” this delivery obligation.
Without the use of a CCP the two parties to a trade would not be able to assess the “counterparty risk” associated with any particular partner to a trade performing as promised. The NSCC, as the CCP, can issue a “trade settlement guarantee” to all market participants which creates what is known as a “safe harbor” for their participation in our markets. If a counterparty to a trade absolutely refuses to deliver shares that it sold and later becomes insolvent then THEORETICALLY all NSCC participants are on the hook in a pro rata manner proportional to their levels of trading activity at the NSCC.
How does an investor test the authenticity of any “trade settlement guarantee”? They demand the delivery of the shares they purchased in a paper-certificated manner and see what happens. If the DTCC refuses to deliver them in a timely manner then you can deduce that the “trade settlement guarantee” was bogus. Demanding the delivery of paper-certificated shares essentially FORCES the settlement of trades that may have unknowingly not settled in the first place due to outstanding failures to deliver (FTDs).
One of the downsides of using clearance and settlement systems with CCPs is that there is an intentional “concentration of risk” onto the shoulders of the CCP. This is of the same magnitude of the collective amount of risk associated with all transactions done in the absence of a CCP. It is beyond description in terms of systemic risk to any country’s financial system if a CCP does not religiously follow through with that which it promised to i.e. “assume” and “execute on” all of the delivery obligations that it recently “discharged”.
In November of 2004 the “Technical Committee of IOSCO” (the International Organization of Securities Commissions) published its now famous “Recommendations for Central Counterparties”. In it they and the “Bank for International Settlement” or “BIS” remind the world of this incredible “concentration of risk” issue and the possible repercussions if any CCP were not up to ACTING IN GOOD FAITH in that regard.
In the case of the United States’ choice of a CCP, the NSCC subdivision of the DTCC, a problem arose in the form of massive “conflicts of interest”. If the CCP known as the NSCC were to balk on its promise to “assume” and “execute on” these delivery obligations that it recently “discharged” then enormous amounts of investor money could easily flow to the “participants” of that NSCC. Why? Because of the self-fulfilling prophecies accessible in a clearance and settlement illegally based on “collateralization versus payment” (CVP) instead of what IOSCO and BIS mandate all clearance and settlement systems be based on i.e. delivery versus payment or “DVP”. Both IOSCO and BIS find it reprehensible that the seller of shares can access the funds of the investor without ever delivering that which it sold.
But that’s exactly what happens in a system based on CVP. All market participants need to do in a CVP system is to refuse to deliver that which they sell in order to access a built-in self-fulfilling prophecy. This is associated with the aforementioned and self-leveraging “cascade of corruption” explained earlier.
If a CCP refuses to act responsibly with the risks INTENTIONALLY concentrated onto its shoulders i.e. they choose to cave in to those financially tempting conflicts of interest while kowtowing to the financial interests of its “participants”, as it promised to act once the delivery obligations were “discharged” then your financial system is built as a “house of cards” with systemic risks beyond calculation.
In a clearance and settlement system based on mere CVP the participants are tempted to run up gigantic naked short positions that can easily preordain a corporation unfortunate enough to be targeted for these attacks to die an early death. It’s hard to combat self-fulfilling prophecies and self-leveraging corrupt infrastructures.
What typically becomes of the “trade settlement guarantee” involving a corporation with massive levels of yet to be bought-in FTDs? A point comes at which it can’t be honored without risking the financial health of the abusive NSCC participants that established it. What might a corrupted CCP do under these circumstances? It could refuse to deliver paper-certificated shares in a timely manner after they were demanded via an “entitlement order” permitted by UCC Article 8. It could call a “chill” on the delivery of these paper-certificated shares. It could induce a “global trading halt” in the shares of the corporation under attack. It could run to the SEC and ask them to start an administrative proceeding in an effort to “delist” the corporation under attack or it could do the right thing and “execute on” the delivery obligations it previously “assumed” and buy-in these now archaic failures to deliver and finally deliver the missing shares to its purchaser.
A question arises, how can the CCP of the United States, the NSCC subdivision of the DTCC, after “discharging” the deliver obligations of one of its abusive “participants” plead to be “powerless” to buy it in when the party making the sale refuses to deliver that which it sold. By definition, a CCP can’t do this. This is not an option. What about all of those systemic risk issues that are intentionally taken away from the buying and selling parties and placed onto the shoulders of the CCP? How corrupt can our NSCC be to kowtow to the financial interests of its abusive participants (not its honest participants) and allow all U.S. citizens both investors and noninvestors to shoulder these immense risks?
Why don’t the honest participants of the NSCC that are theoretically on the hook for these delivery failures raise a ruckus? It’s because they’re not on the hook because in reality there is no valid “trade settlement guarantee” in our markets. There’s only an implicit guarantee that applies only to parties that promise not to exercise it. I’ve always wondered how the NSCC management can be “powerful” enough to “discharge” the delivery obligations of its abusive “bosses/owners” and then 2 seconds later plead to be “powerless” to do the only thing possible to remedy the situation i.e. buy-in the failed delivery obligation when the selling party absolutely refuses to deliver that which it sold.
In between the “discharging” and the “executing on” the failed delivery obligation that it “assumed” the NSCC willfully made the choice as to whether to act as a CCP that shoulders the immense risks it promised to shoulder or whether it chose to construct a Madoff-like “House of cards” and cave in to the conflicts of interest present in an effort to kowtow to the financial interests of its corrupt “participants”.
http://www.real-debt-elimination.com/real_money/crimes_of_the_economy/russian_mafia_conspiracy_on_wall_street-13.htm
Amscel the above link leads to the “Story of Deepcapture” verbatum!! Why would you place that link here and why would someone plegarize (sp) Deepcapture’s work? Now people are Naked Shorting Exposes huh? Sad!!! VERY SAD!!! I hope they don’t sue whoever did this because I WOULD!!!
The Server is NOT letting me post a message with three links to the NEW COP report out today.
Testing to see if server will allow message without any links……
OK, there seems to be an issue with the server this morning.
It is NOT letting me post quoted sentences from the blog page of the Senate COP committee, which has release a two part report today.
Testing again………..
COP Report: Modernizing the American Financial Regulatory System
Summary… The report examines how deregulation of financial markets over the last twenty-five years have returned the boom-and-bust cycles that had plagued the United States’ economy until reforms of the Great Depression ushered in a half-century of financial stability.)
OK, I give up….
I cannot post with any links to the Senate COP Report and I cannot post a message with quote marks without links.
Maybe someone at DeepCapture.com can figure out what the issue is.
Dr. Jim DeCosta,
Above you stated in one paragraph…
What are the structural components of this “cascade”? First of all you need a clearance and settlement system based on CVP? This may take a while to construct because you need to get a lot of corrupt practices incorporated into the rules and regulation of your particular “registered clearing agency”. You need to sneak through any new corrupt rules at a time when the SEC is napping or in a manner wherein you baffle them with complexity that they don’t understand. Once these corrupt rules are in place you have it made in the shade because the SEC is not allowed to add to or abrogate (delete from) the rules and regulations of any “registered clearing agency”/”sacred cow”. Why? I have no idea because the 7 “Securities Acts” expressly forbid any “registered clearing agency” from having any rules that are not in alignment with the tenets of these 7 “Securities Acts”.
Did you intend for the second sentence to have a question mark after it? Or should it be a period?
davidn – Technically you are correct, however using that logic, the owner of a business could loan himself money from his C corp, at zero percent interest and not pay income taxes, stating it was “just a loan”. However, the IRS would not allow this abusive practice to avoid income taxes.
Same deal
clearthinker…the ones way in the background behind pulling the IRS strings are the same ones that have the other hand pulling the strings in the markets…NSS included. Nothing is done or allowed if they don’t consent to it. Sometimes some of the little ones, allowed to play somewhat freely by the big ones get too greedy and get cut off, or cut up.
In banking just ask Fuld.
Dr. Jim DeCosta,
I see from your explanation above:
THE SELF-PROPAGATING “CASCADE OF CORRUPTION” ACCESSIBLE IN A CLEARANCE AND SETTLEMENT SYSTEM FOUNDED UPON “COLLATERALIZATION VERSUS PAYMENT” (CVP)
that CVP is the foundation of the corrupt Wall Street Counterfeit Machine.
To enable the common man and woman on the street to understand you good explanation, I think we need additional things added to it:
> An illustration of the differences between shares of stock in a person’s stock account that are counterfeit shares via CVP and real shares via DVP.
For example, we can have two individuals – one with stock in his account via CVP and the other via DVP. The monthly statements look the same – long position is xyz, but behind the scenes there are vast differences, which the investor is NOT ALLOWED to know about.
>> Table(s) with specific examples in it (them).
For example, where you say: …You need to sneak through any new corrupt rules at a time when the SEC is napping or in a manner wherein you baffle them with complexity that they don’t understand…. >> In a table linked to this paragraph via a footnote or something else like a link, we can add at the top of the list “MADOFF EXEMPTION”
From your many years of studying and writing about Abusive Naked Shorting, I am guessing you and others can create tables with specific examples.
Lastly, we need an easily understand written analogy that every common man and woman can quickly understand. Someone, maybe it was David, gave an example to me of buying a car using CVP in contrast to DVP. David’s? example was good, but I think we need a simplified version also to appear first and then David’s more detailed version following this simplified version.
I am willing to try my hand at a more simplified version.
http://www.investmentweek.co.uk/public/showPage.html?page=837177
Here’s an analogy.
Gasoline has fallen quite a bit in the last six months.
Imagine six months ago, you went to the gas station, stood at the pump and watched as it metered a $50 purchase. You “pay at the pump” and are about to drive away, when you notice your gas tank needle is still on empty.
Frustrated, you go into the store to talk to the manager, who explains that his supplies are tight, so he’s programmed his machines to not actually pump any gas, although they continue to meter what the gasoline would have cost.
He explains “We are a bit short supplies right now and think the price of gasoline is over valued. You will be pleased to know that not only am I putting your $50 on deposit, but I’m putting up $1 of my own money (102%) to collateralize your purchase.”
You complain, “But I need delivery now. I demand delivery now.”
The manager responds, “Unfortunately, regulations don’t require us to actually DELIVER gasoline to you and your demands mean nothing to us. The regulators only require us to COLLATERALIZE your purchase. Here’s an IOU. Please come back when the shortage is over and the price has fallen.”
Six months later, the price has fallen in half and your coupon for a tank of gas is no longer worth $50. Now it is only worth $25.
You request delivery of your gasoline and the manager responds, “Sir, unfortunately, we’re not required to actually deliver any gasoline to you, even at this lower price, but you’ll be happy to know that we are out of pocket $25.50 as we have to collateralize our obligation to you.”
“But I gave you $50!!!”
“Yes, we originally put up your $50 and our $1 collateral, but with the falling price of gasoline, now we only have to put up $25.50. We’ve taken our $1 back and $25 of your purchase price as our profit on the transaction and spent it on bonuses for the staff here and dividends to our shareholders, but we are men to our words and plan to continue to collateralize our obligation to you well into the future.”
“Can I ever get delivery of the gasoline I paid for?”
“No! We’re getting rid of delivery entirely as it is too costly for the industry and you will find other gas stations are doing the same as it is better for the industry as a whole. Just as the stock market is getting rid of costly delivery of paper stock certificates, we’re getting rid of the costly delivery of actual gasoline. We find this new efficiency of not delivering what you paid for will greatly enhance our profits, but feel comfort in the knowledge that the refinery has $25.50 to securely back your purchase. After all, you are a valuable customer and we appreciate your business.”
“But I checked the records and I see your company actually owns the refinery, so you’ve only deposited that $25.50 to yourself. Worse, the refinery you own has spent the $25.50 cash on reserve and instead replaced it with $25.50 worth of IOU’s from another refinery they swapped for $25.50 of IOU’s from this refinery. There’s no limit to IOU’s you print, so you’ve just exchanged worthless non collateralized IOU’s for the cash collateral that was supposed to represent my purchase. I smell a rat. Your obligations are backed by nothing and are just a house of cards that are going to come tumbling down. When you go bankrupt after pulling all the cash out, myself and other customers will be left with nothing in return for our money.”
“Sir, you and your wacky tin hat conspiracy theories. The government will guarantee our obligations with tax payers money when the time comes as they always bail us out, although they won’t deliver either.
Over time, the IOU’s will build to such a level, that there is no cash coming through the system to pay our bonuses and dividends. At that point, the government will give us tax payer cash, but they know not to force delivery as that would just exacerbate the problem.
I’m going to ask you to leave the premises as other customers can hear your raised voice. I assure you that leading oil company analysts have assured us that the industry as a whole will be able to generate more gasoline sales (greater transaction liquidity) if we sell IOU’s instead of actually securing real gasoline.
In addition, the politicians whose campaigns we funded and the media outlets we advertise in all concur that our new system is a really good idea and no one is complaining other than the odd tin hat car driver that happens to notice that his tank is still empty after pumping for three minutes. The rest of the stakeholders in the industry love the idea and most drivers are completely content to not check their gas tank needle when they drive off our lot and the people who don’t know they didn’t get delivery don’t complain.”
I stand up,
Let me try a different approach because you’re right it is tough to develop an interpretation of our clearance and settlement system without becoming a little bit “granular” as to detail.
If you sell securities in our markets you have two options. You can either deliver them in a timely manner or you can fail to deliver them in a timely manner. The contracted for timeframe was to deliver by “settlement date” or T+3. Since there are truly legitimate reasons for a slight delay in making delivery then let’s add a 3 day fudge factor to accommodate truly legitimate delivery delays.
[Let’s take a slight detour for a second now. Two realities come into play. The first is that there do exist legitimate reasons for delivery delays. Second, DTCC default policies are to ASSUME that all delivery failures are associated with legitimate delays until proven otherwise and by the time you prove otherwise it’s too late as those failures to deliver can take protective residence in one of many hiding places where they are untouchable due to other DTCC policies. “Opportunists” on Wall Street realized that they could INTENTIONALLY fail to deliver shares sold and portray them as being of a “legitimate” nature until the fact that they’re ILLEGITIMATE becomes a moot point again due to DTCC policies i.e. they are “powerless” to buy-in FTDs. Dr. Leslie Boni’s research in 2004 identified these “intentional” or “strategic” failures to deliver.]
If an abusive DTCC participant absolutely refuses to deliver that which it sold then there is only one remedy available and that is to “buy-in” that FTD (failure to deliver). The party doing the “buy-in” goes into the open market and buys the missing shares and hands the bill to the party refusing to deliver that which it sold. It then delivers these missing shares to the original purchaser that never received that which he paid for. This is pretty simple.
Next the question becomes who is the party legally empowered to execute the “buy-in”. In a clearance and settlement system like ours utilizing “central counterparties” (CCPs) and the legal concept of “novation” there are 16 parties legally “empowered” to execute buy-ins. Most of these are obvious. The “CCP” that “discharged” the original delivery obligation, the NSCC, and that promised to “assume” and “execute” on it would be the most obvious one. That’s what CCPs do by definition when a party refuses to deliver that which it sold.
Another obvious one would be the party congressionally mandated to “promptly settle” all securities transactions. This is also the NSCC. Again, when a party absolutely refuses to deliver that which it sold there is only way to get that trade to “settle” and that’s to execute a “buy-in”.
The party acting as the “qualified control location” for granting compliance with Rule 15c3-3 (“The Customer Protection Rule”) obviously has the power to execute buy-ins. It’s job is to “take physical possession of all fully paid for shares” on behalf of its “participants” that seek compliance with 15c3-3 through it acting as a “qualified control location”. Buying brokerage firms are given two options. They can either take physical possession by themselves of all fully paid for shares OR keep them at a “qualified control location” that will do it for them. Once again the NSCC subdivision of the DTCC has this power.
The party ordered by Congress to “immobilize” and “dematerialize” all paper-certificated shares INTO AN EQUAL AMOUNT of electronic book entry shares (the DTC subdivision of the DTCC) obviously has the power to execute buy-ins when the number of “dematerialized” electronic book entries exceeds the number of paper-certificated shares it has “immobilized” and which it is acting as the “LEGAL CUSTODIAN” of. That was their congressional mandate.
The SRO (self-regulatory organization) which acts as the “first line of defense against abusive naked short selling frauds” (the NSCC) has the mandate to monitor the “business conduct” of its participants and to create and enforce regulations against fraudulent behavior.
I won’t bore you with the other ones now but 15 of the 16 parties that are clearly “empowered” to buy-in delivery failures when the seller of securities absolutely refuses to deliver that which it sold are held by one party. It’s the DTCC and its DTC and NSCC subdivisions.
That leaves us one last party with the power to execute buy-ins and that’s the DTCC participating brokerage firm whose client bought the shares that didn’t get delivered. But the NSCC developed a clever policy to dissuade this party from ever buying-in any delivery failures. It allows any brokerage firm that didn’t get delivery of that which its client purchased two options. One is to file an “intent to buy-in” with the NSCC. The other one is to patiently wait for the “eventual” delivery of the shares. If it chooses the latter then the NSCC will unconscionably allow the interest earned by the investor’s cash to go to the client’s brokerage firm (and not the client) UNTIL delivery occurs. Not only that but the cash can also count towards the brokerage firm’s all-important “net capital reserves”. In other words the brokerage firm is essentially “bribed” NOT to execute a buy-in.
This is why the Evans, Geczy, Musto and Reed research in 2002 revealed that only one-eighth of 1% of even MANDATED buy-ins on Wall Street is ever executed. Try to imagine the audacity of the party that is empowered by each of 15 different reasons to execute a buy-in pleads to be “powerless” to buy-in delivery failures. Even if you hold those 15 reasons in the aggregate they claim that even in the aggregate there still isn’t enough “empowerment” for them to execute buy-ins. Why would it do this? Because it allows its abusive “participants” to access the self-fulfilling prophecy of gaining access to an investor’s funds by merely refusing to deliver that which it sold.
Remember that a forced buy-in is the ONLY solution available when a party absolutely refuses to deliver that which it sold. Now you can relate all of these FTDs floating through cyberspace because of their inability to be bought in back to the “cascade of corruption” model you can see how that top “FTD pool” can be easily made to overflow which allows those refusing to deliver that which they sold free access to the unknowing investor’s funds.
In regards to the above post:
Those are the actions of an SRO or “self-regulatory organization” that the SEC refers to as “the first line of defense against abusive naked short selling frauds”. The SEC sits at headquarters and if it never gets a call for back-up from this SRO it assumes that help isn’t needed because “the first line of defense” has not asked for any help because they ostensibly have everything under control.
How can you have “self-regulation” in an industry with trillions of dollars of relatively unsophisticated investor funds up for grabs when the “securities cops” have a vastly superior “KAV” factor or Knowledge of, Access to and Visibility of our illegal “collateralization versus payment” (CVP) based clearance and settlement system.
These are the actions of the “cops” for crying out loud! Where is internal affairs in this mess?
I think that even a non-market reform advocate might find it odd when the “securities police” acting as the “first line of defense against abusive naked short selling frauds” assert that they are “powerless” to perform the only act possible to “police” the business conduct of its owners/participants active in this particular form of a securities fraud i.e. buy-in the delivery failures of its participants that refuse to deliver that which they sell, when the financial beneficiaries of these thefts just happen to be the “participants” of the “police force” and their hedge fund “guests” that provide them with $11.2 billion annually in commissions and fees. Coincidence?
Interesting…no honor among thieves. Crooked NSS Einhorn going to gut the crooked marker manipulator covering COMEX? Let the crooks kill each other then execute the ones left standing. I would buy the ticket to that event!
Jim Sinclair’s Commentary
http://jsmineset.com/
Nail the Comex the way they deserve and gold will be at $1224-$1250 five trading days later.
I am not suggesting breaking the playing field in any way, but rather taking delivery of your Comex gold and therein reducing the warehouse supply by 50% so shorts have to have gold.
How about those new funds buying gold, the ones that are buying real physical gold, not paper. Many are readers here.
It is a real possibility as this fund is one of the most notorious of the bank short sellers. With that sceptic’s attitude maybe this fund is going to send the Comex gang a good 250,000 volt shock.
I think it might just happen on the next three deliveries.
That would be the rest of his Grandfather’s advice.
++++++++++++++++++++++++++
Jim Sinclair’s Commentary
Listening to Grandfather’s advice is a good idea.
Greenlight Founder Takes Grandfather’s Advice on Gold
By Stewart Bailey and Saijel Kishan
Jan. 28 (Bloomberg) — Greenlight Capital Inc. founder David Einhorn is finally taking his grandfather’s advice. The $5.1 billion hedge fund is buying gold for the first time amid the threat of inflation from increased government spending.
Since Einhorn was 10 years old, his grandfather has warned him that investing in bullion and gold-mining stocks was the only “sensible” thing to do given the threat of inflation and the risks of so-called fiat currencies, New York-based Greenlight said in a Jan. 20 letter to clients. The firm had never before considered buying bullion or mining-company shares.
“To everyone’s dismay, we believe some of Grandpa Ben’s predictions are playing out,” Greenlight said in the letter, a copy of which was obtained by Bloomberg News. “The size of the Fed’s balance sheet is exploding, and the currency is being debased.”
Greenlight is turning to the centuries-old currency to mitigate the effects of the economic collapse and government efforts to end it. Bullion gained for the eighth straight year in 2008 as governments in Europe and the U.S. rescued banks from collapse.
Greenlight said in the letter that in addition to buying gold, it has added call options on gold and the Market Vectors Gold Miners exchange-traded fund to its other investments. Call options are the right to buy a security or commodity at a set price, within a set period of time. The owner of the call profits when the security rises above the set price.
More…
Today Prez Obama talked about
Wall Street’s 18Billion $ Bonuses..
He needs to be educated in what they should be called “ILL GOTTEN GAINS.”
Not saying all the street is crooked, but they know who they are.
http://news.yahoo.com/s/ap/20090129/ap_on_go_pr_wh/obama_bonuses
R101
Dr DeCosta or anyone else who can answer me,
1. Madoff had his own investment funds.
2.Madoff had his own brokerage.
3.Madoff never traded the funds he held for people through the brokerage.
4. Therefore those funds never made it past the investment side.
5. How is it the SIPC owes any of these investors who lost money a dime when the money never made it from the investment side and into the brokerage side ?
R101
How is this a government bail out thing (SIPC) when the brokerage was never utilized by these monies as a trading platform? Sure, he did use his brokerage for other people’s money from other sources, just not from the monies he collected from his investment side. Should this be a Madoff thing and not a Government thing as far as money goes?
R101
I think it is only the assets under custody at Madoff’s brokerage that are covered, not the fund, but I could be wrong.
http://www.securitiesdocket.com/2008/12/26/bankruptcy-court-approves-sipcs-madoff-liquidation-plan-limiting-payouts/
http://www.madofftrustee.com/
davidn,
Thanks for the reply. Yes, they were assets indeed, but, they were never officially traded as to become part of the market, as to be considered government responsibility. I believe Madoff was never registered his asset side until 2007? That makes that money only liable by the government since 2007?
R101
Just trying to figure out who should receive “OUR” money out of this scam if he basically didn’t do anything with the money he held for others….no trades, nothing.
R101
What SIPC Covers… What it Does Not
The cash and securities – such as stocks and bonds – held by a customer at a financially troubled brokerage firm are protected by SIPC.
Among the investments that are ineligible for SIPC protection are commodity futures contracts and currency, as well as investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.
It is important to recognize that SIPC does not work the same way as the Federal Deposit Insurance Corporation in terms of blanket protection of losses. For more information click here.
Good article titled:
“IT’S 10 P.M. DO YOU KNOW WHERE YOUR SECURITIES ARE?”
http://www-rcf.usc.edu/~usclrev/pdf/072403.pdf
As Professor Loss put it, the “recurrent theme” of federal securities
regulation is “disclosure, again disclosure, and still more disclosure.”…
…When an investor purchases securities, they
are generally not held in the name of that investor (sometimes referred to
as the “beneficial owner”), but rather in the name of an intermediary.3 The
intermediary retains custody of the securities. An investor’s claim to securities
in her account with an intermediary, though sometimes treated by the
law as a conventional property right, is more like a contractual relationship
with the intermediary. Thus, “[u]nlike property claimants such as lessors
and secured creditors, the sui generis claims of customers of a securities
intermediary are marked by a lack of control and knowledge and an almost
exclusive reliance on the integrity and solvency of the intermediary.”
…In April 1968, $2.67 billion worth of transactions failed; in December 1968, that number
rose to $4.13 billion.25 Although the dollar value of fails declined thereafter,
nearly twelve percent of all transactions failed in July 1969.26
…In any industry, accepting orders that cannot be filled violates basic principles of contract.
Moreover, in the view of the SEC, such conduct constituted securities fraud.
…The most common form of
misconduct leading to firm failure is the outright misappropriation of customers’
cash and securities.
…Investors who were, in the lay sense, customers of the failed firm often
suffer losses that will not be paid out of the SIPC fund.
…The SEC and SROs do not actively monitor brokers’ financial
health; rather, the financial conditions of broker-dealers are largely selfreported.
Furthermore, even if the SEC becomes aware of broker-dealer
financial distress, it is unclear who within the SEC has primary responsibility
for reporting it to SIPC. SEC regulations assign the statutory duty to
a number of different officials at various levels.143 Nonetheless, only the
SEC can order SIPC to initiate a SIPA liquidation proceeding; individuals
have no standing to sue SIPC to compel it to do so.144
…While the tradition of regulation in this area is long, Congress and the
SEC have not implemented very demanding capital rules, and have left
much of the responsibility for enforcing the rules to the industry itself.
…While some violations may be due to a failure to understand
the complexity of Rule 15c3-3, it is likely that some brokers deliberately
flout this rule in order to realize higher gains on customer assets.
…Certain aspects of the SIPA scheme further illustrate Congress’ intent
to use investor protection primarily as a means for industry protection.
…After 1978, “[a]ll customers who left negotiable
securities in their broker’s possession share the risks of misappropriation
and share ratably in remaining customer property.”
>> COP Report: Modernizing the American Financial Regulatory System
cop.senate.gov/blog/entries/blog-012909-reformreport.cfm
Summary… “The report examines how deregulation of financial markets over the last twenty-five years have returned the boom-and-bust cycles that had plagued the United States’ economy until reforms of the Great Depression ushered in a half-century of financial stability.” ……
“COP released its special report on regulatory reform today. The report discusses how regulation would have averted the crisis that we are in today, and how the implementation of smart regulation will help the United States can prevent another financial crisis and determine our economic success in the years to come.
Watch video of Chair Elizabeth Warren introducing this report below.
The report examines how deregulation of financial markets over the last twenty-five years have returned the boom-and-bust cycles that had plagued the United States’ economy until reforms of the Great Depression ushered in a half-century of financial stability. The report specifically points to three areas of regulation that could have prevented the current economic crisis, specifically basic consumer protection rules, supervision of credit rating agencies, and regulation of companies that are “too big to fail.””
Part 1cop.senate.gov/documents/cop-012909-report-01-summaries.pdf
Part 2
cop.senate.gov/documents/cop-012909-report-02-summaries.pdf
I have not yet read these reports, but I sense HOPE for “good changes” in the summary sentence above.
Reporter101,
You may be on to something, but I don’t know one way or the other.
The previous article is good.
It looks like the DeepCapture,com server did not like “http://” in front of the url in my previous message.
Reporter 101,
At the end of the day I’m not sure if those guys will be getting checks or not from the SIPC. I think the more important takeaway from the Madoff case is this: The single brightest guy on the planet in regards to having a superior working knowledge as to how our clearance and settlement system is responsible for the biggest heist ever. This tells me that crooks are not afraid to leverage their superior knowledge over investors. Point #1 is let’s take away that huge knowledge disparity by getting educated. Point #2 is to have well-educated and UNCONFLICTED regulators protecting the less financially-sophisticated investors. This leads us to removing the conflicts of interest in the system.
Pushing for laws that forbid SEC employees from joining the firms of people they used to be regulating would be a good start and we are gaining traction on that front. I’ve long noticed a phenomenon at the SEC I refer to as “the brain drain”. Every time an SEC staff member gets the modus operandi of the crooks figured out he seems to be hired away by some hedge fund manager or investment bank. He then gets replaced by a rookie 3 days out of law school.
Forbidding the SROs that theoretically act as “the first line of defense against ANSS crimes” from running interference for the crooks might be another good move. When you see aberrational statistics you need to wonder why the aberration. Why do only one eighth of 1% of even mandated buy-ins ever get executed? The answer is above on an earlier post from today or yesterday. What is the statistical probability that the brightest guy on the planet in re: to the nuances of our clearance and settlement system would turn out to have pulled off the biggest heist in history. What does he know that some of the most brilliant financial guys in the world that were sending him billions of dollars didn’t know?
When the young SEC guys had difficult questions on the inner workings of Wall Street they went to Madoff. He was then able to leverage his superior knowledge in combination with his schmoozing with the regulators beyond belief. Seven years ago he sat up at a “roundtable” discussion on our markets and said that the SEC was so rigorous at regulation that nobody could pull off a fraud on Wall Street. When I regained consciousness I knew that something was up with this guy because nobody with his background could ever make that comment. That comment was an aberration that just didn’t make sense but apparently not many people except maybe Markopolous followed through on it.
The DTCC with those 15 various responsibilities clearly empowering them to execute buy-ins when their abusive participants absolutely refuse to deliver that which they sold claiming to be “powerless” to execute buy-ins sounds like a bit of an aberration doesn’t it.
I highly recommend you listen to Elizabeth Warren’s Introduces the COP Special Report on Regulatory Reform:
http://www.youtube.com/watch?v=NZY3sFlhPfc&eurl=http://cop.senate.gov/blog/entries/blog-012909-reformreport.cfm&feature=player_embedded
ITS ABOUT TIME THE GLOVES CAME OFF!!!
Next Question,
Will all the hundreds of millions of dollars lost (Many Ponzi’s popping up), and many funds going under, where do they thing the money came from to pay 18 Billions in Wall Street Bonuses?
R101
Elizabeth Warren’s introductory video to the newly released CAP REPORT (in 2 parts) is Wonderful!
Thank goodness she as the chairman of the Senate COP (Congressional Oversight Panel) is NOT a politician.
It sound like those expert plugged into DeepCapture.com should contact this panel to educate them about Wall Street’s Counterfeiting Machine.
FYI – the addresses above to the COP website needs “http://” added in front of the cop.senate.gov to get their. Without this address the address will not work.
Alternatively, you can use a search engine to find the website by using >> Senate COP report <<.
The COP Panel wants to hear from everyone – see their home page. I am going to take the opportunity to communicate with them.
funny i spoke with guy from state street said Goldman was calling all over to make sure people did not lend out their shares to short. said they would not do busnessn with them i they did,, They didnt like the bear raid ON THEMSELVES
Government Regulators Aided IndyMac Cover-Up, Maybe Others
Darrel Dochow May Not Be the Only Official Who Helped Banks Hide Financial Problems
By BRIAN ROSS, JUSTIN ROOD, and JOSEPH RHEE
Jan. 16, 2009
http://abcnews.go.com/Blotter/Economy/story?id=6658365&page=1
R101