A Bad Day for Criminals and the Journalists Who Love Them

The mainstream financial media says that the SEC should not crack down on criminal short sellers because short sellers are vital to the markets (and vital ghost-writers of a lot of what appears in the financial media). But much of the world has come to understand the enormity of the illegal short selling scandal, and there is a palpable feeling that the days are numbered for the miscreants who are turning our markets to mush.

Consider the events of just the last 24 hours.

Yesterday, we received word that Jonathan Curshen of Red Sea Management was arrested in New York. As described in “The Story of Deep Capture,” Curshen used to work for Pacific International, a Mafia-infested brokerage that has been favored by criminal naked short sellers and serves as a popular source to journalists, such as Dow Jones Reporter Carol Remond, who insist that illegal naked short selling isn’t a problem.

A Deep Capture team member, working undercover, once traveled to Costa Rica to meet Curshen. On multiple occasions, this creep admitted to our undercover vigilante that he participated in illegal naked short selling – and threatened to kill anyone who revealed this. Curshen also admitted laundering money for criminal short sellers, and described special debit cards that could not be traced to their users. These cards, Curshen said, were used to pay off government officials and journalists.

We are awaiting details of the charges against Curshen. They should be interesting.

Meanwhile, it was announced today that Deutsche Bank Securities has agreed to pay the largest fine ever levied by the New York Stock Exchange for short-selling violations. Only the Associated Press and Reuters reported this news. Reuters noted that Deutsche Bank completed sales of securities “without borrowing the securities or having reasonable grounds that they could be borrowed.” This is otherwise known as illegal naked short selling.

Strangely, however, Reuters suggested it wasn’t naked short selling at all. It wasn’t naked short selling,said Reuters, because the case involved “failures to locate the securities to cover short sales, not necessarily a failure to deliver the securities.”

How does one deliver securities that one has not located? Late in the day, Reuters put out a corrected story with a quote from a NYSE official who said, yes, “if you can’t locate the securities, it may lead to a fail to deliver” – and, yes, that is naked short selling, which is another way of saying that Deutsche Bank Securities sold massive amounts of phantom stock.

This is not at all surprising. For years, a devoted crew of bloggers have pegged Deutsche Bank as a central player in the naked short selling scandal. This was a big reason why the bloggers were called “conspiracy theorists” and “crazies,” and I suppose it would be pretty nutty of me to suggest that one of these days there’s going to be jail time for the criminal hedge funds that ordered Deutsche Bank to sell all that phantom stock in an effort to destroy public companies for profit.

But short sellers are vital to the markets, so let’s pretend not to notice the third interesting news item of the day, which is that Morgan Keegan & Co., a Tennessee-based brokerage, has fired stock analyst John Gwynn for allowing short-selling clients to see his research reports before they were made available to the public. As Deep Capture reporter Judd Bagley noted in our previous blog post, the reports in question all concerned a company called Fairfax Financial.

A small group of short-sellers are alleged to have participated in a scheme – dubbed the “Fairfax Project” – to drive down Fairfax’s stock price. We noted in “The Story of Deep Capture,” that one of the short selling hedge funds, an affiliate of Steve Cohen’s SAC Capital, went so far as to hire a thug named Spyro Contogouris to threaten Fairfax’s executives and their families. The thug (later jailed for ripping off a Greek shipping magnate) even wrote a letter to the church pastor of Fairfax’s CEO, accusing the CEO, who is an honest family man, of being a sado-masochist group-sex afficionado who had scammed the Catholic Church out of millions of dollars.

In a lawsuit filed in 2006, Fairfax claimed that this group of short sellers – Steve Cohen, David Rocker, Jim Chanos and Dan Loeb – conspired with Morgan Keegan to manufacture false, negative research about Fairfax. Morgan Keegan, no doubt to avoid liability, maintains that the research was accurate, but I’ve seen some of that research, and it can hardly be called “truth.” In any case, by firing Gwynn, Morgan Keegan makes it plenty clear that the short-sellers who attacked Fairfax were up to no good.

This same clique of short-sellers has attacked dozens of other companies, almost always resorting to similar tactics: false “independent” research (dictated by the short-sellers, who trade ahead of it); harassment of targeted executives by thugs and criminals; scurrilous rumor-mongering; so-called “bashers” who are paid by the shorts to flood the Internet with smears and distortions; corporate espionage; government investigations (which are instigated by the shorts, and drain corporate resources, but usually end in no action); and bogus class action lawsuits (usually filed by a corrupt law firm called Milberg Weiss until Milberg’s top partners went to jail for bribing plaintiffs).

A hugely disproportionate number of the companies that have been targeted by this clique of short-sellers have also been victimized by massive levels of phantom stock. Ultimately the SEC will have to say who was behind the illegal naked short selling, and so far it has not prosecuted anyone. However, it has launched an investigation into Dan Loeb, who aside from being named as a leader of the “Fairfax Project,” has featured prominently on Deep Capture for paying a minion to manage a stable of criminals and knaves to smear corporations and whitewash the naked short selling scandal.

The media has dutifully mimicked Loeb’s claim that the SEC is only investigating whether he has “communicated” with other hedge fund managers – and, golly, there can’t be anything wrong with sharing ideas with one’s colleagues. But we’ll wager that Loeb isn’t telling the whole truth, and the SEC is investigating the full range of tactics employed by his crew of short-selling scallywags.

It is par for the course that the media has been kind to Loeb. For years, his clique of short-sellers have been the primary sources of negative information for a small cast of influential, but dishonest journalists. The journalists’ stories were often false, but they — along with the phony financial research, the criminal bashers, the hired thugs, the bogus lawsuits, the dead-end government investigations, and the piles of phantom stock – helped pummel stock prices. When the stock prices fell, the journalists wrote more stories blaming the companies for their falling stock prices.

Not once have any of these journalists written about the shenanigans of their short-selling sources. Not once have the journalists suggested that the short-sellers’ tactics or phantom stock could have contributed to the falling stock prices that were the subjects of so many of their stories. Indeed, the most degenerate of these journalists — CNBC’s Herb Greenberg, former BusinessWeek reporter Gary Weiss, Bethany McLean of Fortune Magazine, Carol Remond of Dow Jones, Joe Nocera of the New York Times – have gone to lengths to convince the American public that short-sellers do not commit crimes.

Perhaps following the lead of their eminent colleagues, or perhaps because they simply don’t have time to clear away the smoke blowing from the hedge fund lobby, a number of other journalists continue to behave as if illegal naked short selling is not a problem. And today, with the emergence of yet more evidence to the contrary — with the criminals backed against the wall, and the search light creeping closer — there was from the complicit journalists nothing but silence.

  1. This drama is highly addictive. I’ve tried to stay away, even succeeded at times, but this is building, and the excitement and anticipation can not be ignored.

    Thanks for the article, and the enlightenment, Mark.

  2. Mark,
    Excellent article! I look forward to the day when all of these low lifes are rounded up and charged with their financial crimes, although I doubt they will get what they deserve. Most likely a slap on the wrist and an insignificant fine.

  3. You forgot to mention the Senate hearing today on the 100bb a year our pals at Broad and Wall are helping hedge funds steal from the Treasury.

  4. Mark-I’ve only read a few wire reports on Morgan Keegan, and correct me if I am wrong, but it appears rather than tie their star to claiming Gwynn’s reports were true, they stated that he (Gwynn) believed them to be accurate. Seems they are leaving themselves some wiggle room to back off him further, as discovery goes on. That is if I am reading this correctly. At any rate, for them to do this in the middle of a law suit, speaks volumes.

    BTW, following the Rueters definintion of not actually fails to deliver, a thug held up a gas station at gun point. However, it is not actually armed robbery, because rather than just keep the cash, he had the intention of returning the money one day. 🙂

  5. The reason Reuters said it was “not necessarily a failure to deliver the securities” is because ever since attention has begun to be paid to Failures to Deliver statistics, the shortselling cabal has shifted their strategy from “holding” short positions to instead closing out short positions at the end of every day. In this way, all that pesky locating, borrowing, and delivering is completely avoided.

    With the eliminationl of the uptick rule, and with wink and nod agreements with one’s prime broker that shorted positions will not be held overnight (thereby requiring tracking and delivery), the predatory shortselling Cohen-Rocker-Chanos-Loeb, et al., community can collude with each other on what the day’s targets are, dump massive quantities of phantom, counterfeit shares into the market intraday, destroy the share price, and leisurely collect their manipulated profits at the end of the day — all without ever having to borrow or even locate a single share.

    The next day, rinse and repeat.

    I believe this INTRADAY naked shortselling of phantom, counterfeit shares massively dwarfs the FTD problem and has become the real problem in today’s markets.

  6. Whats that sound I hear? That chincking noise coming from the attic? Dang,sounds like boltcutters? Going to have alot of work to do to clean up the mess left behind,hope its not to late?

  7. Another great article Mark Mitchell. As we move ahead, it is obvious to see who is behind the market manipulation (naked short selling) as each company comes forward filing legal action. Although the companies differ, the miscreants remain the same.

    Looking back in time, lets say 9-11-2001, there was huge put options in place against the market/American Airlines yet we were never told who was behind this . What are the chances the market miscreants who have clearly been identified are one in the same from yesteryear ?

    What commonality does today’s financial crisis have with 9/11 ?, The mainstream media’s once again uniformly ignores clear evidence of illegal market activity.


    In my opinion, we see history repeating itself day after day and year after year. Sad times we live in.


  8. So, the next logical step would be to get a list of companies that Deutsche Bank naked shorted. If any of my holdings are on that list and I suffered losses during that period, it would seem to be cause for a civil suit.

    I’ve lost my butt on options in companies that were heavily shorted. If it’s proven manipulation was the cause, shouldn’t I be entitled to recover my losses fromt he perpetrators? For what it’s worth, I wouldn’t be a bit surprised if Deutsche Bank was selling naked calls on the very stocks they were naked shorting. Wouldn’t that be the perfect crime… Why not make money on both ends if you control the share price?


  9. So, the next logical step would be to get a list of companies that Deutsche Bank naked shorted. If any of my holdings are on that list and I suffered losses during that period, it would seem to be cause for a civil suit.

    I’ve lost my butt on options in companies that were heavily shorted. If it’s proven manipulation was the cause, shouldn’t I be entitled to recover my losses fromt he perpetrators? For what it’s worth, I wouldn’t be a bit surprised if Deutsche Bank was selling naked calls on the very stocks they were naked shorting. Wouldn’t that be the perfect crime… Why not make money on both ends if you can control the share price?


  10. Sad to say but I doubt that John Q. Investor has the fire in the belly to react to being robbed blind. Just take the general public’s reaction to the cornering of the oil futures market by just a handful of traders. With every fill up at the pump, they were being skinned alive and now with the revelations where is the righteous indignation? So why would we think that those who buy securities would act any differently? Unfortunately, the fine art of tar and feathering and the outrage that produced it has been lost. However, the naked short crowd’s greed is so great, that the stench of their corruption can no longer be covered up. Now even the SEC realizes that for its and the markets survival steps must be take to reign them in.

  11. By the time Fairfax and Overstock.com get to court all these companies that are getting sued will be out of exsistence,all sporting new names owned in part by the federal government i;e taxpayers.

    Litigation Release No. 20712 / September 11, 2008
    Securities and Exchange Commission v. Bruce Grossman and Jonathan Curshen, Civil Action No. 08 Civ. 7893 (PGG) (S.D.N.Y.)
    SEC Charges Two Stock Promoters With Market Manipulation

    The Securities and Exchange Commission yesterday charged two stock promoters with engaging in a fraudulent broker bribery scheme designed to manipulate the market for the common stock of Industrial Biotechnology, Corp. (“IBOT”).

    The complaint, filed yesterday in federal court in Manhattan, alleges that beginning in at least June 2008, Bruce Grossman and Jonathan Curshen engaged in an undisclosed kickback arrangement with an individual who claimed to represent a group of registered representatives with trading discretion over the accounts of wealthy customers. Unbeknownst to Grossman and Curshen, the individual actually was an undercover FBI agent. Grossman and Curshen promised to pay a 25% kickback to the agent and the registered representatives he purported to represent in exchange for the purchase of up to $3 million of IBOT stock through the customers’ accounts.

    The complaint further alleges that from June 27 to July 2, 2008, Grossman and Curshen instructed the agent to purchase approximately 85,000 shares of IBOT stock for a total of approximately $76,000 through matched trades using detailed instructions concerning the size, price and timing of the purchase orders. Thereafter, Grossman and Curshen paid bribes of almost $19,000 to the agent.

    The complaint charges Grossman and Curshen with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The Commission seeks permanent injunctive relief, disgorgement of ill-gotten gains, if any, plus pre-judgment interest, civil penalties, and an order prohibiting Defendants from participating in any offering of penny stock.

    The Commission acknowledges assistance provided by the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation in this matter.

    From: http://www.sec.gov/litigation/litreleases/2008/lr20712.htm

  13. “The Commission acknowledges assistance provided by the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation in this matter.”

    Unfortunately, the FBI turned this over to the SEC, who will only pursue civil penalties and a promise from the crooks that they’ll never do it again.

  14. The Commission is quite diligent in pursuing pump and dump scams; it is amazing they can not devote just a couple of employees to the far more prevalent short and distort scams. The reason the latter are so prevalent is that the idiots at the SEC are unwilling or unable to pursue them. At least that is one reason. The fact that they are far more lucrative can’t hurt either.

  15. Last night the presidential candidates had their interview about public service and how to get more people invovled.

    I would like to say THANK YOU to all the Deepcapture team for your service to this country. You are giving more information on something that is in dire need of attention by criminal investigators to the public, than most of the regular news media combined. It appears that as more attention is drawn to the whole NSS RICO ring activities, some actions are finally being taken to address it. Small as those actions so far may be, I have no doubt with your continued efforts to inform and educate the public, the powers that be will be forced to step up and take action against the crooks and their supporters.

    THANK YOU for your Service to this country and it Law Abiding Citizens! You are making a difference for the better.

  16. Deutsche Bank was THE central player when MJK Clearing failed because of a naked short daisy chain.


    MJK cleared for 175,000 investors and was brought down by presidential connected Saudi Arabian arms dealer Adnan Khasshogi on September 11th, 2001 by naked shorting and the mainstream media considers it too boring a story to cover.


    Why has the general public never heard of this failure?

  17. This is the story about Deutsche Bank and naked shorting that is too boring for the mainstream news to cover (from the wiki link above). The naked short daisy chain caused the largest SIPF payout in history.

    “Khashoggi, along with Ramy El-Batrawi, was the principal financier behind GenesisIntermedia, Inc. (formerly NASDAQ: GENI), a publicly traded Internet company based in Southern California. After the September 11, 2001 attacks, Khashoggi’s U.S. based checking accounts were frozen and Khashoggi was unable to make a margin call with Native Nations Securities, whose CEO and largest shareholder, at the time, was Valerie Red Horse, former office manager of junk bond king, Michael Milken. In turn, Native Nations and Red Horse were unable to meet their obligations on the margin loan to MJK Clearing, Inc.[2][3] Trading in the stock of GenesisIntermedia was halted in September 2001. Khashoggi’s unwillingness to pay his margin loan to Native Nations Securities, and Native Nations (and Red Horse’s) inability to pay its debts to MJK Clearing, began a series of bankruptcies that ended in the largest payout in Securities Investor Protection Corporation history.[4][5] Native Nations Securities and MJK Clearing both eventually filed for bankruptcy.[6]

    Adnan Khashoggi’s sister Samira Khashoggi Fayed was the mother of Dodi Fayed, who died with Princess Diana.

    He was implicated in the Iran-Contra Affair as a key middleman in the arms-for-hostages exchange along with Iranian arms dealer Manucher Ghorbanifar and, in a complex series of events, was found to have borrowed money for these arms purchases from the now-bankrupt financial institution the Bank of Credit and Commerce International with Saudi and US backing. In 1988, Khashoggi was arrested in Switzerland, accused of concealing funds, and held for three months and then extradited to the United States where he was released on bail and subsequently acquitted. In 1990, a United States federal jury in Manhattan acquitted Khashoggi and Imelda Marcos, widow of the exiled Philippine President Ferdinand Marcos, of racketeering and fraud.[1] He has also worked for Col. Ghaddafi of Libya in 1992 as a mediator.”

  18. My next door neighbor is a treasury agent and one day I asked him about a lot of this stuff and to my surprise he didn’t deny it. He said that no matter what they do these Wall Street Perps are always one or more steps ahead of them. He said that they were all to dam smart and worked weekends.

    I guess the feds and the banksters are working a lot of weekends now days it seems in order to stay one step ahead of us. I’m starting to fear that they may get away with this while we watch.

  19. “The truth is out there!”- maybe a lame quote from a TV series, but you are helping to make it true. Without truth and some material changes in SEC enforcement, all the money in the market will dry up completely.

    Mark keep up the hard work, Keep the light focused on this fraud – “evil prevails when good men stand by and do nothing”.
    These greedy thieves need to know God waiting for their souls, they can hope is a forgiving God, and I can
    hope for a vengeful one, since it is unlikely that justice will be served in this life.

  20. I keep asking myself the same question: Why isn’t the American Public tearing their hair out, (or the hair of their elected officials,) over what we (the informed, or rather, the ripped-off) believe is the current situation, vis-a-vis the SEC, the Wall Street Cabal, the news/financial media, et al? I think it’s partly because they don’t believe it. They don’t know who owns the FEDERAL RESERVE. They think it’s the government. They don’t know who owned FNME or Freddie Mac, up until last week. They thought it was the government. They don’t know that the SEC’s mandate is not protecting the investor on Wall Street, its’ mandate is ‘To restore investor confidence in the Equities System,’ (Wall Street!) They don’t know any of this, who owns the DTCC, how the short system tried to bankrupt the Country of Iceland. (Yes, the whole dang country.) Well, when they’d done their worst to the economy, by incentivizing the pushing of exorbitant loans on less than stellar home owners/purchasers and then pulling rug on the lenders, guess what? They started eating their own. Bear Stearns was the initial gambit, and the current target is Lehman. In the interim, they took down Fannie and Freddie, pocketed whatever they could steal, and threw the gnawed bones to the public, the taxpayer, the people they had just ripped off to the tune of billions. Now, we’ve not only lost OUR investment, (the stockholders are holding the stick, and that’s about all,) they’re now taking the future production capacity of our children, and our children’s children, via the taxpayer backed bailout. Who outside of those of us who are involved in this would ever believe such a story? I have a close cousin who just went to work for the SEC. He seems not to know about any of this. I have another relative who owns stock, and works in the Legislature. He has no clue that he’s one of the people being robbed. His eyes glaze over when I try to ‘splain him. I think he just can’t believe it.
    Bill Maher last night (I may not agree with him, but I don’t think he’s stupid,) admitted that when it comes to the economy, he just doesn’t get it. I dunno how to get the message out, so that people will actually understand it. If they understood it, they’d believe, and then, and only then, will all hell break loose. We’ll never recover our Fannie/Freddie money, or our PGSW money, or our NFI money. By the time the lawsuits pay off, all the money will either be ‘elsewhere,’ or the miscreants will go bankrupt. I don’t see any scenario wherein we get whole. Maybe we can clean the streets for our progeny.

    One can only hope, but, if anyone has any ideas, I’d be happy to listen.


  21. http://www.cnbc.com/id/15840232?video=858994209&play=1

    Gasparino in this video says CEO’s of Morgan Stanley and Goldman called Cox today and said they are being hurt by naked shorting… And the SEC immediately jumped. They apparently met today to decide what else to do.

    Wonder why they did not jump when Dr. Byrne called, over and over? Or the 1000’s of others who called, wrote, commented, etc.

    Truly, it pays to have “juice” when dealing with the SEC.

  22. The Questions You Won’t Hear on CNBC – September 23, 2008

    David Patch

    This week must have been a sobering one for the news team at CNBC.

    Over these past 8 years CNBC anchors and commentators have fawned over the short seller without ever making the effort to dig deeper into how these people operate. The motto of each has been to engage in a PR campaign that included “Short Sellers are always right because they do more research than anybody else”. The team later taking the cue from such short sellers and ran the battle cry of “CEO’s who go out and blame short sellers are simply diverting their attentions away from the real problems within their company”.

    Never once did the CNBC crew acknowledge that predatory short selling could actually damage a good company. In fact, just the opposite, Short Sellers can not impact sound companies is what they presented to the public.

    Guess what.

    This week General Electric, the parent to CNBC, contacted the Securities and Exchange Commission and requested that General Electric be placed on the short sale ban list. CEO Jeff Immelt was not at all amused at how hard the GE market was hit by short sellers feeding off allegations of huge losses associated with the GE Capital Division. The GE market was driven below valuation and it was because of those nasty short sellers.

    GE, and CNBC were now the target. There goes my 401K they all thought.

    Read the rest by clicking on the link below:


  23. I see key players like Valerie Red-Horse is advising Native American tribal leaders and casinos and receiving leadership awards?! How is this possible? The criminals are still being rewarded and havent lost there licenses?

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