Strange Occurrences, and a Story about Naked Short Selling

An investigation into naked short selling and Wall Street leads to death threats

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 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, 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 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

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.

* * * * * * * *

To be continued….

* * * * * * * *

Mark Mitchell is a reporter for 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: [email protected]

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  1. 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.

  2. 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…


  3. 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.

  4. WOW!!!!
    Senator Orrin Hatch delivering a ‘Death Threat’ message to Dr. Byrne.
    Criminals dispatching Senators to do their
    Only in Amerika.
    Our tax dollars hard at work.
    The rabbit hole ends in Chinussia.

  5. 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.

  6. 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.

  7. Jim-
    Either you are being sarcastic or you need to brush up on your reading comprehension.

    MM & PB-
    Keep fighting the good fight!

  8. MJK Clearing failed on September 11, 2001 and 175,000 customer accounts had to be bailed out.

    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.


    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.


    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

  10. 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.

  11. 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.

  12. 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.

  13. 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.

  14. 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.

  15. 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.”

    ( )

  16. 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.


  17. 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.

  18. here are some common threads:

    prostate cancer foundation
    proquest investments
    dr howard scher
    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.

  19. 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?
    “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!

  20. 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.

  21. 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.


  22. 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?

  23. 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.

  24. 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.

  25. 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!

  26. 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!

  27. 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


    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. .

  28. 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.”


  29. 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.

  30. 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).

  31. 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.

  32. 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.


  33. 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 !

  34. 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.


  35. 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.

  36. 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.

  37. 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:


  38. 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 .

  39. 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.

  40. Warren Buffet endorsed Obama’s campaign – can Patrick pull any favors through his friend Warren to make sure Obama completely understands this issue?

  41. 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.


    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”.

  42. 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.

  43. 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.”

  44. 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…

  45. 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.

  46. 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.

  47. 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….


  48. 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.


    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”.

  50. 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!!!

  51. 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……

  52. 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.

  53. 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.)

  54. 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 can figure out what the issue is.

  55. 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?

  56. 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

  57. 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.

  58. Dr. Jim DeCosta,

    I see from your explanation above:


    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.

  59. 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.”

  60. 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.

  61. 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?

  62. 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?

  63. 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

    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.


  64. 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 ?


  65. 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?


  66. 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?


  67. 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.


  68. 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.

  69. Good article titled:


    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.”

  70. >> 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.” ……

    “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 2

    I have not yet read these reports, but I sense HOPE for “good changes” in the summary sentence above.

  71. Reporter101,

    You may be on to something, but I don’t know one way or the other.

    The previous article is good.

  72. It looks like the DeepCapture,com server did not like “http://” in front of the url in my previous message.

  73. 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.

  74. 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?


  75. 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 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 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.

  76. 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

  77. Lets see if I understand this correctly. Hedge funds helped/aided in this financial crisis now they are turning their sights on making money on the law suites ? They better save their money cause I am thinking some funds just might nee it for themselves!!!

    Funds May Seek Profit in U.S. Lawsuits
    January 29, 2009, 7:45 am

  78. The SEC has a budget of $1,000,000,000 per year, but they say the reason they can’t catch crooks is they are understaffed and need money.

    They have 3,400 employees, so the average pay is $294,000 per year per employee, including overhead (office space, phones, etc.)

    Are we getting good value?

    If the SEC wasn’t here, crooks would be arrested, possibly even executed for treason by the department of justice.

    Luckily, we are saved from that barbarism by the SEC who files amicus briefs to ensure crooks are not roasted alive.

    One of my favorite websites was and I’m saddened Dave Patch slowed the fight because his willingness to give the establishment the middle finger is exactly what we need more of.

    I know writers like myself and readers like yourself are afraid to pop our head out of the sand for fear of getting whacked, JFK style, but that means that when a Patrick or a Mitchell have the bawls to write what they write, us lurkers have to do whatever it takes to give them their full support.

    Patchie, you’re a hero to me.

  79. Doubtful.
    Disinformation is a hall mark of deception.

    “J. L. Says:
    January 27th, 2009 at 3:56 pm

    Senator Orrin Hatch delivering a ‘Death Threat’ message to Dr. Byrne.
    Criminals dispatching Senators to do their
    Only in Amerika.
    Our tax dollars hard at work.
    The rabbit hole ends in Chinussia.”

  80. Thin edge of the wedge.
    The fact that Bill Pardoned Marc has nothing to do with anything, of course it has and more IMO.

    “Jim Says:
    January 27th, 2009 at 4:01 pm

    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.”

  81. COP REPORT – Part 1 – Page 98:

    Hedge Funds and Private Equity
    Hedge funds and private equity escape most regulation because, under the terms of the securities laws, they do not sell shares to the public (for example, they deal with ―sophisticated‖ investors not seen to need regulatory protection). Kuttner argues that they pose systemic problems because they account for a large share of financial market activity, intensify market disruptions by acting in similar ways, and support, by being counterparties, ―dubious, highly-leveraged, and lightly regulated‖ transactions. Furthermore, they are ―swamps‖ of conflicts of interest, facilitated by the fact that they are not subject to regulatory examinations or most other regulatory controls. He suggests that they should be regulated because they perform functions similar to regulated financial institutions.429 Short Selling
    Kuttner maintains that short sellers facilitate the marketing of risky, complex derivatives by acting as counterparties in such transactions, aggravate market volatility, and need to be examined critically. He writes, ―if we don‘t prohibit short selling outright, we need to further investigate the abuses and develop strategies to contain them—which is necessary in order to truly understand their impact on market volatility.‖430

  82. COP REPORT – Part 1 – Page 100-101:

    Securities Regulation and Self-Regulation
    Kuttner maintains that the ―pervasive ideology of deregulation has weakened a once strong SEC.‖435 He cites regulation of executive compensation, proxy reform, rights of private action in litigation, mutual fund transparency and disclosure, enforcement of disclosure requirements governing publicly traded corporations, hedge fund regulation

    and registration, and stock options practices as needing more attention, also arguing for longer intervals between SEC service and relevant employment with regulated firms. He discusses the possibility of SEC/CFTC merger or related organizational changes, expressing concern over the weakness of CFTC regulation and opposing any weakening of the SEC‘s regulatory focus.436

    The paper criticizes the operation of securities self-regulation (currently, the main securities SROs are the Financial Industry Regulatory Authority and NYSE Regulation), observing that ―[t]here is a good argument that the whole self-regulation model has failed, and that something as fundamental to the integrity of the nation‘s capital markets as the conduct of stock exchanges, broker-dealers, and investment bankers should revert to the SEC itself; or at the very least to an independent nonprofit responsible to the SEC rather than to the regulated industry, such as PCAOB in the case of accountants.‖

  83. COP REPORT – Part 1 – Page 100-101:

    Recommendation 4: Oversight of Private Pools of Capital

    Limited and flexible official regulation should apply to private pools of capital, especially hedge funds.272 This would provide official supervisors with information required to track funds and monitor systemic risk, and encourage continuous improvement in market and counterparty discipline:

  84. Interesting that our friend Jim (certainly not referring to you, Dr. DeCosta) has completely disappeared ever since his Red Herrings were refuted with actual facts….


    There are 16 entities on Wall Street “empowered” to buy-in delivery failures when it becomes obvious that the seller of securities had no intent whatsoever to deliver that which it sold. The DTCC and its DTC and NSCC subdivisions constitute 15 of these entities and the buying brokerage firm that failed to get delivery of that which its client paid for is the 16th. Since NSCC policies allow this party #16 to earn interest off of his investor’s funds and allow them to count towards his net capital reserves UNTIL delivery occurs then it has been financially incentivised NOT to ever buy-in the shares owed to his client. This 16th party has been paid off to shirk his fiduciary duty of care owed to his client that just paid him a commission as his “agent”. Thus ALL 16 parties empowered to do buy-ins are represented by the DTCC and/or its policies.

    Despite all of this “empowerment” the DTCC and its subdivisions to this day still plead to be “powerless” to buy-in these delivery failures. The repercussions of this theoretical “powerlessness” is that the “participants” of the DTCC can refuse to deliver that which they sell and predictably reroute the funds of investors into their own wallets. How do they do this? They simply refuse to deliver that which they sell which accesses a self-fulfilling prophecy created through DTCC policies.

    What is the foundation of this entire pandemic “fraud on the market”? It is that the DTCC will continue to pretend to be “powerless” to buy-in the delivery failures of its abusive DTCC participants despite their being empowered to do so for 15 separate reasons and the fact that party #16 has been financially incentivised NOT to order any buy-ins. The DTCC has a corner on this “power to execute buy-ins” market. There’s nobody else in sight. These responsibilities and mandates were “concentrated” onto the shoulders of the DTCC and its subdivisions.

    What are the repercussions of shirking these mandates and responsibilities? The investment funds of U.S. citizens can be predictably rerouted into the wallets of those that absolutely refuse to deliver that which they sell. Is there any risk to this criminal behavior? No, not when the only party with the power to execute buy-ins balks on executing the buy-ins.

    Aren’t there any natural deterrents to this type of behavior present within our market system? Yes, the main one is the fear of being bought-in but this deterrent has been surgically excised by the DTCC’s pretending to be “powerless” to do so. Not only has the meticulous infrastructure to “facilitate” these frauds via falsely pleading to be “powerless” to execute buy-ins been put into place the natural market phenomena to provide truly meaningful deterrence to this criminal behavior has been removed. Coincidence?

    Part of the problem here is that there is only one “cure” to failures to deliver currently in place and this is to buy them in. There are a variety of ways to prevent their creation but only one to treat them once created. When the “participants/owners” of the DTCC that both “facilitates” these frauds via these bouts of “powerlessness” and removes the natural market phenomena that deters this behavior just happens to be the financial beneficiaries of all of these thefts then we’ve got some issues to deal with.

    A lot of this goes back to UCC Article 8. It is the body of law that allowed the “securities entitlements” procreated by “failures to deliver” to be readily sellable as if they were real “shares” of a corporation which they aren’t. The other option was to have the “securities entitlements” resultant from FTDs to remain “restricted” from further sale UNTIL delivery did occur. The assumption of the authors of UCC-8 was that the 16 parties “empowered” to execute buy-ins would do so when it became obvious that the seller of shares had no intention whatsoever to ever deliver that which it sold probably around T+7 or so. They counted on these 16 parties to ACT IN GOOD FAITH with this gigantic responsibility placed onto their shoulders. They were badly mistaken because free money is free money.

    Let’s get pragmatic for a moment. What is the solution when all 16 parties empowered to do so refuse to execute buy-ins even after it becomes obvious that the seller of securities had no intent to ever deliver? The obvious solution would be to not allow FTDs to occur in the first place if this is how they’re treated once created. What would this look like? A brokerage firm could not take a sell order UNTIL the shares being sold were in an account so that delivery by “settlement date” was essentially guaranteed. A selling broker could no longer take a sell order by somebody promising to put their certificate in the mail that day.

    When you run a clearance and settlement system wherein self-fulfilling prophecies are easily accessible and the cost of access is paid by merely refusing to deliver that which you sell with no risk of being bought in then allowing “credit” is unconscionable because it will be abused. What you’re left with is all reward with no commensurate risk.

    Now if you layer on the fact that we currently down have an “uptick rule” these fraudsters can knock about bid after bid to induce panic selling. This drives the share price down which decreases the collateralization requirements. This in turn allows the unknowing investor’s funds to flow to those that refuse to deliver that which they sell. This cash can then be deployed to assume and collateralize that much larger of a naked short position which in turn drives down the share price even quicker. Now you see the concept of “self-generated leverage” leading to a self-fulfilling prophecy i.e. that corporation, the investments made therein and the jobs it provides are all going down.

    Unfortunately for the U.S. the job growth engine is the development stage corporations typically targeted for attack because they’re relatively defenseless. A word of warning: Do not bring your development stage corporation public in the U.S. UNTIL you have sufficient cash flow to allow you to buy back your own shares should they become ridiculously cheap because you will be attacked and your shares will become ridiculously cheap.

    The moral of the story is to not allow the 16 parties with the power to execute buy-ins to be “concentrated” into one entity whose owners/”participants” become the financial beneficiary of this pretending to be “powerless”. The power to execute buy-ins needs to be placed into an UNCONFLICTED party if there are any left on Wall Street.

  86. I failed to add one more “layer” to the above comment. When the holders of the 16 responsibilities/mandates with the power to execute buy-ins (DTCC, DTC and NSCC management) plead to be “powerless” and this results in the investor’s funds flowing into the wallets of the DTCC owners/”participants” that is obviously very bad. When the holders of these 16 mandates just so happen to be the self-regulatory organization (SRO) mandated to serve as “the first line of defense against abusive naked short slling crimes” then that’s just plain scary!

  87. So Dr.DeCosta, if a company can buy back its stock will this action reverse?

    It would seem that they would just continue to NSS and fail to deliever since we have seen companies that have have many times the authorised issue created in the brokers computers.

  88. Ron Doc,
    In regards to your question as to whether or not share repurchase programs work: Yes they do but only if the cash used is from the sale of assets, a loan or positive cash flow. It makes no sense to sell shares at the typical discount to existing share price levels via a Reg D private placement only to buy them back at market levels.

    Do you remember that “self-generated leverage” which can easily be converted into a “self-fulfilling prophecy” available to the crooks associated with them redeploying the money stolen from investors in order to amass and collateralize yet larger naked short positions? That exact same leverage is available to victimized corporations and their shareholders that have survived these attacks in one piece and that have access to cash other than through private placements.

    The one positive aspect of these crimes is that they are so pandemic that many dozens of cases have shown us exactly what does and doesn’t work to not only fight off the attackers but also to reverse the damages incurred to date. I’ll give you a hint do not change the corporation’s name and CUSIP #, it won’t work yet every management team seems to want to try it. Another hint, don’t wait for an SRO or the SEC to arrive on a white horse with a bugler playing “reveille”. It’s not going to happen. If you bellyache to the authorities there is a 1,000 times greater chance of your corporation getting targeted for SEC sanctions than for them to receive any help. Every management team is on its own to design a plan tailor made for its particular circumstances.

    The existence of this massive “industry within an industry” associated with ANSS needs to be covered up lest the already anemic investor confidence fall completely out of bed and nobody chooses to participate in these markets “rigged” in favor of those DTCC participants and their hedge fund “guests” able to establish and collateralize massive naked short positions while accessing the self-fulfilling prophecy associated with any company unfortunate enough to be targeted being essentially preordained to an early death.

    The good thing about fighting back now is that the investors of the world are in such an uproar that even some of the super bad boys might be a little reticent to misbehave too badly. You’ve got to remember that the money being stolen is usually either retirement plan money or post tax dollars. For the average family there aren’t many post tax dollars in the first place that they can afford to have stolen without serious pain being felt. This probably isn’t the proper venue to go through all of the different defensive modalities that can be deployed. I’m open to any suggestions.

  89. A suggestion to the board, particularly to Jim DeCosta since your posts have been so lucid on this topic: So what happens should the regulators decide to do the right thing and really clean this up? Yes, many companies have already been destroyed, but with the buy-in required, the DTCC left holding the bag in many cases, its apparent owners on the ropes for other imprudent actions, and our economy in the grip of Coriolis forces, what happens then? Is it something the regulators would fear even if they were not concerned with protecting the miscreants? Who gets hurt, how, how bad? Who benefits? Would the overall bad effect on the economy swamp any good effects a particular shareholder might realize? Of course, sooner or later this Ponzi has to unwind of its own accord, doesn’t it? Or could it continue ad infinitum as long as there are entrepreneurs and securities buyers foolhardy enough to gamble on a new concept?

  90. I can’t help thinking that if we keep bailing out the banks and brokerages, then we the taxpayers should own them or at least call the shots.

    Other countries know what to do when 99.999% of the population is being shafted by .001%.

    The South Korean government took control of Korea Exchange, the
    privately held company that owns and operates the country’s stock exchanges, by invoking a monopoly law to designate it a publicly run firm.

  91. “The rabbit hole ends in Chinussia.” … J. L. Says: January 27th, 2009 at 3:56 pm


    Its start has transferred to CyberSpace.

    May the Best of the Best Mutual Intelligence Services Win Win and that of course, would be unlikely to rule out Irregular Unconventional Surrogates who might be perceived of and/or deliberately depicted as supposed Criminals, rather than Alternately High Minded Business Associates battling Official Corruption and Feather Nesting for Conflicting Power Control [and IT and Media Controls].

    A Strange World in Deed, indeed, but when looking on the Bright Side, much more just Chaotic than Bad or Evil.

    With the Supply of some Enigmatic Virtual Order to Streamline/Beta Manage Conflicting Elements into a Contributory Cointerdependent MainStream, even when that may be, and need best remain as an Independently Governed and Run XXXX Stream, given the Novel and Innovative Nature of some Universal Alternate Business Model Adventures/Joint Ventures, would Chaos be Subdued/Intellectually Medicated, allowing for a more Orderly and more Peaceful and more Profitable Environment to Flourish and Strengthen.

    Win Win in a Present Field of Conflict with Losers all around on the Ground?

  92. Inept,

    In regards to your question as to what might happen with en masse mandated buy-ins, the abusive players will be isolated from the clean players and they will be forced to deploy the money they stole back into the markets so that the CCP, the NSCC, can finally deliver to the buyers of shares that which they purchased an inordinate amount of time ago.

    Mandated buy-ins work like heat-seeking missiles that will land in the lap of the crooks and avoid the clean players. You don’t need a bunch of regulators doing detective work or staking out mail boxes in the Cayman Islands. The bad guys will be selectively punished and punished proportionately to the level of their criminal activity.

    This will lead to a form of natural selection wherein the clean players will survive. Currently we have the “survival of the corruptest” occurring as hedge fund managers will aim the $11.2 billion they spend annually on commissions and fees to market participants that will bend or break the greatest amount of securities laws on behalf of the financial interests of the hedge fund manager making his “2 and 20”.

    Currently purchasing brokerage firms aim their buy orders at market participants LIKELY to naked short sale into the order. Why? Because they get the use of their client’s money to earn interest off of and to count towards their net capital reserves UNTIL delivery occurs. Note the “conflict of interest” here involving the party that just took a commission from his client while acting as his “agent” being financially incentivised to harm his client by intentionally manipulating the share price of his investment down via generating “failures to deliver” (FTDs) which procreate incredibly damaging “securities entitlements”.

    Who in the world could fight the concept of FORCING (via buy-ins) those that intentionally refuse to deliver that which they sell to finally deliver that which they sold to the investors whose money they rerouted into their own wallets? You’re basically FORCING the thieves to open up their wallets and take out the stolen money and deploy it into the markets in order to make good on the contract it entered into which was to deliver shares by T+3.

    The DTCC issues a “trade settlement guarantee” which attracts investors into our markets. How long past T+3 should the DTCC be FORCED to make good on that “guarantee”. I would venture perhaps T+7 or so. But they won’t even do it on T+700. Why? Because it’s not in the financial interests of the DTCC management’s bosses/”participants”.

    Why don’t the politicians that oversee the SEC mandate this? Who do you think are the biggest contributors to these politicians, the clean players on Wall Street or the dirty players and their lobbyists that might periodically need a “favor” from these politicians? What’s a favor look like? Oh maybe “grandfathering in” FTDs in Reg SHO or perhaps removal of the “Uptick rule” that was doing just fine for 70 years.

    The DTCC management to this day still contends that FTDs are no big issue and that “99% of all trades “settle” on time and that the vast majority of the other 1% “settle” within 5 days”. OK, that’s fine then mandated buy-ins would obviously be no big deal so why don’t we just do them to reinstill the currently anemic levels of investor confidence. Unless somebody’s covering up a fraud it would be a win-win, right?

  93. A couple of brief remarks fwiw.

    Dougie Kass, an associate of The goes on the tube and reports that he has longstanding connections to various Citibank associates (I forget the term he used, whether they are current employees or past employees) and says he knows from discussions with them that Citi is on the ropes and he is therefore shorting them. This was when the stock was considerably higher than today. And he is therefore short Citibank.

    Uh, hello, this is trading on insider information, a JAILABLE offense. Even if those people Mr. Kass took the information from were past employees, the STILL had insider information and passed it to Kass.

    And who even bothers to listen or do anything about it? Has the capitalist world gone completely mad? Who is minding the store here? Or is it the asylum that the inmates are minding?

    On the subject of naked shortselling, I have not read the entries, but naked buying transpires on just as grand a scale. Any casual view of Yahoo will reveal many companies who’s float is over 100% owned. Just how is that possible? Call me ignorant on this one.

    And lets not discuss accurate accounting standards with legitimately certified audit companies for publically traded companies! The financial reporting systems of publically traded companies often times appears to be comprised of Mexican jumping beans. Or is it just the evolution of creative accounting?

  94. Notice the circularity to these frauds. The DTCC issues a “trade settlement guarantee” to the world to bring investors into our markets. Come on in there are no sharks in these waters. A “trade settlement guarantee” guarantees that after you cut your check to buy securities you will get delivery of that which you purchased. There is no timeframe indicated on that guarantee except for the ground rules that “settlement date” is T+3.

    Some clever “opportunists” figure out that since the DTCC even with their 15 separate mandates/responsibilities empowering them to execute buy-ins when their abusive participants absolutely refuse to deliver that which they sell still has the audacity to plead to be “powerless” they deduce that there’s no risk in refusing to deliver that which they sold. They know that the accumulation of readily sellable “securities entitlements” resulting from these FTDs will put the share price of the corporation targeted for an attack into a “death spiral”.

    This will make their previously established naked short positions worth a fortune thus they see all reward and no risk. Why? Because there is only one solution available when a DTCC participant absolutely refuses to deliver that which he sold and that’s to buy-in the delivery failure. Since the party empowered from 15 separate directions still unconscionably pleads to be “powerless” to do buy-ins there is nothing to lose. What also comes in handy is that in a clearance and settlement illegally converted to a foundation based up mere “collateralization versus payment” (CVP) you can get the funds of the investor you hoodwinked flowing to you without EVER delivering that which you sold but only if the party with the 15 separate “empowerments” to execute buy-ins can be counted on to continue to pretend to be “powerless” to do buy-ins.

    (As an aside though look at the dilemma that might occur if you have 1,000 different U.S. corporations 99% dead but they refuse to die because other investors see an opportunity in buying shares of these corporations at perhaps 2% of book value. Sounds kind of like a “stalemate” in dire need of covering up lest investors catch on to these frauds and stay away from the securities markets.)

    Soon all kinds of DTCC participants catch on to these “opportunities” and all of a sudden after a couple of decades of this behavior the share structures of targeted corporations become poisoned with this share price depressing toxic waste. Again though, the trouble is that some of them with solid business plans refuse to die on cue and one shareholder’s misery is another shareholder’s opportunity.

    After a while it would become very embarrassing to reveal to the world how low our clearance and settlement system has “devolved” to. Soon it becomes necessary to sweep all of these crimes under the rug. Since the clean players at the DTCC are on the hook for the FTDs of the dirty players should they become insolvent from being “short squeezed” to death (due to the “trade settlement guarantee”) all of a sudden the clean players need to prop up their dirty colleagues in a “Weekend at Bernie’s” manner because on paper their dirty colleagues are basically insolvent should they be forced to deliver all of the shares they have sold over the years.

    The party with the 15 separate mandates/responsibilities empowering them to execute buy-ins then suddenly needs to put on a blindfold and handcuffs and make the rather curious assertion that they are “powerless” to buy in delivery failures and besides there’s no problem that they can see (from underneath the blindfold).

    Things get further complicated because the DTCC has become too integral to the U.S. financial system to close them down. They’ve achieved the long sought after “too big and too important to fail” status. So where does that leave us? When push comes to shove nobody wants to go to jail. I would predict a “Pontius Pilate” moment wherein the DTCC management is forced to wash their hands and buy-in the FTDs of their dirty participants to appease the pitchfork wielding crowd whose retirements have been postponed indefinitely while asserting that they had no idea that these games were being played on their watch as an SRO mandated to act as “the first line of defense against abusive naked short selling abuses”.

  95. A really good post from

    Wall Street has always been a scam. It has no positive purpose whatsoever, just a long list of negatives. Capital formation doesn’t even come into the equation. That’s what the bond market is for (which has its own set of Wall Street induced problems). Wall Street exists solely for connected insiders to cash out of their equity stakes in publicly traded corporations.

    Wall Street is also a tool of the power brokers to make sure certain competitive ideas and products never see the light of day: Is a certain person, company, or product a threat to the status quo? “Advise” the founders to go public and then summarily destroy the stock price, discrediting the owners, ousting management, and throwing access to the bond market in jeopardy.

    Those non-threatening Wall Street creatures that are not destroyed become long-term tools of the moneyed elite, more often than not irresponsible corporate citizens bent on externalizing costs and privatizing gains with little or no public or private possibility to correct their aberrant behavior.

    There is no connection between earnings and a stock’s price. There can’t be or else none of the above would be possible. Any given stock’s price is nearly arbitrary. Any given stock’s actual tradable float is in constant, major flux, via desking, naked shorting, options, futures, opaque accounting, and various Ponzi schemes, rendering any attempt to assign a dollar value to earnings moot. For that matter, attempting to assign a value to the dollar is also moot, as its float, too, is in continual flux. The only constant in the dollar system is that there will be many more dollars tomorrow than today. The only question is: how many more?

    Finally, the entire aggregation of Wall Street “product” is used as a Skinnerian conditioning device of the public at large. The public mood is manipulated up and down by the direction of the major indices. Congressional voting on the bailouts is only the most recent example. Public and Congressional support for war, the budget, trade policy, major elections, sector support or denigration, and many other are all influenced, at least in part, by the direction of the market or sectors within. And the more the public at large has a stake in the markets, the more operant this conditioning becomes.

  96. Dr. DeCosta, I’m afraid I did not make my major point clear. Okay, the “heat-seeking” missile targets those most responsible, but what happens when those perps cannot make good. I.e., the massive buy-ins push prices of affected stocks higher, but those who drove them down have long ago disgorged their profits. The owners of DTCC are currently on life support from the TARP, courtesy of their co-perpetrator Henry Paulson, and now, perhaps, his acolyte Mr. Geithner. We all know we cannot size this scam, but it could be so big as to overwhelm those who would be forced to pay. What then?

  97. inept,
    There is so much counterfeit stock in the system there is not enough money( already spent ) to ever cover those naked short positions. There can NEVER be a fix to make the (past, present or future) illegal activity right. The market would crash..The felonious players and regulators(co conspirators) will never be indicted or tried for their crimes of treason and they will just create a fictitious excuse( via corrupt media outlets) for why this happened and move on either with a corrupt market that there is no fixing or making the wrongs right, or close her down.
    A identification and forced buy in of naked short positions can never heal the destruction this illegal activity has caused. They (the crooks) knew this. IMO



    Banks collecting billions of dollars in federal bailout money sought government permission to bring thousands of foreign workers to the U.S. for high-paying jobs, according to an Associated Press review of visa applications.…oreign_workers


  99. Dr. Jim DeCosta,

    Thank you for your answers to my questions and your continued elucidation of the WALL STREET COUNTERFEIT MACHINE.

    Have you finished making updates to your new book you started in January 2009?


    Also do you have a place on the Internet where others to find and link to?

    I think every American writing to their representatives in Congress need to reference this book via an address, which can be easily inserted into a letter or email letter.

    Also I think it is very important that we development a simple booklet (PDF file) with illustrations to educate the American Public about the Wall Street Counterfeiting Machine and How it adversely affects their retirement accounts.

    With the recent collapse of the stock market, the American people smell fraud and deception on Wall Street and the time is ripe to educate them about the crimes occurring on Wall Street daily. A simple educational booklet with links to more detailed technical information, I think, will set the American People on Fire!

    I am thinking that quoting Madoff about how it is” impossible?” for Wall Street to commit any crimes because it is so well regulated is a good starting point for an educational piece (with a link to YouTubes). Then we can go into the differences between DVP and CVP with illustrations. Show an illustration of their monthly brokerage statement, etc.

    Creating such a simple educational booklet with illustrations, I think, will greatly improve the chances that Congress & the SEC WILL make necessary changes to the security laws to shut down the Wall Street Criminals, because when the American people start beating on the doors of Congress they will have to listen or be “un-elected.”

    David, I will get back to you about your example after I have time to read it.

    Another thought – maybe we can get someone to take the written educational piece and create an audio / video for uploading to YouTube…. this would be an additional powerful outlet to educate the American public.

  100. Reporter 101 and istand up,

    Some thoughts in regards to your inquiries:

    Now you know why Wall Street is so different than other industries in doling out massive year end bonuses to its employees. A lot of this money consists of the proceeds from fraudulent behavior. It’s critical to the crooks to take this money quickly before their fraudulent behavior is discovered by the investing public. The money is headed in one of 2 directions. It’s either going offshore or it’s going to buy solid gold bath tubs in a “Homestead exempt” state like Florida or Texas wherein if you are fined a gazillion dollars for fraudulent behavior they can’t touch your house. How in the world can a brokerage firm or bank be allowed to cut even a 2-cent bonus check to an employee when it has archaic outstanding delivery obligations that have not been bought in? Where is the “compliance officer” in these frauds?

    The “banksters” on Wall Street are further protected in that their firms might be either “too big to fail” or “too critical to the foundation of our financial system to fail”. Regulators need to realize that allowing firms to become “too big to fail” creates criminal leverage beyond belief. The DTCC is the ultimate example of this. If the DTCC were shuttered down who in the world would clear quadrillions of dollars worth of trades on an annual basis? The U.S. Postal Service?

    The DTCC is the embodiment of the dark side of all of its participating firms. Its structure provides the ski mask of anonymity for its abusive participants to don while misbehaving. If you’re going to commit fraud do it while acting as a “DTCC participant” not as a broker/dealer or clearing firm. Recall how once corrupt rules become part of the rules and regulations of a “registered clearing agency” like the DTCC then the SEC has no power to abrogate (delete) them from their rulebook. In reality, however, it is expressly forbidden for a “registered clearing agency” to have any rules that are not in alignment with those in the 7 main “Securities Acts”. If you review the nearly 2,000 pages of rules and regulations of the DTCC and NSCC and you can’t readily pick out 50 or 60 that are diametrically opposed to the tenets of the ’34 Exchange Act then you’d better take a reading comprehension class.

    The DTCC and its DTC and NSCC subdivisions have 15 separate sources of “empowerment” to buy-in the delivery failures of its abusive participants when they absolutely refuse to deliver that which they sell yet it pleads to be “powerless” to do so. For crying out loud they are the “national clearance and settlement system created by Section 17 A of the ’34 Act that is mandated to “PROMPTLY SETTLE” all securities transactions. It also administers a share counterfeiting machine called the “Automated Stock Borrow Program” (SBP) and then claims to be unable to correct its flaws because it is “automated” and that it has no “discretion” in the matter despite the fact that they designed it and administer it.

    It operates as an SRO (Self-Regulatory Organization) MANDATED to create rules and regulations against fraudulent behavior and to monitor the “business conduct” of its participants. It then turns around and claims to be “powerless” to monitor the “business conduct” of its abusive participants.

    On midnight of T+1 the NSCC subdivision of the DTCC is officially on the hook (via their “trade settlement guarantee” and their acting as a CCP/central counterparty) to deliver the shares that one of its abusive “participants” is refusing to deliver. Whether investors realize it or not it is this “trade settlement guarantee” that sucks us into investing in the U.S. markets. After granting this “guarantee” what do they do? They turn around and plead to be “powerless” to do the only thing possible to remedy a situation in which its abusive participant absolutely refuses to deliver that which it sold to an investor i.e. “buy-in” the delivery failure so that this CCP/intermediary to the trade can then hand those shares on to their rightful owner-the buyer of the shares that were never delivered.

    In reality why does the NSCC management refuse to honor their “guarantee” in a timely manner? Because it’s not in the financial interests of its bosses the “participants” of the NSCC. Why isn’t it in their financial interests? Because if there are already an astronomically high number of “securities entitlements” in the share structure of the U.S. corporation under attack resulting from all of these FTDs then a “short squeeze” might be induced. This is the same reason why the preexisting FTDs present at the time that Reg SHO became effective in January of 2005 needed to be “grandfathered in” without any discussion whatsoever in the public comment phase.

    The DTCC and its lobbyists that at the time stated that there is no big problem in regards to FTDs and that 99% of all trades “settle” on time then did a 180 and all of a suddenly lobbied for what amounted to an amnesty period on these evidences of prior fraudulent behavior. Meanwhile the SEC spokesman informed the investing public that the number of preexisting FTDs were so large that they couldn’t be dealt with without inducing “market volatility” issues. Well which is it and who’s lieing?

    In regards to the DTCC participants being able to afford buy-ins there is plenty of money available. First of all, the clearing firms sitting on these FTDs demand sometimes onerous collateralization requirements as there is theoretically nothing more risky than the naked short selling of especially penny stocks. There are 11,000 broker/dealers, banks, insurance firms, etc. that are “participants” of the DTCC. Their combined critical mass is beyond comprehension.

    The immense number of current archaic FTDs is directly proportional to the ease of establishing massive naked short positions. When your only risk is that of being bought-in and those with the 15 separate mandates/responsibilities to execute buy-ins lies and pleads to be “powerless” to execute buy-ins then I’d say it’s pretty easy to “accidentally” run up astronomically large naked short positions that might present a problem if the investing public learns about this massive “fraud on the market”.

  101. It would help greatly if we had a short and (not) sweet “quick capture” piece to get the interest going for the newly awakened minds.

  102. Diane,
    Here’s a quickie summary.



    1) Billion dollar Wall Street firms and their billion dollar hedge fund co-conspirators can easily target relatively defenseless U.S. corporations and cause the investment proceeds of the investors in those corporations to flow to these billionaire behemoths despite the fact that these behemoths absolutely refuse to deliver the (nonexistent) shares they sell to these unknowing investors.
    2) This practice is referred to as “abusive naked short selling” or (ANSS) which is irrefutably a form of fraud.
    3) Each time the seller of shares refuses to deliver that which he sold a “failure to deliver” (FTD) results. These FTDs result in the creation of readily sellable but incredibly damaging “securities entitlements” that appear on the monthly brokerage statements of unknowing investors.
    4) Although these “securities entitlements” are basically IOUs or “accounting measures” and they aren’t real “shares” their being treated as being readily sellable makes them act like real “shares” whose price will be based upon “supply” and “demand” interactions. The accumulation of these “securities entitlements” in the share structures of corporations will with 100% certainty drive the share price of the corporation down.
    5) This then financially rewards those that have established “naked short positions” via merely refusing to deliver that which they sell.
    6) These “securities entitlements” are damaging because they artificially inflate the sum of the “supply” of readily sellable real “shares” of a corporation PLUS the “supply” of mere “securities entitlements”.
    7) Since those that refuse to deliver that which they sell need only “collateralize” these positions on a daily “marked to market” basis this driving down of the share price unconscionably allows the funds of the investor that unknowingly paid real money for nothing but air to flow to the sellers of these nonexistent “share look alikes” DESPITE THE FACT THAT THEY CONTINUE TO REFUSE TO DELIVER ANYTHING TO THE PURCHASER.
    8) Over the years these “securities entitlements” have invisibly accumulated in the share structures of U.S. corporations targeted for one of these attacks. This has resulted in the driving down of their share prices to artificially low levels well below where they would be trading without this fraudulent behavior.
    9) There is only one solution available to remedy these frauds and that is to FORCE the parties refusing to deliver to finally deliver the missing shares by reaching into their wallets and taking out the money stolen from investors and buying the equivalent amount of shares out of the open market. Then they must finally deliver the missing shares to their rightful owner.
    10) The problem is that those that refuse to deliver that which they sell belong to a “fraternity-like” organization referred to as the DTCC. Through a variety of complex interactions and relationships the only people on Wall Street with the legal power to execute these “buy-ins” is the management of the DTCC and they refuse to financially harm their fellow fraternity brothers by executing these buy-ins. Instead they curiously plead to be “powerless” to do so even though they have all of the power in the world as well as the congressional mandate to do so.
    11) This “attitude” of the DTCC has resulted in the ability of abusive fraternity brothers to target any U.S. corporation for destruction which results in the funds of the investors in that corporation to flow to these abusive fraternity brothers despite their continual refusal to deliver that which they sell.
    12) The victims of these frauds include not only the investors in the corporation losing their investment proceeds but they include the employees of these corporations losing their jobs as well as those U.S. citizens that may have benefitted from the cancer cures or technological innovations that this corporation could have been providing.
    13) Currently we are in a bit of a “stalemate” in that all of the incredibly damaging “securities entitlements” that have accumulated in the share structures of these corporations are actively forcing the share price of these corporations downwards as we speak while the DTCC continues to plead to be “powerless” to do anything about it.
    14) To exacerbate the situation the SEC mandated to oversee the activities of the DTCC refuses to order the DTCC to follow up on their congressional mandate to do whatever is necessary to make sure that all securities transactions “promptly settle”. When the seller of (nonexistent) shares absolutely refuses to deliver that which it sold the only option left is for the DTCC to “buy-in” this debt and forward the missing shares on to their original buyer and to hand the bill to the party refusing to make delivery.
    15) The “Deep Capture” name of this website refers to the phenomenon of certain regulators like the SEC and certain “self-regulators” like the DTCC refusing to act in that capacity when the financial interests of those being regulated takes precedence over them doing the job that congress mandated them to do.
    16) Part of this current “stalemate” has to do with the fact that the “buy-in” process might drive share prices back upwards to a more nonmanipulated level which would force these fraudsters to pull more of the stolen money out of their wallets to collateralize the associated higher collateralization requirements. If these securities fraudsters have been pretty much the only sellers for a while then the mere cessation of the daily naked short selling being done to keep collateralization requirements in line would cause share prices to go up. The covering of an astronomically large naked short position in a market already moving upwards might be rather expensive. Thus we sit in this stalemate wherein U.S. corporations are left dying with the weight of all of the preexisting “securities entitlements” weighing heavily on their shoulders while the DTCC management continues to pretend to be “powerless” to do anything about it.
    17) Thus today’s “status quo” involves the markets of corporations unfortunate enough to be targeted for an attack being basically “rigged” to go nowhere but downwards in order to look after the financial interests of the abusive “fraternity brothers” that choose to take part in these frauds. This is all while the only parties with the ability to do anything about this crime wave, the DTCC, its overseer the SEC and the congressional committees overseeing the SEC refuse to throw a lifeline to these corporations, their investors and their employees.

  103. Dr. Jim DeCosta,

    One thing I am not clear about is WHO is paying the collateralization fees…. The market maker? or the Hedge Fund?

    And Who is receiving these collateralization fees (pocketing the money)?

    And what does the market maker get from the hedge funds when they help the hedge funds drive down the price of a corporation with abusive naked short selling?

  104. iStandUp,

    The party establishing the naked short position sells through an “introducing or correspondent” b/d or through a b/d that is self-clearing. The “clearing firm” is a “participant” of the NSCC with cash and share accounts there. The naked short position is held in the name of the clearing firm not the naked short seller. The clearing firm needs to be protected in case the NSS-ing party goes b/k.

    The MM gets paid in “order flow”. It gets a piece of the $11.2 billion paid annually by hedge funds willing to break the most amount of laws on behalf of the hedge fund manager. Cash bribes are so old-fashioned.

    When an FTD occurs there is still the investor’s money to deal with. It earns interest and can be counted towards somebody’s net capital reserves. Maintaining sufficient net capital reserves is an anti-fraud measure in and of itself. Even crooked b/ds on their death bed look relatively healthy on paper UNTIL they’re asked to finally deliver that which they sold. If they go insolvent then the noncrooks at the DTCC get stuck with the bill in the case of buy-ins. Thus they’ll help prop up the weak crooks to save their own bacon.

    In regards to the investor’s money, who should get the interest earnings during the lifespan of the FTD, the party that failed delivery or the b/d of the buyer? Both sort of have a claim. It’s the b/d of the buyer that wins out.

    This fact financially incentivises the b/d of the buyer to aim all buy orders to counterparties LIKELY to naked short sell into the order. These are easy to find in a clearance and settlement system that rewards people for refusing to deliver that which you sell. The b/d of the buyer wants the interest earnings and a “quick fill” which is synonymous with a quick commission check. What do these crooks do to attract buy orders? They charge $7 commissions.

    Every single DTCC participating “market intermediary” on Wall Street makes an absolute fortune when the share structures of corporations are stuffed with “securities entitlements” because they can earn commissions from buying and selling them as if they were legitimate “shares”. They can rent them to others as if they were real “shares”. They can rent one particular “parcel” of securities entitlements in a dozen different directions simultaneously through the NSCC’s SBP program.

    What’s really sickening is that all of the systemic risk associated with this “house of cards” might be borne by the taxpayer if we don’t buy-in these “open positions” now before they get any larger which occurs every day that the buy-ins are postponed.

    Each time a corporation that has been under attack finally dies there is a gigantic sigh of relief from Wall Street you can hear as the now ex-employees empty out their desks.

  105. iStand up,

    In the case of the interest earnings of the investor’s money during the lifespan of the FTD it should obviously go to the investor whose purchase never got delivered, right?

    But think about it if investors realized that what they were purchasing either took many months to deliver or never got delivered at all then the fraud would be exposed and nobody would invest in these “rigged” markets.

  106. iStand up,

    What you’ll notice is that any fraud as glaringly obvious as refusing to deliver that which you sell is going to need the perpetration of a vast series of “cover up” frauds.

    The buying b/d cited above just took a commission while acting as an “agent” for his client doing the buying. He then steered the buy order to somebody that he knew would naked short sell into the order. By so doing he intentionally damaged the prognosis for the success of his client’s investment because of the incredibly damaging “securities entitlements” that were procreated. Now the b/d will refuse to buy-in that debt because by doing so his interest earnings would cease and his net capital reserves would decline.

    Let’s keep score here. The buying b/d got a commission, interest earnings and enhanced net capital reserves. What did the investing client get? Screwed.

  107. Diane,

    Here is one that really boggles the mind. Wall Street is “spreading the risk” and is bankrupting communities with toxic products. All the while they are extracting huge fees. It could have been in your school district….

    Wisconsin School Districts Charge Stifel, RBC With Fraud Over CDO Debacle

    The story began in 2006, when five Wisconsin school districts – Kenosha Unified School District, Kimberly Area School District, School District of Waukesha, West Allis-West Milwaukee School District and Whitefish Bay School District – went looking for investment advice to shore up its teachers’ retirement plans. David Noack, a local investment banker with Stifel, Nicolaus & Company, had the perfect solution. It involved hedge funds and investments in complex collateralized debt obligations (CDOs).

    According to Noack, the investment was simple, safe, even conservative. There was no way anyone could lose. The school districts’ board members knew very little about CDOs; they did know Noack, however. He had been a trusted advisor to them for years.

    The five Wisconsin school districts ultimately took Noack’s advice and borrowed $200 million from the Depfa Bank of Ireland. In addition, they invested some $35 million of their own money to purchase three CDOs sold by the Royal Bank of Canada (RBC), which also had a relationship with Noack. Under the arrangement, the Wisconsin school districts would receive the spread between the interest rate they were paying on their loan from Depfa and the interest rate received from their CDO investments, according to a Nov. 8 article in the St. Louis Business Journal. The spread itself was lucrative: “several million dollars” over the seven-year life of the investment.

    Everything worked – for awhile. Then, the districts began to notice something was off. Bonds are expected to deliver consistent, steady returns, yet the value of the districts’ investment kept fluctuating wildly.

    The school districts found their answer after hiring a lawyer. They discovered the AA/AAA-rated corporate bonds that had been touted by Noack and Stifel, Nicolaus & Company at the beginning of their deal didn’t exist. Instead, the “safe” investment described to them consisted of synthetic CDOs that purchased high-risk subprime mortgage-backed securities and other toxic investments.

    In addition to the CDOs, the districts learned that another part of their investment consisted of a credit default swap. Unbeknownst to them, they were in the insurance business, responsible for guaranteeing about $20 billion on a pool of corporate bonds. If the bonds did OK, so did their investment. However, if just a handful of companies in that CDO pool were to default, the school districts could lose all of their money.

    The inevitable happened. Lehman Brothers, American Insurance Corporation (AIG), Washington Mutual, Fannie Mae and Freddie Mac all were part of the districts’ CDO pool. So far, the Wisconsin school districts’ $200 million investments have lost $150 million of their value.

    The districts are now suing Stifel, Nicolaus & Company and the Royal Bank of Canada. In addition to fraud, negligence and breach of contract, the districts allege that both firms intentionally misrepresented the CDOs and the credit default swap as safe, low-risk investments.

    Meanwhile, the people and the companies responsible for orchestrating the deal for the school districts – David Noack, Stifel, Nicolaus & Company and the Royal Bank of Scotland – have raked in millions of dollars in fees for their services.

  108. Some companies tried to sue and the courts ruled the central bank is sovereign and laws don’t apply to it.

    If the failing to deliver of gold is being organized by the privately owned cartel of central banks around the world, it makes you wonder who is behind allowing the failing to deliver of equities in public companies.

    There’s no conspiracy theory – it’s documented public record – you can even pull transcripts off the fed website.

  109. George Soros published in Gulf News.

    “Putting these three considerations together leads to the conclusion that Lehman, AIG and other financial institutions were destroyed by bear raids in which the shorting of stocks and buying of CDS amplified and reinforced each other. Unlimited shorting was made possible by the 2007 abolition of the uptick rule (which hindered bear raids by allowing short-selling only when prices were rising). The unlimited selling of bonds was facilitated by the CDS market. Together, the two made a lethal combination.”

    “My argument raises some interesting questions. What would have happened if the uptick rule on shorting shares had been kept, in effect, but “naked” short-selling (where the vendor has not borrowed the stock in advance) and speculating in CDS had both been outlawed? The bankruptcy of Lehman might have been avoided but what would have happened to the asset super-bubble? One can only conjecture. My guess is that the bubble would have been deflated more slowly, with less catastrophic results, but that the after-effects would have lingered longer. It would have resembled more the Japanese experience than what is happening now.”

  110. Also, in terms of reaching Joe Sixpack, I like the idea of replacing the phrases “naked shorting” and “failing to deliver” when possible, with the more visceral phrase istandup used.

    “Wall Street Counterfeiting Machine”

    It explains a complicated subject in four easy to understand words.

    It’s easy to understand and for the public to believe and as a gut level, they know that money is sucking out of their wallets and they see the government bailout corruption and big fat bonus for the Wallstreet execs.

    I also prefer using the phrase “phantom shares” than “entitlements” or “iou’s”.

  111. The analogy and sound bite that my friends seem to understand is kiting checks.

    “Our friends in Wallstreet have found a way to kite shares. These phantom shares are like toxic waste. The weight of them drags down share prices, draining your retirement account and bankrupting promising young American companies before they can get started. Where does the money go? The financial terrorists selling the bum shares wire your purchase funds out of the country as soon as they can get their hands on it. Regulators and politicians know about it, but the problem is so big, no one wants to tackle it. Madoff is only the tip of the iceberg and the reporters in the media are gagged as Wallstreet is paranoid that the public might find out they are being ripped off.”

  112. Kevin,
    Your comment on “Kiting” is bang on. “Kiting” crimes are associated with the abuse of a “float” period. Although the DTCC has the congressional mandate to “promptly settle” all securities transactions they allow for an immense “float” period via 2 ways. First they refuse to buy-in delivery failures and secondly they “bribe” their “participants” whose clients didn’t receive that which they purchased to NOT buy-in those delivery failures. If the buying broker/dealer refuses to exercise its right to execute a buy-in then it is rewarded with the interest earnings off of its client’s funds UNTIL delivery occurs. It also gets to count its investing client’s funds towards its own net capital reserves.

    This intentional extension of this “float” period then facilitates the commissions of crimes associated with “kiting” like “counterfeiting” for example.

  113. LOL.,. this is too funny. Get caught dipping your hands (accepting special favors) in the VIP program for Countrywide and make it all better by refinancing…UNBELIEVABLE!

    Sen. Dodd says he’ll refinance Countrywide loans

    1 hr 44 mins ago

    HARTFORD, Conn. – Connecticut Sen. Chris Dodd says he’ll refinance two mortgages that he received through a VIP program from Countrywide Financial Corp.

    Dodd told reporters Monday that the mortgages for his homes in Washington and East Haddam, Conn., will be refinanced with a different company.

    Dodd has acknowledged receiving mortgages in 2003 through a VIP program at Countrywide, which was sold to Bank of America Corp. earlier this year and has been the focus of allegations that it gave favorable loan terms to lawmakers.

    Dodd says he’s moving the loans in part because he was wrongfully labeled a friend of Countrywide’s former CEO, Angelo Mozilo. Dodd says he never sought special treatment.

    The chairman of the Senate Banking Committee, Dodd says a third party will be involved in choosing the new bank.


  114. kite – increase the amount (of a check) fraudulently; “He kited many checks”
    kite – a bank check that has been fraudulently altered to increase its face value
    kite – get credit or money by using a bad check; “The businessman kited millions of dollars”
    kite – a bank check drawn on insufficient funds at another bank in order to take advantage of the float

  115. Diane, in regards to your question #130. You could CUT & PASTE the following in an email message to all of your personal friends like I did:

    While searching for answers, I found the following information on our nation’s current financial crisis. This is certainly worth sharing. What I am sending you is not the “effects” or “ain’t it awful” part, but the most logical and probable cause of the crisis. I would recommend that you first view the following video for excellent background information:

    It is a special video presentation on the fraud of “naked short” stock selling, and is not to be confused with “short” selling, which is lawful. From a creditability stand point, the video is a two part special that was created by the Bloomberg Financial News Service.

    Then look at this second link:

    This is a short article on “naked short selling” of US Government Bonds. Talk about a pending disaster —–the key economic research was done by Dr. Susanne Trimbath, who previously worked for the Depository Trust Co, a subsidiary of Depository Trust and Clearing Corp, which is the U.S. clearing house for all stocks and bonds that are bought and sold on Wall Street. Just my opinion, but note how possibly Congress came up with the $700 billion figure for the Emergency TARP Fund. Note also that Dr. Trimbath’s dollar figures are only concerning US Govt bonds. When our President George Bush said, “our financial markets are on the verge of collapse”, he meant it and the case is still open until they crank all the “phantom” shares of stocks and derivatives into the total.

    You might also want to be sure to view/read this material on a full stomach.


    PS – I gathered all this info from the excellent web site that has a goal of creating greater public awareness of the financial fraud and abuse that is now affecting each one of us. After you have viewed the two sites above, I guarantee you will rush to the DeepCapture site which is an unbelievable site when it comes to data integrity and journalism on this topic.

  116. Ginger, I remember a story from when I was a kid when some guys got caught kiting checks for years.

    I don’t remember the exact details, but he had five bank accounts and he would just write checks among them to cover one bad check with another.

    When he wrote a bad check, he had three days to get the funds there or he would have “failed to deliver” the funds. He just waited until the third day and wrote a bad check to cover the first bad check in a long daisy chain.

    It was some big amount of money he had borrowed off the bank interest free by kiting checks for a couple years.

    That was in the days before computers, as you could never do that now because computers would catch it…

    …unless you work at the dtcc where their computers can’t catch simple frauds like kiting delivery.

  117. In regards to the discussion above on the role of “kiting” crimes in abusive naked short selling (ANSS) frauds: Picture a broker/dealer (b/d) “K” that places a buy order for its client for “Acme” shares and a DTCC “participant” naked short sells into the buy order and intentionally refuses to deliver that which it sold. As per DTCC policies the seller of these nonexistent shares is mandated to only collateralize the monetary amount of that failed delivery obligation on a daily marked to market basis. Via this abomination the “delivery” of that purchased has been officially DISCONNECTED from gaining access to an investor’s funds. They are now two INDEPENDENT variables.

    As these FTDs and the securities entitlements they procreated accumulate the share price of Acme drops and let’s assume the investor chooses to minimize his losses and sell with a 50% loss. Meanwhile the seller of the nonexistent shares continues to refuse to deliver that which it sold but 50% of the purchase amount has now been rerouted into its DTCC cash account due to the DISCONNECT cited above.

    Let’s assume the (nonexistent) “shares” sold out of frustration are bought by a client at b/d “L”. By definition, “L” won’t get delivery of anything because the shares in question never existed in the first place. The investor at “L” then gets frustrated after another 50% drop in the share price of Acme from all of these FTDs accumulating and it sells to a client of b/d “M” and so on and so on.

    In regards to the “float period” associated with “kiting” crimes the “float” period becomes the arithmetical sum of all of the individual “float periods” lining up in a daisy chain fashion. At the DTCC when the first investor to take his loss sold what he purchased (nothing) then the fact that he never did get delivery of that which he purchased becomes a moot point. This particular fraud becomes buried.

    Since the NSCC subdivision of the DTCC has illegally converted the clearance and settlement system of the U.S. into a “collateralization versus payment” (CVP)-based system the investment funds lost by this series of investors are routed to the b/ds that sold them bogus shares and failed to deliver anything to them. Their winnings match to a penny the losses of the line of investors.

    Due to this corrupt foundation ANY FTD within the system becomes an emergency to investors and the corporations under attack. One single FTD can spawn or “sponsor” an entire daisy chain of subsequent FTDs in a clearance and settlement system illegally converted from a “delivery versus payment” (DVP) foundation to a CVP foundation.

    One can see the obvious financial incentive for the DTCC to operate this way because its owners/”participants” are the b/ds receiving the money that the unknowing investors are losing on a penny for penny basis.

    Let’s go back to the daisy chain illustrated from b/d “K” through “L” to “M”. Who’s to say that the “shares” sold to the client of “K” back at the beginning weren’t the same bogus shares that just went from b/d “A” to “B”, to “C”, etc.? Now try to picture a “pyramid” with one FTD at the top and notice how dangerous to investors and corporations or how profitable to DTCC participants one single FTD can be. Now overlay upon that the DTCC management with 15 separate responsibilities/mandates to execute buy-ins when it becomes obvious that the seller of shares had no intent whatsoever to deliver that which it sold pleading to be “powerless” to do the only thing possible to end these daisy chains that reroute unknowing investor’s money to their own owners/participants i.e. execute buy-ins.

    Since crimes related to “Kiting” are associated with the artificial extension of “float periods” or abuses related to “float periods” you can see how tight of a fit ANSS frauds are to “kiting” crimes. The “float period” is the timeframe between trade date and the date of delivery of that which was purchased. With the ability to create these daisy chains of failed deliveries there is no delivery date. The longer the abusive DTCC participants can artificially extend this period the longer the incredibly damaging “securities entitlements” procreated by FTDs can manipulate the share price downwards

  118. Ted,

    I have to thank Dr. Jim DeCosta for the phrase:

    “Wall Street Counterfeiting Machine”

    since it was at the end of one of his entries.

    I totally agree with you that these four words clearly explain a very complicate issue, that is, an issue with many, many details.

  119. Everyone I talk to perfectly understands the Wallstreet Counterfeiting machine.

    So, to refine Kevin’s elevator pitch,

    “The big bonuses on Wallstreet are generated because the Wall Street Counterfeiting machine allows the big firms to kite delivery obligations. The day of reckoning has come for them to make good on the IOU’s, but the money is gone, used to pay bonuses, so the taxpayer has to bail out obligations from years past.”

    I like Kevin’s phrase “The weight of them drags down share prices, draining your retirement account and bankrupting promising young American companies before they can get started.”

    The imagery of the anchor of the IOU’s or the bleeding of retirement accounts and companies is a good picture if anyone here is artistic enough to put together a picture for a simple pamphlet we can email around.

  120. Ben Stein”s article Jan 27 2008 in NYTIMES really said all this- but NOBODY seemed to care.. I hope your story and thoughts will light a fire .. Someone has to champion the longtime investor.. Thanks. I”ll keep my fingers crossed.

  121. The reality is that all of the responsibilities and mandates to execute the only known cure for when people refuse to deliver that which they sell i.e. execute buy-ins is CONCENTRATED in one spot and that is on the shoulders of the DTCC management. Unfortunately all of the financial rewards for NOT executing on this responsibility are CONCENTRATED in one spot and that is on the owners/”participants” of the DTCC. This results in a multi-quadrillion dollar “conflict of interest”.

    The DTCC management has WILLFULLY chosen which path to go down. Any clearance and settlement system with one scintilla of integrity would have several of those 15 responsibilities/mandates empowering the execution of buy-ins to be resting on UNCONFLICTED shoulders.

  122. Joanne, Ben Stein is a blithering idiot who is wrong about almost everything, so him writing about this doesn’t exactly help the cause. Besides, the column you cited completely misses the point by merely calling out short sellers without even hinting at the Wall Stree Counterfeiting Machine that is really the issue here.

    If anything, people like Stein who blame legitimate short sellers with claims that they just magically manipulate markets undermine the entire Deep Capture premise. Pessimism and short selling are not the problem. Abusive NAKED short selling is the problem.

  123. Dr. DeCosta, if you take x-clearing out of the equation, then the NSCC is 100% responsible for all the fails.

    No one other than the NSCC is failing to deliver shares to the buyer.

    The clearing firms may be failing to deliver shares to the NSCC, but that’s their damn problem and doesn’t relinquish their responsibility to deliver shares to me.

    That’s the whole point of novation. They’ve become the party that literally owes the buyer shares.

    No wonder they don’t want the system fixed. If they start a squeeze and the people that owe them money go bankrupt, then it is the NSCC that’s left holding the bag.

  124. Is the same Rampart? Will the thieves turn each other in? I say Cramer is the first to squeal if someone puts pressure on him

    “Markopolos said he began his investigation into Madoff in late 1999 when a marketing executive from Rampart Investment Management Company Inc. told him of Bernard Madoff’s fantastic returns. Markopolos said he determined in less than four hours that Madoff’s operation was a fraud”

    Then check out Patchie’s site:

    “While Rampart collapsed a year ago, Mr. Senger continued to fly to Toronto on business, although his recent brokerage contacts or dealings are not identified. On Jan. 30, in a conversation taped by Bermuda Short agents, Mr. Senger said he had just gotten back from a business trip to Toronto. “He says that, ‘Rick and I,’ Rick being his brother and him, ‘had been making money faster than we can count it,'” Assistant U.S. Attorney Rolando Garcia told the judge. Customs records also show Mr. Senger entered the U.S. from Toronto twice in late July, a few weeks before he was arrested at his home in Florida.”

  125. A “Disturbing” Theme Is Emerging Here…

    Madoff tipster faults SEC, says feared for safety- AP

    The man who waged a decade-long campaign to alert regulators to problems in the operations of now-disgraced financier Bernard Madoff is assailing the Securities and Exchange Commission for ignoring his warnings and saying he feared for his physical safety…

  126. Dr DeCosta,
    I’ll ask this again as it keeps popping up in my mind. I am thinking about all this money the SIPC potentially may pay to investors.
    According to the records:
    The Madoff firm became registered as an investment adviser in September 2006. That being said, anything prior to that time (pre registered days of his investments), would the SIPC be responsible to pay those investors losses?


  127. Dr DeCosta,
    Secondly, I presume he was registered as a BD. None of his funds were EVER trades through his BD side. Would that not disqualify those monies from SIPC protection since in actuality they never entered the system as an acyual traded entity? Would this not be a Madoff issue only as related to the money owed to investors ? Would not the assets of Madoff be the only entity responsible for paying back investors? I just keep feeling the SIPC in this case would “NOT” be responsible for investor losses.


  128. For the record, I hold no animosity toward these investors. Truly they are the victims. I myself have lost money in the market by scam artist. That being said, no one ever refunded me for my losses and I just want whatever help to these investors be legal and fair according to the rules. This is massive fraud, but, it appears to me Madoff assets bear the brunt of these losses, not SIPC. The losses of the elite should not be considered any different than any other losses suffered by investors. The rules are the rules and should be maintained the same for ALL INVESTORS.


  129. Sean,
    I agree. Now seems like the time to put the pressure on Congress and SEC regarding the phantom stock ( failing to deliver that which you sold) scheme perpetrated by these crooks. Now is the time to take this issue to the public and hopefully get your voice out. Now that things are unraveling, its time the DTCC be put on the stand along with all their paid players and partners in crime. Someone need to get a hold of this man Markopolos because he has the Ears of congress. He is a smart man and can easily connect the dots Deep Capture have mapped.


  130. Reporter the SEC is TOAST!!! But you are right, the cat has been let out of the bag and Armaggedon has begun for these crooks!!Its OVER!!They cant hide anymore. He also just destroyed FINRA at the same time!!!! This is good stuff!!!!

  131. Sean,
    Yeah, he said FINRA is more incompetent than the SEC and in bed with Wall Street. OMG….this guy needs to be on Deep Capture’s Team. Deep Capture’s investigations of fraud and corruption makes Madoff seem like nickel dime stuff. Imagine the DTCC being on the stand. I hope this guy opens the doors for others to be heard. This is HUGE !!


  132. Now we have Mary Schapiro as head of the SEC when in Markopolos <sp words FINRA was more worthless that SEC. Now Ms. Mary is heading the SEC and as we know, she has been compromised by WS. WAKE UP OBAMA (MAN OF CHANGE) YOUR CHOICE AS SEC DIRECTOR SUX’s…..


  133. Reporter, you have hit the nail on the head Mary Shapiro cannot be allowed to head the SEC, PERIOD!!!! Why has nobody made this connection yet? Almost like they don’t want to bring this point to light!! Don’t blame Obama for this he is not making this cabinet appointments I assure you. These people are being chosen for him!!! I am starting to think ALL Presidents are pawns. Look the direction of the Federal (unFederal) reserve!!!)

  134. I am Pizzed. Just when we get to asking the hard questions to the ones who were complacent with this fraud Geithner and Pres Obama speaks and it supersedes
    the Congressional meeting regarding Madoff. Intentional? Probably so. Lets stop the American people from hearing the facts about the fraud and speak about what we plan on doing about the crisis and executive pay. Man, this stuff just can’t be made up. The switch to Obama and his speech had to be planned.



    Madoff tipster Harry Markopolos assails SEC
    By MARCY GORDON, AP Business Writer Marcy Gordon, Ap Business Writer – 23 mins ago

    about Madoff

    * Bernard Madoff charged with fraud Slideshow: Bernard Madoff charged with fraud
    * How to Spot a Swindler Play Video Video: How to Spot a Swindler CNBC

    Harry Markopolos, a former financial executive, testifies before a House Financial Services Subcommittee on “Assessing the Madoff Ponzi Scheme a Reuters – Harry Markopolos, a former financial executive, testifies before a House Financial Services Subcommittee …

    WASHINGTON – The man who waged a decade-long campaign to alert regulators to problems in the operations of fallen money manager Bernard Madoff told Congress Wednesday that he had feared for his physical safety.

    Harry Markopolos also assailed the Securities and Exchange Commission in his first appearance before lawmakers. The SEC failed to act despite receiving credible allegations of fraud from Markopolos about Madoff’s operations over a decade.

    Because of the agency’s inaction, “I became fearful for the safety of my family,” Markopolos said.

    He told a House subcommittee hearing that “the SEC is … captive to the industry it regulates and is afraid” to bring big cases against prominent individuals. The agency “roars like a lion and bites like a flea,” Markopolos said.

    Madoff, a prominent Wall Street figure, was arrested in December after allegedly confessing to bilking investors of more than $50 billion in what the authorities say was a giant Ponzi scheme, possibly the largest ever. His repeated warnings to SEC staff that Madoff was running a massive pyramid scheme have cast Markopolos as an unheeded prophet in the scandal.

    “The SEC was never capable of catching Mr. Madoff. He could have gone to $100 billion” without being discovered, Markopolos testified at the hearing. “It took me about five minutes to figure out he was a fraud.”

    Markopolos, a securities industry executive and fraud investigator, brought his allegations to the SEC about improprieties in Madoff’s business starting in 2000. He fruitlessly pursued the quest through this decade with agency staff from Boston to New York to Washington, but the regulators never acted.

    Now thousands of victims who lost money investing in Madoff’s fund, which was separate from his securities brokerage business, have been identified. Among them are ordinary people and Hollywood celebrities — as well as big hedge funds, international banks and charities in the U.S., Europe and Asia. Life savings have evaporated, foundations have been wiped out and at least one investor apparently was pushed to commit suicide.

    And the SEC has been sustaining volleys of criticism from lawmakers and investor advocates over its failure to discover Madoff’s alleged fraud, which could be the biggest Ponzi scheme ever, despite the credible allegations brought to it over years.

    Markopolos said he determined there was no way Madoff could have been making the consistent returns he claimed using the trading strategy he touted to prospective investors.

    Madoff, who was at one point chairman of the Nasdaq Stock Market and sat on SEC advisory committees, was “one of the most powerful men on Wall Street and in a position to easily end our careers or worse,” Markopolos said.

    Calling the SEC “nonfunctional” and harmful to the reputation of the U.S. as a global financial leader, Markopolos recommended ways to revamp the agency, including replacing its senior staff and establishing a central office to receive complaints from whistleblowers.

    Also due to testify before the House Financial Services subcommittee were five top SEC officials, including the agency’s enforcement director Linda Thomsen, and the head of its inspections division Lori Richards.

    In December, Christopher Cox, then the SEC chairman, pinned the blame on the agency’s career staff for the failure over a decade to detect what Madoff was doing. He ordered the SEC’s inspector general, H. David Kotz, to determine what went wrong. Kotz has expanded his inquiry to examine the operations of the divisions led by Thomsen, who has been the enforcement chief since mid-2005, and Richards, who has held that position since mid-1995.

    Thomsen and Richards defended their actions at a Senate hearing last week over the SEC’s failure to uncover Madoff’s alleged fraud scheme. Members of the Senate Banking Committee were scarcely satisfied with explanations given by the two officials and by Stephen Luparello, the interim chief executive of the brokerage industry’s self-policing organization.

    That organization, the Financial Industry Regulatory Authority, was headed until December by Mary Schapiro, President Barack Obama’s new SEC chief. Schapiro has said that because Madoff carried out the scheme through his investment business and FINRA was empowered to inspect only the brokerage operation, it wasn’t possible for the organization to discover it.

  136. Sean,
    Perhaps these people are chosen by others and the Pres’s are pawns, but, when you as the leader of the American people back these choices without looking at the facts your credibility is GONE. Surely the Presidents get briefed on these people and whomever chose them getting the Presidents approval should be kicked to the curb along with that cabinet member and the President should once again say, it was my fault. I take responsibility and have delt with it appropriately.


  137. A dozen top Merrill I bankers are moving to Deutsche Bank as to avoid salary caps which will be imposed by the Obama administration.
    Imagine that.( We do not get the money we really don’t deserve, we’ll move to another bank where you can not regulate our salaries and bonuses.) TAKE THAT MR. PRESIDENT…they are saying. I say close them all down and lets get back to the basic’s of mom and pop banking.


  138. Reporter I agree in full, if only such scrutiny was applied for the last eight years though. Now let’s focus back on the topic at hand and leave politics out of our discourse please. I feel uncomfortable going in this direction. This Markopolus character is giving light to what deepcapture has been saying for the last year or so, down to the Russian Mafia. This is some scary stuff.

  139. In response to msg 30612 by nopullnoshow

    Recs: 5 Re: Linda Thomsen on the way out (?)
    WaPo is still carrying water for Wall Street. As Markopolos says, FINRA is entirely a protector of Wall Street’s big predators, enabling them to victimize other investors. Must we remind WaPo and others that Mary Schapiro just came from FINRA, which paid her $2.7 million last year, and she takes over the SEC for $180K. She has come to the SEC for only one reason: to do more for the big predators there. JMOO

    Apparantly we are not the only ones that are of the above opinion!!

  140. Sean,
    I am not Republican or Democrat at this point. I only speak about Obama because he has the task at hand and I hate any President is kept in the dark on these people who have threatened our financial stability as a nation. I type only in frustration that again, another President is being bamboozled by the same WS crooks who have been in place in our government for far too long. It is not an Obama thing, it is a wake up leaders and see the crooks for who they are. See how those Merrill executives are skirting around what the president is trying to do to get WS under control by salary caps if they receive TARP money ?(a good thing). They are flocking to Deutsche bank where there are no caps. Is that not a sign of what kind of people ( greedy & corrupt )our markets and government by means of their Lobby groups are? As i said, this is frustration that even leaders of our country are used( pawns) as you mentioned by the worst of the crooks. This is where change needs to take place. Weed out the corruption from inside out. What you will see is Greed that will undermine the presidents positions of trying to get this mess under control. These Merrill guys are saying, we don’t like it so we will just leave. Good Riddance and Goodbye I say.


  141. The Christian Science Monitor’s Editorial Board reports:

    “… President Obama admitted Tuesday he made mistakes after two of his cabinet nominees, Tom Daschle and Nancy Killefer, were forced to bow out because of revelations over their nonpayment of taxes. But what kind of mistakes?

    One was clear. “There aren’t two sets of rules,” he told NBC News, “one for prominent people and one for ordinary folks who have to pay their taxes.” ….”
    ( )

    The questions that comes to my mind are:

    Why are there two sets of standards on Wall Street? ……….
    One for the “Insider Wall Street Fat Cats?” And one for those who are not insiders?

    Why can the “Insider Wall Street Fat Cats” sell stock they continually refuse to delivery (counterfeit shares) year after year right under the eyes of the SEC and FINRA, and the common man and woman, who are not insiders, are NOT allowed to sell non-deliverable shares to the “Insider Wall Street Fat Cats”?

    Why are the “Insider Wall Street Fat Cats” allowed to operate a “Wall Street Counterfeiting Machine” in the Wall Street CLEARANCE AND SETTLEMENT SYSTEM FOUNDED UPON “COLLATERALIZATION VERSUS PAYMENT” (CVP) in which they sells shares of stock that they refuse to deliver year after year? And the common person is Not allowed to do this?

  142. Lawmakers Criticize Role of SEC in Madoff Scheme

    FEBRUARY 4, 2009, 2:19 P.M. ET

    WASHINGTON — The Securities and Exchange Commission was sharply criticized by both U.S. lawmakers and the fraud investigator who blew the whistle on Bernard Madoff’s alleged Ponzi scheme Wednesday, describing the regulator as scared to pursue cases against top securities firms and investors.

    “You are both a captive regulator and a failed regulator,” Harry Markopolos said of the SEC in highly anticipated testimony to a U.S. House subcommittee.

    Mr. Markopolos detailed his nine-year effort to alert federal regulators about Madoff, who is accused of engineering one of the largest swindles in U.S. history. The SEC was “unable to understand” the complex financial instruments involved in the alleged fraud, Mr. Markopolos said, and regulators weren’t interested in pursuing investigations against influential firms and investors.

    Mr. Markopolos also said Wednesday that he also tried to tell former New York Gov. Eliot Spitzer of Mr. Madoff’s actions.

    “The SEC was never capable of catching Mr. Madoff,” Mr. Markopolos told a House Financial Services subcommittee.

    Mr. Markopolos described his efforts in the terms of a Tom Clancy novel, sprinkling his testimony with talk of intelligence networks, the Russian mob, drug cartels and collecting information from “field operatives.” He claimed he feared for his life as he sought to expose Mr. Madoff’s actions, even making sure to remove his fingerprints from an envelope with Madoff information he handed to former New York Gov. Eliot Spitzer during an appearance in Boston.

    “When you are zeroing out mobsters, you have a lot to fear,” he said. “If [Madoff] would have known my name, and he had a team tracking it, I wouldn’t have been long for this world.”

    Lawmakers agreed that Mr. Markopolos was right to take precautions. “When you deal with the kind of characters that you were trying to bring to the bar of justice, you have to be concerned, not only for yourself, but to family members that are near and dear to you.” Rep. Al Green (D., Texas) said.

    Mr. Markopolos said that in December 2005, he contacted a reporter at The Wall Street Journal, resulting in a number of phone calls and emails. Mr. Markopolos said he thinks that senior editors prevented the reporter from the newspaper’s Washington bureau from flying to Boston to meet and discuss the Madoff issue. A spokesman for Dow Jones & Co., publisher of The Wall Street Journal, declined to comment on Mr. Markopolos’s statements.

    Also during testimony, Mr. Markopolos said he gave Mr. Spitzer a package with information about Mr. Madoff when Mr. Spitzer appeared at the John F. Kennedy Presidential Library in Boston.

    “I figured the odds were high that he was a Madoff investor,” said Mr. Markopolos, an independent fraud investigator.

    Mr. Spitzer’s family real estate firm had in fact invested with Mr. Madoff. According to Mr. Markopolos, he took care to remove his fingerprints from the package he gave to Mr. Spitzer.

    Mr. Markopolos didn’t say when he attempted to inform Mr. Spitzer of Mr. Madoff’s activities. Mr. Spitzer served as New York state attorney general before his tenure as governor, a position he resigned in March after revelations of his use of a high-priced New York escort service.

    Reached at his office Wednesday, Mr. Spitzer said he had “absolutely no recollection” of ever meeting Mr. Markopolos.

    “Obviously, I wish people had listened to him,” Mr. Spitzer added.

    Mr. Markopolos said that Mr. Madoff is not alone. He plans to turn in a “mini-Madoff” to the SEC’s inspector general Thursday and urged lawmakers and regulators to pursue Mr. Madoff’s alleged accomplices, including the feeder funds that brought in additional funds.

    “My team was out there in the field talking to the Madoff feeder funds and identifying who they were,” Mr. Markopolos said. “There are 12 more out there lying low in the weeds in Europe that you have not heard of yet.”

    Lawmakers on the panel lavished praise on Mr. Markopolos, while focusing their criticism on the SEC for missing warnings about Mr. Madoff for years.

    “Unfortunately, our regulators failed to follow his road map and heed his warnings,” Rep. Paul Kanjorski (D., Pa.) said. “As a result, thousands of investors were hurt.”

    Rep. Scott Garrett (R., N.J.) the subcommittee’s ranking Republican, said the alleged Madoff fraud wasn’t a result of a lack of regulation, but instead a lack of coordination and information sharing among regulatory bodies such the SEC and the Financial Industry Regulatory Authority, or Finra.

    The entities, Mr. Garrett said, didn’t pay enough attention to Mr. Madoff’s broker-dealer operations.

    “At least some of the things, had they been implemented earlier, at least in this case, it appears that the improprieties would have been discovered much earlier,” Mr. Garrett said.

    The Madoff case, along with similar alleged frauds that have been uncovered in the last two months, have focused criticism on the SEC as federal policy makers consider a wholesale overhaul of the U.S. regulatory system.

    “We have to re-engineer the SEC going forward,” Rep. Ed Royce (R., Calif.) said.

    Write to Michael R. Crittenden at [email protected]

  143. I stand corrected. It seems that someone else hs made the Corrupt Finra/ Mary Shapiro/SEC Chairman connection.

    Recs: 1 AP’s coverage….

    Subpoenas for the SEC?? Wonder if they dare throw ’em down?

    Lawmaker says SEC hindering House’s Madoff probe
    By MARCY GORDON, AP Business Writer Marcy Gordon, Ap Business Writer 28 mins ago
    WASHINGTON – House lawmakers on Wednesday accused the Securities and Exchange Commission of impeding their probe into the agency’s failure to uncover the alleged $50 billion Bernard Madoff fraud.

    The clash between lawmakers and high-ranking SEC officials at a House Financial Services subcommittee hearing came after the man who waged a decade-long campaign to alert the regulators to problems in Madoff’s operations denounced the agency for its inaction. Whistleblower Harry Markopolos also said he had feared for his physical safety and would turn over new evidence that Madoff had not acted alone.

    In loud, angry exchanges, lawmakers threatened to issue subpoenas to SEC officials to compel their testimony in the case.

    Pennsylvania Democrat Paul Kanjorski, the panel’s chairman, vented frustration after the SEC’s acting general counsel said the five officials appearing at the hearing couldn’t answer lawmakers’ questions about the Madoff case because it’s under investigation. The five SEC commissioners voted earlier to assert a privilege in not having officials answer lawmakers’ questions.

    Kanjorski accused the agency of impeding the panel’s investigation, calling it a “lack of cooperation” and an “abuse of authority.”

    Linda Thomsen, the agency’s enforcement director, said the SEC takes the Madoff case very seriously, but asserted there were confidential areas related to the ongoing investigation that could not be publicly discussed.

    The SEC officials said the agency is looking at possible changes in the wake of the scandal, including more frequent examinations of investment advisers and improving its process for assessing risk.

    Because of the SEC’s inaction, “I became fearful for the safety of my family,” Markopolos said.

    “The SEC is … captive to the industry it regulates and is afraid” to bring big cases against prominent individuals, Markopolos said. The agency “roars like a lion and bites like a flea” and “is busy protecting the big financial predators from investors.”

    While the SEC is incompetent, the securities industry’s self-policing organization, the Financial Industry Regulatory Authority, is “very corrupt,” Markopolos charged. That organization was headed until December by Mary Schapiro, President Barack Obama’s new SEC chief.

    Markopolos discovered additional funds that funneled money to Madoff — whose managers he said willfully turned a blind eye to his improprieties because they were paid generous fees. Markopolos said he will present his findings to the SEC’s inspector general. If proven, they would substantiate the assertions of many analysts that the alleged fraud was far too large for Madoff to have conducted alone.

    In New York, a trustee liquidating Madoff’s investment firm told a federal judge Wednesday that nearly $950 million in cash and securities has been recovered for investors. Trustee Irving Picard said $111.4 million in cash had been recovered from financial institutions and about $300 million in securities were identified although it was unclear what they were worth.

    JPMorgan Chase & Co. and Bank of New York Mellon Corp. last week said they would transfer a combined $534.9 million from Madoff’s investment firm accounts to Picard. Investors have until July 2 to place their claims.

    European investors who feared they lost millions investing with Madoff have a chance to recoup some or all of their money from the banks that marketed the stricken funds, according to lawyers in Europe who are preparing a possible U.S.-style class-action lawsuit.

    Back in Washington, the SEC has been sustaining volleys of criticism from lawmakers and investor advocates over its failure to discover Madoff’s alleged $50 billion fraud, which could be the biggest Ponzi scheme ever, despite the credible allegations brought to it over years. Against the backdrop of the worst financial crisis since the 1930s, the SEC is being accused of further eroding investor confidence and lawmakers of both parties are calling for a shake-up of the agency.

    Madoff, a prominent Wall Street figure, was arrested in December after allegedly confessing to bilking investors in what the authorities say was a giant Ponzi scheme, possibly the largest ever. His repeated warnings to SEC staff that Madoff was running a massive pyramid scheme have cast Markopolos as an unheeded prophet in the scandal.

    “The SEC was never capable of catching Mr. Madoff. He could have gone to $100 billion” without being discovered, Markopolos testified. “It took me about five minutes to figure out he was a fraud.”

    Markopolos, a former securities industry executive and fraud investigator, brought his allegations to the SEC about improprieties in Madoff’s business starting in 2000 after determining there was no way Madoff could have been making the consistent returns he claimed using the trading strategy he touted to prospective investors.

    Markopolos and his team of four investigators fruitlessly pursued the quest through this decade with agency staff from Boston to New York to Washington, raising 29 specific red flags regarding Madoff’s operations. But the SEC never acted.

    Now thousands of victims who lost money investing in Madoff’s fund, which was separate from his securities brokerage business, have been identified. Among them are ordinary people and Hollywood celebrities — as well as big hedge funds, international banks and charities in the U.S., Europe and Asia. At least one investor apparently was pushed to commit suicide.

    Markopolos disclosed that he anonymously conveyed a package of documents on Madoff to former New York attorney general Eliot Spitzer, but noted Spitzer took no action. Spitzer’s family trust was among the victims that lost money investing with Madoff.

    Markopolos also suggested that senior editors at The Wall Street Journal may have prevented a reporter from pursuing leads he provided because the newspaper “respected and feared” Madoff.

    Madoff, who was at one point chairman of the Nasdaq Stock Market and sat on SEC advisory committees, was “one of the most powerful men on Wall Street and in a position to easily end our careers or worse,” Markopolos said.

    Markopolos recommended ways to revamp the SEC, including replacing its senior staff and establishing a central office to receive complaints from whistleblowers.

    In December, Christopher Cox, then the SEC chairman, pinned the blame on the agency’s career staff for the failure over a decade to detect what Madoff was doing. He ordered the SEC’s inspector general, H. David Kotz, to determine what went wrong. Kotz has expanded his inquiry to examine the operations of the divisions led by Thomsen, who has been the enforcement chief since mid-2005, and Lori Richards, who has headed the inspections division since mid-1995.

    Schapiro has said that because Madoff carried out the scheme through his investment business and FINRA was empowered to inspect only the brokerage operation, it wasn’t possible for the organization to discover it.

  144. I’ll try to post Figure “S” soon.


    Failures to deliver (FTDs) generate incredibly damaging “securities entitlements” as unfortunately permitted by UCC Article 8. They are damaging in that they are readily sellable just as if they were legitimate shares which they are not. They are only IOUs meant to be used as ultra-short term “accounting measures” UNTIL the theoretically temporarily delayed delivery of the securities sold occurred. The timeframe anticipated was the perhaps 2 or 3 days associated with “legitimate” delivery delays. The invisible accumulation of “securities entitlements” within the share structure of a U.S. corporation will with 100% certainty result in the manipulation of its share price downwards.

    In a clearance and settlement system illegally based upon “collateralization versus payment” (CVP) instead of the congressionally mandated “delivery versus payment” (DVP) those that intentionally refuse to deliver that which they sell need only “collateralize” (the “C” in CVP) the monetary value of this failed delivery obligation on a daily marked to market basis. As the share price predictably falls from this intentional manipulation so too do the collateralization requirements mandated. This results in the unconscionable flow of the investor’s funds to the parties refusing to deliver that which they sold to this unknowing investor despite the fact that they continue to refuse to deliver that which they sold. In a clearance and settlement system illegally based upon CVP you need not deliver that which you sell in order to gain access to an investor’s money. That’s why Congress forbade it.

    The proceeds “stolen” from these investors can then be used to establish and collateralize yet larger naked short positions which represents a dangerous phenomenon involving access to “self-generated leverage” (SGL). This “SGL” then results in the self-fulfilling prophecy involving the mere targeting of corporations for destruction by intentionally refusing to deliver the shares that you sell all but guaranteeing their destruction.

    The prerequisite for this entire fraudulent scheme is that the parties empowered to do the only thing possible when a selling party absolutely refuses to deliver that which it sold i.e. execute a “buy-in” of this failed delivery obligation refuse to do that which they have all of the power in the world as well as the congressional mandate to do. In the U.S. the power/mandate to buy-in failed delivery obligations rests squarely on the shoulders of the DTCC management and the management and Boards of Directors of its NSCC and DTC subdivisions.

    The problem is that these “buy-ins” would be directly antipodal to the financial interests of the abusive DTCC “participants” that amassed these fraudulent naked short positions in the first place. Thus a “conflict of interest” between investors and the management of the DTCC and its owners/”participants” arises. When they came to this fork in the road the DTCC management has WILLFULLY chosen to look after the financial interests of its bosses/participants and balk on their congressional mandate to do whatever is necessary to make sure that all securities transactions “promptly settle” as per Section 17 A of the “34 Exchange Act. Empowering the employees of any institution to forgive the failed delivery obligations of its bosses in an effort to steal from U.S. investors is unconscionable.

    When many different co-conspiring parties simultaneously access this “self-generated leverage” leading to this self-fulfilling prophecy then obviously certain synergies can be realized to augment the intention to destroy corporations unfortunate enough to have been targeted for one of these attacks.

    In a clearance and settlement system based upon CVP with each and every intentional downtick in share price a portion of the money of the U.S. investor is allowed to be swept off of the table top and into the wallets of these securities fraudsters.


    1) Criminals sell shares they don’t own, they don’t borrow nor do they perform a bona fide “locate” for (as per Reg SHO).
    2) They simply refuse to deliver that which they sold. What could be easier?
    3) A “failure to deliver” (FTD) results on the books.
    4) The FTD procreates what was supposed to be an ultra-short term “accounting entry” known as a “securities entitlement”.
    5) The default assumption made by the DTCC is that the FTD was of an ultra-short termed “legitimate” nature until proven otherwise. (but by the time you can prove otherwise the DTCC management will predictably refuse to do the only thing that can be done to address it i.e. buy it in.)
    6) These “securities entitlements” have been allowed to be readily sellable by their purchasers as per UCC-8 whose authors ASSUMED that the DTCC would follow through on its congressional mandate to “promptly settle” all securities transactions. Otherwise they would have restricted their resale UNTIL delivery was achieved because they were well aware of the share price depressant effects of readily sellable but mere “accounting measures” able to increase the “supply” of securities that interacts with the “demand” for securities that dictates share prices via the “price discovery” process.
    7) The DTCC management empowered to buy-in “securities entitlements” when it becomes obvious that the seller of shares had no intent to deliver what he sold then curiously plead to be “powerless” to do so leaving no other unconflicted party empowered to buy them in. Why? Because it’s obviously not in the financial interests of the DTCC management’s abusive bosses the “participants” of the DTCC.
    8) As the “securities entitlements” invisibly accumulate in the share structure of the corporation under attack the share price predictably drops due to the artificially manipulated upwards “supply” of that which is readily sellable whether they be real shares or mere “securities entitlements”.
    9) As the share price predictably drops so too do the collateralization requirements.
    10) A portion of the investor’s funds then flows to the sellers of nonexistent shares despite the fact that they continue to refuse to deliver that which they previously sold. The previously agreed to “settlement date” was T+3 or 3 days after the trade was done.
    11) This money can then be deployed back into the market to amass and collateralize that much higher of a level of FTDs and that many more incredibly damaging “securities entitlements” procreated by the FTDs.
    12) The share price now ACCELERATES in its downward path.
    13) The collateralization requirements plunge proportionately.
    14) The unknowing investor’s funds then are in free flow to these criminals allowing yet more access to this “self-generated leverage”.

    Now you can see why these mere “accounting measures” used to denote failed delivery obligations (“securities entitlements”) were to be bought-in by the DTCC when it became obvious that the seller of shares had no intent whatsoever to ever deliver that which he sold. One can also intuit why Congress insisted that the DTCC “promptly settle” all securities transactions i.e. buy-in delivery failure that reach perhaps 3 or so days in age past “settlement date”. Opportunists could obviously tap into this “self-generated leverage” once they learned that the DTCC management was going to balk on their congressional mandate while catering to the financial interests of their bosses.

    All of the steps needed to access this “self-generated leverage” have been put in place by DTCC policies. All one must do to access this “theft machine” is to simply refuse to deliver that which you sold. Again, what could be easier?

  145. My vote is Chanos.

    I bet you there are some uncomfortable Hedgefund/Ponzi scheme managers squirming at about right now.
    “10:45 a.m. | Mini-Madoffs: Asked whether there are any “mini-Madoffs” out there, Mr. Markopolos says that there are and that he is planning to turn in a $1 billion Ponzi scheme to the S.E.C. on Thursday. “Hopefully they listen to me this time,” he said.”

    It seems like another too good to be true returns come from none other than James Chanos, the president and founder of Kynikos Associates. If I were a betting man, I am thinking he may be on those documents to the SEC tomorrow. After voicing such displeasure with the SEC, who better than to turn in
    the HF industries Lobby Leader? The main mouthpiece for the SEC’s deregulation of markets? Time will tell if I am wrong or right. I have a gut feeling on this one.


  146. re: getting the point across:

    SEC and DTCC Let Wall Street Insiders Reap Billions Selling Securities They Never Deliver

    (emailed to 48 major financial columnists, national media & pols)

    “Mandated by Congress to be the investing public’s “first line of defense against securities fraud,” the SEC leadership over the past 10 years has repeatedly betrayed its duty to the American people; not only by consistently ignoring tons of evidence of criminal activity brought to its attention, but by delegating its fiduciary duty to protect the investing public to the Depository Trust & Clearing Corporation, a secretive, non-transparent entity wholly owned and operated by Wall Street insiders, that acts only to protect and enhance the interests of it’s Wall Street owners– and which has willfully and deceptively enabled the defrauding of investors with a duplicitous 3 card monty style bait and switch non-settlement system that rapes the investing public, rewards the rapists, and is a root cause of the financial disaster confronting the world today.”

    read full blog at:

  147. “The hearing at times seemed to enter verbal territory more often explored at organized crime hearings.

    Mr. Markopolos repeatedly referred to his fear that he would be killed if Mr. Madoff learned of his investigation. At one point, noting his experience in military intelligence, he described an offer he made to “go undercover” for the S.E.C. — a proposal that was rebuffed.

    And he recalled wearing gloves as he assembled a package of information he planned to slip to Eliot Spitzer, when he was New York’s attorney general, so he would leave no fingerprints.

    While one lawmaker asked whether this all wasn’t “a little paranoid,” others agreed that Mr. Markopolos was wise to be cautious given the scale of the fraud he was trying to bring to light.”

    Source: Madoff Witness Talks of Other Possible Cases – New York Times


  148. Is this the same Rampart? Was he given the lead on Madoff by a known naked short?

    “Markopolos said he began his investigation into Madoff in late 1999 when a marketing executive from Rampart Investment Management Company Inc. told him of Bernard Madoff’s fantastic returns. Markopolos said he determined in less than four hours that Madoff’s operation was a fraud”

    Then check out Patchie’s site:

    “While Rampart collapsed a year ago, Mr. Senger continued to fly to Toronto on business, although his recent brokerage contacts or dealings are not identified. On Jan. 30, in a conversation taped by Bermuda Short agents, Mr. Senger said he had just gotten back from a business trip to Toronto. “He says that, ‘Rick and I,’ Rick being his brother and him, ‘had been making money faster than we can count it,’” Assistant U.S. Attorney Rolando Garcia told the judge. Customs records also show Mr. Senger entered the U.S. from Toronto twice in late July, a few weeks before he was arrested at his home in Florida.”

  149. All this is going to make it costly for the crooks now. Think of how much bigger the donations they will have to give to thier favorite pocket puppet, Congressman or Senator now for a cover up.

    Rework the SEC? I hope so, but the past tells me I could sufficate waiting for that action.

  150. ISON was trading around $20,00 a few years ago and they joined the Miken Institute workshop. It had a reverse split during this time and …

    ISON .002 bid .005 ask.

  151. Another Chapter for your book re: Milken & his bag of dirty tricks……look into the Milken – Dr Howard Scher – Prostate Cancer drug trials – FDA scandal that is brewing over the Dendreon-Provenge delay in 2007….there are some very interesting facts uncovered so far…

  152. I have an open mind and these stories are intriguing, but I simply do not believe them to do lack of credibility or real evidence.

    My main criticism, however, is against all of the believers in this grand plot. You people believe there is corruption on a scale at all levels of organized society, longstanding, and large enough to destroy world economies and the most you do is bitch about it on the internet? This is a joke. IF I sincerely believed in such a grand scheme I would fight it at all costs. At all costs. Do you understand me? I understand that there are things more important than the life of myself and my daughters. As far as I’m concerned you’re all cowards. Sorry, but its true. Your actions are as criminal as those you condemn. Possibly worse.

  153. The possible usurpation of the U.S. is reminiscent of the usurpation of the Byzantine Empire by the Ottoman Empire, or what came to be known as the Ottoman Empire. None of this banter shocks me nor surprises me… it is evident throughout history that man’s appetite for power and control is never satisfied. I see the attempt or possible current success of yet another grab for power. I think we will see leadership from a grass-roots origin develop overtime both here and abroad to circumvent the current political, social and economic climates… it’s about time.

  154. This is very insightful. It is a pulitzer worthy piece.
    Your dialoque is exceptionally coherent and fluid. I have found a journalist worthy of the title JOURNALIST!
    Hats off.
    I am no conspiracy theorist but this blends nicely with some other historical insights that have been on many Americans minds.
    Forgive me BUT…… Anyone can look back on this centuries major travesties and see how Nations are run asunder by what formerly was thought a far fetched fantasy, until it was too late. I don’t think I have to name them but outside of Russia and Germany there are so many others. I look around over the last year and see surreal posters of a “leader” vaulted to the top eschelon of the system. Glorified, logo emblemed and risen on the cause of social justice. Enter a well connected militaty industrialist as his exhaulted advisor. One that controls the mainstream media (GE and Immelt). A change agent from nowhere who’s real claim to fame is a radical agenda through radical associations and a booming message of inequalities that afflict the “people”. Manipulated by his own inexperience and a penchant to appease.
    I have to wonder what manipulation is in the background and just how many steps away from historical Coupes we are at this stage. It seems, only one National emergency and a calling out of the “peace keepers” to quell objection by the gun toting mobs. A few clean headshots to keep order in the upper ranks. Threats to ones family to align the rest. Single party rule, overrun by thugs in high places. An agenda that circumvents the tenets of Democracy in the name of social order and justice, hijacked by the ruthless assisted by all manner of Media Censorship, and control…..
    Maybe this story should be investigated Top Down! There is noone else to do it.

  155. Great exposure…the truth is a very deep disappointment in MM and men and women driven by greed. They must be pretty empty inside to need to do such harm. Thank you for writing this article…I will send it to all I know.

  156. If Bernie Madoff is the devil incarnate , Maybe his confrere Ezra Merkin can be enticed to show his innocence and regain his good name by becoming the second messiah (read Elliot Ness) by going to the Feds and showing them where the bodies are buried- He certainly ought to know about the naked short sellers and all the other speculators who are draining off the taxpayers’ money as fast as the government doles it out. Ihope the Mitchell report is continued soon and really comes to the attention of the authorities

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