Michael Milken Redux: Insider Trading Indictments on the Horizon for SAC Capital and Others in its Destructive Network

SAC Capital and other hedge funds might finally pay the piper.

It’s been a long time coming, but the guys with guns and badges might soon be slapping handcuffs on some of Wall Street’s most destructive miscreants. According to a report posted over the weekend on The Wall Street Journal’s webpage, “Federal authorities are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders and analysts  across the nation…”

The New York Times on Sunday followed up with its own report, quoting Preet Bharara, the United States attorney in Manhattan, who bemoaned “the lengths to which corrupt insiders will go to misuse confidential information for their own personal gain.” As the Times noted, the rhetoric is reminiscent of the 1980s, when the Feds busted the massive stock manipulation and insider trading ring led by the famous financial criminal Michael Milken – and, indeed, it might not be a coincidence that this weekend’s announcement of imminent indictments came exactly 20 years after Milken was sentenced to prison.

The names of some of the hedge funds mentioned in the press as likely DOJ targets – hedge funds like SAC Capital and Ziff Brothers – will be completely familiar to readers of DeepCapture.com. In fact, this website was founded in large part to expose the depredations of precisely this network – a network that has its origins (at least to some extent) in the criminal enterprise that Michael Milken built in the 1980s.

As we have long explained, this network not only regularly trades on inside information, it has pioneered new variations of the practice by, for example, manufacturing information (often false) which they can front-run in the market, employing abusive (and likely illegal) short selling techniques to manipulate the stock of public companies; and “capturing” some of the institutions this nation relies upon to curtail such behavior.

Most notable among these institutions are the financial press (large swaths of which have grown inappropriately close to precisely this network of hedge fund managers), and the SEC, which has not only failed in its regulatory duties, but has often assisted the hedge funds’ schemes by launching misguided (and go-nowhere) investigations of the companies the hedge funds have targeted, and providing the hedge funds with confidential information about those investigations.  All of this has been thoroughly documented within the pages of Deep Capture.

It was more than five years ago that Overstock.com CEO and future Deep Capture founder Patrick Byrne first gave a famous public conference call that he dubbed “The Miscreants Ball”. With more than 500 Wall Street executives and a few journalists listening in, Patrick outlined the existence of a “network” of miscreant hedge funds and “independent” financial analysts that he said was using underhanded methods to trade on privileged information and do serious damage to the financial markets.

In “The Story of Deep Capture”, we sought to explain the origins of the Deep Capture project by telling the tale of our extensive (and at times, arguably over-the-top) investigation of this network of hedge funds – a network that included SAC Capital (whose founder, Steven Cohen, was investigated by the SEC in the 1980s for trading on inside information given to him by Milken’s shop at Drexel, Burnham), Ziff Brothers, and others. This story was (I admit) exceedingly  long – it demanded its readers’ patience – but it provided plenty of detail of how the network operates.

Among the tactics we cited in that story was the use of so-called “independent” experts – experts who had been hired by hedge funds to ferret out inside information about companies targeted by the hedge funds, or to badmouth companies the hedge funds were selling short. It now appears that the Feds have themselves independently discovered how these “expert networks” actually operate and, as a result, some of these “experts” seem to be looking at possible jail time.

Another tactic we detailed at length was the use of supposedly “independent” financial research shops, such as Gradient Analytics, which were, in fact, in the business of publishing spurious reports for the benefit of their hedge fund clients, which would obtain the reports before they were made public and place trades that would profit from the effect that the reports would have on stock prices. Over and over again we noted how the false information in these reports ended up regurgitated in stories written by a small clique of journalists who appeared to have developed exceedingly close relationships to a small circle of hedge funds, and had come to depend on the hedge funds’ bogus analysis to the exclusion of all dissenting views.

The journalists (some of whom worked for The Wall Street Journal and The New York Times, whose editors must have swallowed hard before publishing this weekend’s stories announcing the imminent indictments) had, like the SEC, been “captured” by the hedge fund managers.

Some of these journalists even went to lengths to cover up the hedge funds’ shenanigans, insisting all along that their favorite hedge fund managers were innocent of any crime – indeed, insisting that the hedge fund managers were heroes and the smartest people on Wall Street. (The hedge fund managers were clever, to be sure, but apparently not clever enough to avoid becoming targets of what now appears to be the biggest criminal investigation in the history of Wall Street.).

In January 2009, in a story titled “Hedge Funds Reading Tomorrow’s Headlines Today”, Deep Capture reporter Judd Bagley provided indisputable evidence that SAC Capital, Ziff Brothers, and some of the network’s other major figures, such as James Chanos of Kynikos Associates, received advance copies, and traded ahead of bogus financial research produced by Morgan Keegan, a supposedly “independent” research shop that was, in fact, working for those same hedge funds.

Even after this evidence was posted for all to see, the press continued to use these hedge fund managers as sources, and never once cast doubts as to whether they really were wholesome geniuses who deserved the final say on the health of public companies. Meanwhile, James Chanos, who heads a hedge fund lobby, could be found regularly roaming the halls of the SEC, where he successfully convinced regulators to flinch from enforcing the rules against manipulative trading that he and his associates were skirting.

Some time ago, Deep Capture published another treatise titled “Michael Milken, 60,000 Deaths, and The Story of Dendreon.” In this book-length story (which might, indeed, have been the longest blog post ever published), we provided excruciating detail about the lengths that the Milken network of hedge funds – including SAC Capital – went to obtain (and manufacture) inside information about biotech companies.

We noted in that story that the hedge funds and  Michael Milken apparently even managed to “capture” doctors working for the Food and Drug Administration – prominent doctors who abandoned their duty to the public and served the interest of the most destructive network of financial operators in America. And we explained in that story that the hedge funds did not just trade on inside information, they also deployed their information advantage and abusive short selling to hobble public companies that were developing medicines that could have saved lives.

During the many years that Deep Capture has sought to expose these miscreants, we have struggled with our despair – our belief that the system might be so thoroughly corrupted that justice would never see the light of day.  In our view, the DOJ officials and FBI agents who are now going after this network of hedge funds deserve medals. They are “public servants” in the true meaning of the phrase.

If the indictments are indeed imminent, they are proof that there are some officials who will do what is right for the country in the face of great pressure — pressure from the media, which insisted on defending the hedge funds, and from an immensely powerful hedge fund lobby that had a lot of regulators and politicians on its side.

And make no mistake: the hedge funds that the Feds are targeting are not just “insider traders” – a term that makes it seem as if they are nothing more than outsized versions of Martha Stewart. These hedge funds’ tactics have damaged the integrity of the markets. And they have hobbled – perhaps even destroyed —  countless public companies. They even helped bring about our current economic troubles.

Indeed, it might not be a coincidence that the hedge funds named as likely to be facing indictments – SAC Capital, Citadel, Ziff Brothers, and others in their network – are the same hedge funds that attacked Lehman Brothers and Bear Stearns, the collapse of which contributed mightily to market cataclysm of 2008.

Bear Stearns executives reported seeing the managers of SAC Capital and Ziff Brothers celebrating the demise of that bank at a special breakfast meeting days after its collapse. The creditors of Lehman Brothers are suing some of these same hedge funds — SAC Capital, Och-Ziff (run by Dirk Ziff, also of Ziff Brothers) and Citadel —  because they seem to be the  most likely suspects in the illegal short selling and rumor mongering that helped topple or almost topple, not just Lehman, but multiple other pillars of the American economy.

Yes, make no mistake – these hedge funds are not just small-time insider traders. I do not even think it is a huge stretch to say that some of these hedge funds are a threat to the security of our nation.

As it happens, it is on this subject – the threat that some traders pose to national security – that Deep Capture is now on the verge of publishing an immensely long and detailed piece of research. For now I will refrain from revealing too much of the article’s contents except to alert you that it includes excruciating detail about this Milken network, shocking facts about some traders who are dangerous in every sense of the word, and a tremendous amount of information regarding some singularly ruthless organized crime groups and people tied to the world’s most violent terrorist outfits.

Given this, readers will understand if I remind them that immediately before Deep Capture published my work on Dendreon, Patrick Byrne posted a short piece, “Coming Attraction: Michael Milken, 60,000 Deaths, and The Story of Dendreon“. In it, he wrote:

Incidentally, I feel it only prudent to mention that, on the remote chance that anything happened to interrupt the serialization of this piece on DeepCapture (say, for example, a power failure), then arrangements have been made for it to receive immediate publication, in full, in a way that would reach 20 million people, instantly.  In addition, the whole package is already in the hands of some politicians who care.  Lastly, over the last couple of years I constructed a Doomsday Machine (and of course, there’s no point in having a Doomsday Machine if you keep it a secret). The reader who gets but a few pages into it will understand why I make this cautionary mention.

We will begin publishing this new story as a series in a few weeks. We apologize to our regular readers for not updating the Deep Capture site regularly during recent months. And we thank our readers for having the patience to wade through our previous stories, and for staying tuned for what will be by far our longest and most comprehensive story to date.

In other words – more bad news on the way.

  1. I do believe the student is ready. Now, the teacher can appear.

    I want to know, who signed off on this? His punishment should be worse than those that perped it. How many young men died from weaponry we paid for? You didn’t need to be Nostradamus to figure this out.

    I do believe treason in a time of war is punishable by death. They should sell lottery tix to see who gets to pull the switch. I’m available.

  2. Thanks for the hard work and Great Writing. Thank you for taking this risk. Please stay safe. You are All Heroic and i am in your debt. My fear is the miscreants will settle out of court, as usual.

  3. Great job Mark. It is scary how long people knew and people came forward to tell but nobody seemed to listen. Unfortunately when it comes to restitution the public will never see the true levels required. Hedge Funds like SAC leveraged their illegal gains 40:1 over and over again and all these criminal indictments will go after is the initial profits. Regulators and Federal authorities are still not at an intelligence level to expand beyond the simple like they do with drugs cartels. Everything SAC and Stevie Cohen has is technically the fruit of illegal act and open for retrieval but that will never happen.

  4. Outstanding news, Mark. Well done, good and faithful servant of the people. We look forward with great anticipation to your new report in future weeks. Time is precious, but timing may be such that new public officials will be serious in paying heed to your revelations.

  5. Mark:

    It looks like the combined efforts of many, most notably The Deepcapture team, are finally yielding results. Now it’s just a matter of seeing just how far up the food chain this is going to go, if the yield is impressive enough to change the culture. I think we all know that if the catch does not include the big fish, then there’s no real cautionary tale – nothing to dissuade the next generation who aspires to the same madness from reconsidering, simply because it’s impractical to enjoy such largess and power but end up in jail without either.

    Regardless of the result, those of us who were on the right side and paid the heavy price for making that decision, will be able to go on from here – we made some pretty impressive efforts and equally challenging sacrifices; now it’s up to those who have the power to do these things. Let’s hope they do, and again, kudos.

  6. I can’t see anything happening, this is more posturing from the authorities to look lie they are taken action. I will believe when something happens when there is a big short squeeze take place.

  7. How is it possible to trust the SEC in any related investigation? Is there not an historic involvement of the CFTC in all of this?
    I hope this gets to Drs. Scher and Hussain, also, along with our hedge fund friend who “influenced” CMS to hold its Dendreon review.

    1. Just look at GMCR that will show you what a bunch of dirtbags the SEC and their crooked naked shorters are all about…Another SEC investigation led by the shorts and again the crooked SEC finds nothing wrong tell that to the shareholders who watched their stock drop 33% on another misguided SEC investigation into accounting practices..The SEC makes Saddam Hussein look like St Teresa..

  8. It seems so long ago that Dr. Byrnes fielded a “question” during a conference call, and continued to listen politely while an obviously delusional character using the aka of Bob O’Brien ( Known of some of us as the easter bunny) described a soon to appear attack on Over Stock……… Credos to the good doctor for standing up after all the many predictions came true. Right down to the names of the shilling mouthpieces who would act as the media sources of the misinformation. Without the courage, and gravitas, of Patrick we would still be relegated to the fringes of the inter net, struggling vainly on the sanity check. It has been a long journey through the rabbit hole. May chance there will finally be true justice. Unfortunate that so many were harmed in this period of waiting. Oh well, such is life. Not only can the cat be let out of the s.a.c. but hopefully one of the cats can be s.a.c.ed at this late date. Watching steve cohen taking a perp walk would be bitter sweet revenge. Now for chanos, and soros…………….

  9. I think a lot of people forget the role of abusive MMs in these insider trading cases. Abusive naked short selling hedge funds need access to the bona fide MM exemption from executing pre-borrows or “locates” before making admittedly “naked” short sales. Abusive MMs would love to swap their access to the exemption and their superior visibility for increased order flow.

    Although a corrupt management member may have foreknowledge of good or bad quarterly earnings to lever via insider trading MMs have much more powerful insight to lever as they can see the actual buy and sell orders queuing up in front of their eyes in real time. This information is worth a fortune for any Wall Street participant with the ability to direct copious amounts of order flow.

    Abusive MMs also have built-in plausible deniability in that they can always claim that they were just “injecting liquidity” as is their job. Recall the “liquidity” enjoyed by the purchasers of shares of Lehman Brothers near the end when delivery failures went up 151-fold (15,000%). The question arises as to just when is the line between the injection of theoretically beneficent liquidity and the fraudulent accessing of “leverage” crossed.

    As “securities intermediaries” MMs are entrusted by the investing public and by U.S. corporations not to put their own financial interests or those of parties willing to provide them with cash generating order flow over the financial interests of investors and U.S. corporations. In the regulatory vacuum set up by highly conflicted SROs and totally captured regulators this Main Street versus Wall Street clash will always favor the deeper pocketed ones with superior knowledge of the loopholes contained within our clearance and settlement system.

  10. Somewhere up in heaven, a very nobel lady who fought for the justice we all want and the irradication of the scum who feed on us, is smiling broadly. Thank you Mary Helburn.

  11. As always Mark a great article. Let’s hope we not only get some of the larger fish but expose many who didn’t do their jobs to report with integrity as YOU and others here have done.

  12. I saw today that the SEC raided the offices of two hedge funds… This, the DAY AFTER the media forewarned all the involved parties to hurry up and shred their incriminating documents & wipe their hard drives before the G-Mans telegraphed arrival. More of the same.

  13. “THEY” have enough money now that their JAIL time won’t happen! “THEY” will be ‘above’ the law! #@&tards!

  14. I wondered why things have been so quiet around here lately. Looking forward to reading this new work Mark, if it’s of the same caliber as your other pieces, it should make for a good (well, infuriating…but that’s purely due to the subject matter) read.

  15. Another great article in the ongoing quest to level the playing field. WalledStreet© is out of control. HedgeHogs© running amuk, with captured media riding shotgun. A lame duck regulator now under the leadership of the 5th or 6th chickenchit Commissioner.

    Take notice… We no longer “just want our stocks to go up” !!!!


  16. Bravo to Mark Mitchell and the entire Deep Capture team! Just when things were looking so dire that I no longer checked this site every day, all heaven breaks loose. May there be perp walks for the major bad guys and a brighter future for the rest of us.

  17. The SEC what a joke,Green Mountain Coffee half the float short on (GMCR) and they investigate the company for accounting Irregularities and again the SEC finds nothing wrong..The crooks at the SEC should be sued by every shareholder at GMCR for taking BS info from the naked shorts to knock down GMCR from new highs at $37.00 to $26.00..The SEC deserves to be sued and worse yet put behind bars for helping the crooked naked shorters..Is there anyone at the SEC with Morals or Ethics or are they all just a bunch of crooked misguided corrupt slobs..Its time to not only Investigate the SEC but put them in jail for robbing Americans…

  18. Gee more Insider Trading/ Non Public Info trading issues with SAC and its employees? No surprise there cause its their friggin business model!! Its not risky leveraging up the way they do if you are doing your trades on inside/non public info!!! DUH…. otherwise all they got is what all to non illegal HFs got- just incredible levered beta!!
    Don’t think they above the crass pump and dumb on their own PE firm investments. See Cosmos Bank in TW. GE unloaded it on SAC guys who whiffed on it, couldn’t unload when they thought so they resorted to only way they could pocket some cash for themselves. When you run it you have plenty of non public info to play with. Pump it Up, Dump its ass, Repeat. Run the damn thing into the ground and throw the keys back to the Taiwanese.
    SAC took their games on the road. Welcome to the global marketplace. LOL

    see the charts—COSMOS BANK, TAIWAN (2837.TW)

    SAC PEI Taiwan Holdings LLC bought the bank in Sept 2007…” Invested ” $900mil GE downsized their shit and stuck it to SAC. Brilliant!!

    Sept 10 2007
    TAIPEI (Dow Jones)–Cosmos Bank Taiwan said Monday it has reached a final agreement with units of U.S. private-equity firm SAC Private Capital Group LLC and General Electric Co. (GE 15.77, -0.26, -1.60%) for them to take a majority stake for a total investment of NT$29.7 billion (US$900 million).

    Cosmos Bank said SAC PEI Taiwan Holdings LLC agreed to buy 1.65 billion preferred shares at NT$2 each, as well as NT$18.15 billion worth of convertible financial debentures

    06 Apr 2010 at 11:45 AM / NEWS
    Job Posting: Steve Cohen’s Personal Venture Capitalist

    What’s Steve Cohen supposed to do now with a fresh $1.4 billion in his pocket and no Zamboni to ride around on: Throw some cash at tech companies.

    Sources say Stevie’s henchmen are looking for a seasoned venture capitalist to invest about $100 million of the billionaire’s personal stash in tech startups. The headhunting is being overseen by Peter Berger and Frank Baker, both managing directors in SAC’s private equity unit who joined the firm a few years ago from Ripplewood.

    We’re not sure if the new position requires special skills with whiteboard markers and a spokesman for SAC declined to comment. Rumors are also circulating that, once a manager is found, SAC wants to raise $500 million for a new venture fund, but sources said there’s no plan on the table to bring in outside capital.

    While they’re still looking for someone (submit your resume) the new venture unit had time to do a deal last week. On March 30, SAC Venture Investments and J.P. Morgan took a stake in an electronic derivatives trading firm called Derivix. (The company had already raised $6.7 million in Series A funding from Goldman Sachs and Susquehanna Growth Equity.)

    Also, a few years ago SAC’s venture arm invested in a penny stock company called Zoo Entertainment, which makes software for the Xbox, PlayStation, Nintendo Wii and a bunch of other video game systems, so maybe there’ll be some sweet freebies in it for you as a bonus.

  19. Well done to the whole Deep Capture team – Byrne, Bagley and Mitchell – and all the good folks who contributed to this outstanding and innovative journalism with legwork and research, often anonymously.

    I look forward to reading the new research.

    Good luck and wear those kevlar vests. You’ll need them. You just made yourself a bunch of enemies.

  20. The third “signaling” dogma, however, is never discussed today by theoclassical law and economics scholars. The Austrians generally ignore the endemic accounting control fraud (their heroes have always been business cowboys) in their explanation of why we suffer recurrent, intensifying financial crises. The Austrians love to blame the Federal Reserve and “easy money” for producing low interest rates. The Austrians claim this led to excessive leverage, and blame the global crisis on extreme leverage. It is inconvenient to this new meme to recall that the extreme law and economics scholars used to light candles to leverage and chant its praises as a unique signal of honesty. Accounting control frauds do optimize fictional accounting income by engaging in extreme leverage. The leverage is a tactic of the accounting control frauds that drive modern crises, not the cause of the crisis. Because accounting control fraud produces exceptional reported income it is easy for the frauds to borrow enormous amounts (lenders virtually break down the frauds’ doors in their eagerness to lend). The more money an accounting control fraud borrows, the greater the sums the CEO can loot.

    Michael Milken was the original high priest of the extreme leverage dogma and the claim that it signaled honesty (Fischel was his acolyte). Milken was, of course, an expert at signaling honesty while practicing control fraud. His time in prison only increased his hate for U.S. government “interference” in “free markets.” The Milken Institute, therefore, now commissions articles about the ongoing crisis that emphasize (in huge fonts):

    From Main Street to Wall Street, one common thread runs through all facets of this story: excessive leverage.

    http://www.milkeninstitute.org/pdf/Riseandfallexcerpt.pdf (p. 9)

    That’s right – the fraud whose entire junk bond business model at Drexel Burnham Lambert rested on the dogma that corporations had too much capital and needed to massively increase their leverage (e.g., through LBOs) is now running an institute whose scholars claim that (far lesser) leverage that modern U.S. banks employ is the primary cause of global catastrophe. Of course, there’s no mea culpa by Milken admitting that his earlier dogma was false.

  21. I’m always looking for a more simplistic way to explain ANSS crimes. Try this:

    1) There are indeed legitimate reasons for slight delays in the T+3 delivery of securities that were sold.
    2) These “legitimate delays” needed to be accommodated for in the securities laws.
    3) The authors of UCC Article-8 did it by “forcing” securities intermediaries on Wall Street to treat those that paid for securities that were yet to be delivered (theoretically due to an ultra-short termed legitimate delivery “delay”) as being “entitled” to exercise the rights accorded to those securities. One of these rights is the right to resell that which you purchased EVEN IF THE SECURITIES THAT YOU BOUGHT NEVER EXISTED AND WILL NEVER BE DELIVERED.
    4) Criminals noticed this loophole and realized that the parties buying the nonexistent shares would never learn that they didn’t get delivered nor did they ever even exist. They knew that these investors being defrauded would get a readily sellable “security entitlement” credited to their account and on a monthly statement they these “entitlements” look exactly like a legitimate registered share that did exist and did get delivered.

    All the investors wanted in the first place was the right to resell that which they purchased hopefully at a higher price. These investors got half of what they wanted namely the right to resell that which they bought. The part about selling “at a higher price than they paid” in the case of corporations targeted for destruction didn’t work out so well.

    1. Go to page 185 that explains investing in the stock market as a fixed Monte Carlo. This is written in 1912 and they understood that the share prices weren’t supply and demand, they were whatever price Wallstreet CHOSE.

      1. pg. 198, all from 1912

        billions of dollars of margin deals…investors never receive one share

        ..everybody on Wallstreet realizes it is gambling and nothing more

        $10 million dollars is settled for one certificate for 1,000 shares…the other 99 got no stock at all

        The concept is that public companies trade at ten times or more real intrinsic value. A public company might buy a private company doing $1 million in earnings for $5 million, but immediately, that $1 million adds a PE of 50 or $50 million to the market capitalization of the company.

        That $50 million of market cap. only has a $5 million intrinsic value.

        Wallstreet believes that 90% of the public value is water, like adding water to milk in the 1800’s. They know that most of the public value is fake and that 90% let’s them create volatility to fleece the sheep.

        – they can only bother owning 10% of the real shares at the depository. Share ownership is a fractional reserve ownership unless you pull your certificate.

        – they can ask for 10% margin and charge 6% on the value of the trade. Effectively, they are charging 60% on the real value of the shares. They only had to buy the 10%, but they are getting paid interest on the 100%.

        The reason they can counterfeit and get away with it is they are typically counterfeiting at a value above the intrinsic value of the assets, but below the fair trading value of the stock. Because it is below the trading value, sucker money pours in, but they can keep it low because their only real concern is the intrinsic value.

        Dr. DeCosta, my take is they are Bernie Madoff (founder of Nasdaq) criminals and you are being too generous. They obfuscate so they can steal from us.

  22. Good point Kevin,

    The other issue is that of a “fractional reserve custody system”. If investors rarely demand delivery of their paper-certificated shares the owners of the “surrogate legal custodian” of those shares (the DTC participants) learned that they need only get “good form delivery” of a tiny fraction of the share sales that are made. Who is ever going to know the difference? Nowadays if you demand delivery of your shares the DTC “participants” won’t let you put them back into you’re a/c when you’re ready to sell. This is a clever way to dissuade the only defense available against a corrupt “fractional reserve custody system”. What kind of a “surrogate legal custodian” would intentionally promote the devaluing of the financial asset they are holding in their “legal custody” so as to look after the financial interests of their abusive “participants” that refuse to deliver that which they sold over the financial interests of the investors they are acting as “surrogate legal custodian” for?

    1. I requested certificates for an OTC company that’s been on the SHO list and at first, the broker said that wasn’t possible. When I pushed, he started getting angry and said that turned them into “toilet paper” with no value and “have fun ever depositing them again”. It took almost two months to get the cert. through DRS even though their website says two days to facilitate an electronic withdrawal.

      The same brokerage won’t let you buy this stock online. If you try to purchase, it rejects the order as a high risk investment and directs you to phone it in.

      Later, I needed to sell some and deposited the certificate with no problem into a different institution.

  23. Kevin,

    Interesting read! I actually believe that the interaction of “supply” and “demand” to determine share price through the price discovery process in our markets works very well. It’s just that the individual “supply” and “demand” variables are so easy to manipulate. In the case of abusive naked short selling (ANSS), when a delivery failure occurs at the NSCC a readily sellable “security entitlement” is credited to the account of the investor being defrauded. UCC Article-8 mandates that securities intermediaries on Wall Street treat these “entitlement holders” as being “entitled” to exercise all of the rights attached to a legitimate registered share. The intentional refusal to deliver the securities that you sell thus MANIPULATES upwards the “supply” variable.

    On the “demand” side you need to concentrate on the “effective demand” variable. This is represented by the buy orders that were NOT naked short sold into. The total “demand” variable gets manipulated downwards in these crimes as only the “effective demand” is allowed to interact with the ambient “supply” to “discover” the price. When both “supply” and “demand” variables are simultaneously being manipulated into two different directions then the price being “discovered” by the price discovery process will be grossly lower than the price “discovered” when an unmanipulated “supply” variable interacts with an unmanipulated “demand” variable.

    The next concept to appreciate in regards to share price manipulation deals with “selling triggers”. A natural “selling trigger” in our markets might be lousy quarterly earnings. This might induce 5% of a corporation’s investors to hit the sell button. In this crime wave you have to remember that this includes 5% of the buyers of real registered shares that got delivered PLUS 5% of the nonexistent shares purchased that did not get delivered and resulted in the issuance of “security entitlements”.

    As if this isn’t bad enough then you have the role played by Internet bashers. Their job is to dissuade buying, induce selling and manipulate upwards the “supply” of “sell triggers” that are not native to the markets. For instance, if a basher circulates the untrue rumor that a key member of management is an ex-convict this might induce selling by 10% of the purchasers of legitimate shares that got delivered and 10% of the purchasers of nonexistent shares. This is extremely powerful when you realize that the “supply” variable being “worked” has already been pre-bloated. This makes you wonder how any U.S. development stage corporation, once targeted for destruction, can survive one of these attacks.

    1. Consider what the agenda is when they use a wiki leaks to go after the banks or a bank? Who funds them? What is their agenda? What will be done to stop the thugs? I’ve a few suggestions and I’m sure there are those who are close who are ready to implement a few tactical moves to teach the bad boys a lesson.

  24. In regards to appreciating the brilliance of abusive naked short selling frauds go back and review what a “supply” and “demand” curve look like on a graph. If the vertical axis represents the price of an asset like a readily sellable “share” and/or a readily sellable “security entitlement” and the horizontal axis represents the quantity of that asset then a “supply” curve typically is represented by a line going from the lower left to the upper right. The “demand” curve typically goes from the upper left to the lower right. They intersect to form an “X” which corresponds to a given price over on the vertical axis.

    If you shift the “supply” curve to the right and don’t alter the “demand” curve then the price being “discovered” during the price discovery process drops gradually at perhaps a 45-degree angle down the “demand” curve. If you simultaneously shift the “supply” curve to the right by refusing to deliver the securities that you sell and shift the “demand” curve to the left by neutralizing the share price buoying effect of buy orders by naked short selling into them then the share price being “discovered” drops like a rock straight down.

    The brilliance here is that since UCC-8 says that the buyers of undelivered shares must be treated as being “entitled” to sell that which they bought (even if it never existed and will never be delivered) then these crooks can cleverly convert the share price buoying effect of a buy order (“demand”) into a share price depressing readily sellable “security entitlement” (“supply”) by simply refusing to deliver that which they sold all while claiming to be injecting theoretically beneficent “liquidity”. This is the ultimate form of “market rigging”.

    What’s really clever is that the NSCC management merely mandates that those of their “bosses/participants” that refuse to deliver the securities that they sell must only collateralize the monetary value of their failed delivery obligation on a daily marked to market basis. Thus as the share price predictably drops like a rock from this “market rigging” then so too do the collateralization requirements. This then results in the investment funds of the purchaser of nonexistent shares flowing to the NSCC co-owning “participant” that chronically refuses to deliver the securities that they sell. Why would they when making delivery is not necessary in order to steal the funds of the investor and besides there’s all of that wonderful “liquidity” (think “financial waterboarding”) they’re providing?

  25. To step right back, you should read my book link. It’s crazy this activist from 1912 predicted the mess we are in now because of the sell out to the money trust banking cartel.

    – in 1912, what the population knew as the “money trust” wanted to introduce a new concept. Instead of printing money, the government would borrow it from the money trust, who printed money out of thin air and the government would introduce a new concept – income tax to tax the people to pay the interest. The mort gage (French for death contract) would put the independent population into indentured servitude. Currently, most of the value backing this fake money from the banks is deferred income tax assets – how pathetic.

    – the Wizard of Oz was about the money trust. The cowardly lion was the government, the man behind the curtain with no power were the fake banking families, the scarecrow was farmers, the tin man was manufacturing and the yellow brick road and Oz was an ounce of gold. Activists in 1912 got it. Activists in 2010 get their news and schooling from the banking cartel.

    – the private cartel money printed by the royal families of Europe, Rothschilds, Rockefellers, etc. privately owned “federal reserve” notes came to be in 1913

    – in 1914, the world entered WW1, forcing massive borrowing from the cartel by governments all over the world

    – read the book.


    Everything he warned about came true. Public companies trade at 10 times the value of private companies and it is intentional. The companies like it, but it allows the cartel to pump and dump against the 90% of value that is fake. When we say a company is naked shorted into oblivion, it is trading at the intrinsic value of a private company – they’ve just removed the fake public value.

    – the Federal Reserve was given a fifty year cartel over private control over the US dollar. It came up in 1963 and Kennedy introduced the silver note – instead of borrowing money from the money trust and charging income tax for the interest on the people, Kennedy wanted to let the people just print money. He also wanted to get rid of the CIA, funded by importing drugs into the US. The money families assassinated him.

    – the cartel was extended for another fifty years – 2013. Funny about how everyone talks about 2012 end times.

    I believe we are at a huge cross roads. The internet has allowed the people of the world to figure it out and they want to irradicate the banking family PARASITES that control the media, who gets elected, the regulators, the educational system, etc.

    You know it is true – in 2008 both the democrats and republicans agreed – hey let’s give a trillion dollars to bail out this private banking cartel even though 99.9999% of the public in our democracy is against it.

    We could be due for a new golden age. People are waking up and it isn’t beyond French revolution guillotines. Two dozen families are responsible for most of the wars and economic unfairness in the world.

    How to protect yourself? Get real. If you own gold, get the gold coin and put it in your safety deposit box. If you own a share, ask for the certificate.

    Trust no one!

  26. Why hasn’t some ex-Special Forces or Black Ops person started whacking all of these “miscreants” already?

    I don’t think the DOJ will ever achieve real justice here. I would love for these criminals to live in fear for their lives until they day, well, they don’t live at all.

    The only way to fight the mafia is with their own tactics — stealth and violence.

    1. Google “Benjamin Fulford” videos on Youtube. His grandfather was a premier in Canada and he was a senior reporter for Forbes. He interviewed David Rockefeller in Japan, where he now lives.

      His claim is that he’s been dealing with secret societies in Asia and they are the ones that withdrew money from the system in Sept. 2008, crashing the system and that they’ve threatened the 200 banksters responsible for this Madoff pyramid scheme with assassination. 200 down to make the world better for the other 7 billion of us.

      I’d write him off as a looney tunes, except he has the goods – there are lots of photos of him in tight with senior officials from the Japanese government.

      But if you do think of these A-HOLES as the man behind the curtain in the Wizard of Oz, you have to think they must be afraid for their lives right around now.

      As the French revolution showed, it doesn’t matter how much money you have, your head still comes off…

  27. This could be worth an article.

    There’s a worldwide viral video campaign to crash / bankrupt JP Morgan. They have such a huge naked short in silver, that if 100 million ounces of physical silver were purchased ($30 for each of 100 million people worldwide), than it would bankrupt them.

    Google “crash JP Morgan, buy silver” to see all the viral videos. It’s the reason silver is running.

    Now, the ETF’s are admitting that many of the people who think they own ETF shares actually only own naked shorted IOU’s for those shares. They are freaking out that both the owners of the IOU’s and the owners of the real shares will both demand delivery of physical silver.


    For example, JP Morgan could buy ETF shares which are naked shorted to them, then turn around and demand the ETF deliver real silver.

    The real physical commodity problem is their achilles heel. They can screw people around when they ask for their physical certs., but if they refuse conversion to real silver for people who are paying warehouse fees to store it each month through the ETF, then that goes beyond criminal.

    If everyone buys an ounce of silver, this whole house of cards is going to start tumbling down.

  28. Mark & Deepcapture – If “due diligence” plus research that Deepcapture.com has provided in the past will not be the catalyst for change in the way that the SEC accepts Market Makers exemption that provides for “NAKED SHORT” sales – then what does the so called “regulated free market capitalism” terminology really mean?

    Deepcapture has seen the below email before. It is authentic and can be proved!

    Marv Eatinger

    —– Original Message —–
    From: marv eatinger
    To: [email protected]
    Cc: [email protected] ; [email protected] ; CFLETTERS
    Sent: Monday, February 16, 2009 6:16 PM

    Marv Eatinger Says:
    February 16th, 2009 at 7:04 am

    —– Original Message —–
    From: marv eatinger
    To: [email protected]
    Cc: [email protected] ; [email protected]
    Sent: Thursday, July 17, 2008 7:15 PM



    Marv Eatinger

    > 3/14/2000 0.1563 0.1563 0.1563 0.1563 230,000
    > 3/13/2000 0.7500 0.7500 0.7500 0.7500 200,000
    > 3/10/2000 0.1250 0.1250 0.1250 0.1250 0
    > 3/9/2000 0.1250 0.1250 0.1250 0.1250 30,000
    > 3/8/2000 0.7500 0.1250 0.1250 0.1250 2,620,000
    > 3/7/2000 0.5000 0.1250 0.1250 0.1250 230,000
    > ============================================================

    —– Original Message —–
    From: “Ron Franz”
    Sent: Tuesday, April 04, 2006 10:13 AM
    Subject: Re: [CSI Website Query: daily volume figures multiplied by 100 – symbol DLOV]

    >I had them remove the extra digits.
    > Yahoo should have it corrected by this afternoon.
    > Please let me know if you do not see the corrections.
    > Thank You,
    > [email protected] wrote:
    >> Regarding:
    >> Data Error Report
    >> Message:
    >> On March 7, 2000 the following web sites showed volume for the day for DLOV – Daleco Resources CP of 2,300 shares: FinancialWeb.com and Quicken.com.
    >> On March 8, 2000 the following web sites showed volume for the day for DLOV – Daleco Resources CP of 26,200 shares: FinancialWeb.com, Quicken.com and MSN Money Central.com.
    >> On March 13, 2000 Barchart.com showed DLOV – Daleco Resources Corp volume for the day as 2,000 shares.
    >> Daleco Resources Corp was deleted from the OTCBB to the Pink Sheets on February 22, 2000 to be effective on February 28, 2000. Yahoo Finance & MoneyCentral web sites are presently the only web sites that I can find that show Historical Volume figures for the time period of March 1, 2000 to August 1, 2000 when Daleco Resources Corp was listed only on the Pink Sheets.
    >> Yahoo Finance Historical Volume figures for the above mentioned dates is shown as follows:
    >> March 7, 2000——————–230,000 shares
    >> March 8, 2000——————2,620,000 shares
    >> March 13, 2000——————200,000 shares
    >> Apparently from the period starting March 1, 2000 to August 1, 2000, all trades that took place in Daleco’s stock had two zeros added to the daily trading volume!
    >> From:
    >> [email protected]

    HISTORICAL TRADING VOLUME ON APRIL 4, 2006 – SEE [email protected]
    >———————————— VOLUME
    > 14-Mar- 2,300
    > 0.13
    > 13-Mar-000.750.750.750.75 2,000
    > 0.63
    > 10-Mar- 0
    > 0.10
    > 9-Mar- 300
    > 0.10
    > 8-Mar-000.120.750.120.12 26,200
    > 0.10
    > 7-Mar-000.120.500.120.12 2,300

  29. The peasants are demanding democracy. You know, work for a living and get to trust the person you entrust your property to to not sell it.

    ‘Off with their heads!’ shouted the crowd as Charles and Camilla met rage in Regent Street


    You can get used to things not working out, but the whole world is figuring out the western world is run by a banking cartel that runs drugs and makes war and assassinates people with secret alphabet agencies and we don’t have a democracy.

    The republicans and democrats are the left and right hand of the cartel puppet master.

    It’s time to pull back the curtain and expose the scumbags and arrest them.

    Wealth doesn’t trump right.

    1. Here here.

      In a sense, its the same issue as the naked short issue.

      Imagine, I can sell unlimited stock into an easy to manipulate stock, if I am “one of the circle” and the floor assists by allowing a ton of the naked short selling to never be covered. They just journal out the trade. So I can move a stock price to any level I want to, while certain people spread BS lies to pump or to dump. NYSE is not an exchange. never was. Its all criminal top to bottom. It can be made to work, but it takes honest people and a massive computer program to do it.

  30. Paramount Capital, Duncan Carr, Lindsay Rosenwald, Rahul Singh. Morrison Cohen the law firm,

    Each had crucial inside information on the company they represented. They knew insiders illegally removed restrictive legends from 600000 shares and sold the stock. They front ran the sales. They also knew UBS Warburg put out research reports predicting a product in the market in just 12-24 months, while at the same time, UBS Warburg sent around a Private Placement Memorandum which told institutional investors there was no such product any time soon.

    They are all hardened insider trader criminals. Because they have tries to Guliani and Hillary, they seem to escape prosecution time and time again. However, recent court documents, many of which are sealed (stupid Judges) show that the company and the above insiders engaged in illegal sales, manipulation and insider trading.

    The hope damaged investors can still have is, if the authorities are truly serious, eventually they will find this very well documented criminal series of events.

    I live to see the lawyers who lied to the Federal Judges, face to face, put behind bars with no chance for parole. It would be too kind to them. They deserve much worse.

    Fair warning, the SEC has always known of the illegal sale of 600000 shares as well as the NYSE. They do nothing.

    Tells volumes as to what is really wrong on wall street and in our society.

  31. What happened the the new article (referenced below) that was due out a few weeks from the posting of this article on November 21st, 2010?

    “As it happens, it is on this subject – the threat that some traders pose to national security – that Deep Capture is now on the verge of publishing an immensely long and detailed piece of research. For now I will refrain from revealing too much of the article’s contents except to alert you that it includes excruciating detail about this Milken network, shocking facts about some traders who are dangerous in every sense of the word, and a tremendous amount of information regarding some singularly ruthless organized crime groups and people tied to the world’s most violent terrorist outfits.

    Given this, readers will understand if I remind them that immediately before Deep Capture published my work on Dendreon, Patrick Byrne posted a short piece, “Coming Attraction: Michael Milken, 60,000 Deaths, and The Story of Dendreon“. In it, he wrote:

    Incidentally, I feel it only prudent to mention that, on the remote chance that anything happened to interrupt the serialization of this piece on DeepCapture (say, for example, a power failure), then arrangements have been made for it to receive immediate publication, in full, in a way that would reach 20 million people, instantly. In addition, the whole package is already in the hands of some politicians who care. Lastly, over the last couple of years I constructed a Doomsday Machine (and of course, there’s no point in having a Doomsday Machine if you keep it a secret). The reader who gets but a few pages into it will understand why I make this cautionary mention.

    We will begin publishing this new story as a series in a few weeks. We apologize to our regular readers for not updating the Deep Capture site regularly during recent months. And we thank our readers for having the patience to wade through our previous stories, and for staying tuned for what will be by far our longest and most comprehensive story to date.

    In other words – more bad news on the way”.

  32. After I originally left a comment I appear to have
    clicked on the -Notify me when new comments are added- checkbox and now whenever a
    comment is added I get 4 emails with the same
    comment. There has to be a way you are able to remove
    me from that service? Thank you!

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    You’re craving more money, more time, and much less stress. My approach solves your issues and equips you with tried and tested techniques that help you reach your business goals.
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