Goldman Sachs Makes New Attempt at Humor With Old Canard

On Thursday Overstock, a company for which I work by day (and most evenings and weekends, too) issued the following press release:

Overstock Adding Racketeering Allegations to Ongoing Lawsuit vs. Goldman Sachs and Bank of America Subsidiary Merrill Lynch: Company Files Motion to Amend its Lawsuit to Add Claims of Civil RICO

Numerous stories quickly appeared in Reuters (“Overstock accuses Goldman. Merrill of racketeering; Overstock says RICO charges apply in case“) and Associated Press (“Overstock adds RICO claim to short-sale suit”).

At first Goldman punted its reply (“A Goldman Sachs spokesman said the bank opposes the motion, but did not elaborate”, read the early version of the Reuters story), but, after having an hour to think of it, managed this witticism:

“‘The motion is the latest attempt by Overstock to shift the blame for its poor share price performance,’ a Goldman Sachs spokesman said.”

Coming  from an institution that recently (Bloomberg, December 1, 2010: “Fed Names Recipients of $3.3 Trillion in Crisis Aid“) fastened itself to the public sugar teat for tens of billions in indirect bailouts and $24 billion of direct capital support lest it go the way of the wild buffalo and vaudeville,  that statement is funny.


  1. RICO. Just the name sparks fear in hearts of ne’er-do-wells. Now, with the Jefferies’ trader getting seven years, and disgorging 13mm for stealing 7, we’re on our way. The sentences are going to get steeper and steeper, and if O makes civil RICO stick, can the criminal be far behind?

    Imagine. A world without Merrill and Goldman. Imagine.

  2. HA! This criticism coming from a company whose basic premise is to conjure money into existence out of thin air and then lend it to the Prole class at interest. Guaranteed profit is not a bad deal if you can get it… And even with this advantage, they were all insolvent. If our gubmint wasn’t in the pocket of old BIG money, all the TBTF banks would been BK. If the unwashed masses understood how our banking system worked, there would have been a lot of banker heads on pikes by now.

    How absurd for GS to attempt to ridicule the stock performance of any company. Thanks for the laugh!

    Good luck in bringing down this plight on humanity a notch or two. I sincerely hope OSTK is able to proceed with the RICO expansion. I do feel compelled to temper my optimism,however, knowing the bank owns a vast swath of government & regulatory power within the fascism that has morphed into existence. Expect another uphill battle (because the playing field is tilted in their favor).

  3. How many civil charges have been filed against Goldman Sachs for fraud? It seems the make money the old fashioned way – they steal it. But they do it as ‘Gods work’.

  4. I don’t think its a stetch to say that the jury, a judge, court steno or the the maintenance crew would find much humor in any thing that the despised wall st. elites might find a “real knee slapper” after the majority of the country have been victims in one way or another by their criminal and immoral actions. This absolutely verifies the ignorance and arrogance of these buffoons. I am suprised that their lawyers did not provide duct tape for their mouths.

        1. What is brown and black and looks good on a Goldman executive?
          A doberman.

          What do have when a Goldman executive is buried up to his neck in sand?
          Not enough sand.

          How many Goldman executives does it take to roof a house?
          Depends on how thin you slice them.

          What is red and orange and looks good on a Goldman executive?

  5. According to the redacted motion (points & authorities) and declaration, OSTK’s counsel demanded production of documents repeatedly from GS and Merrill, but neither prime brokers ever produced the documents which were finally obtained by subpoenas served on plaintiffs in another case. That is blatant refusal to permit discovery of relevant evidence. Oftentimes, the penalties for such conduct by a defendant is striking of the offending party’s pleadings and prohibition against introducing evidence at the trial. Perhaps counsel here prefer to get to trial without the delay of more motion practice, but GS/ML conduct in preventing discovery certainly appears objectionable.

  6. I think everyone in this thread has a genetic mutation that makes us immune to propaganda, but it is still frustrating to talk to the rest of the world that is under its spell.

    The crimes are so big, that 99.9999999% of the population can’t believe they are possible without the police, media and politicians cracking down.

    Think of the propaganda in movies like Wall Street in the 80’s where people with “SEC” on the backs of their jackets came in to arrest, even though the SEC has no arrest powers.

    It’s all about manipulating perceptions.

  7. If this goes in front of a jury, you should make an effort to keep sociopaths off that jury. 9 out of 10 times sociopaths side with power, 99 out of a 100 with sociopathic pleaders. Our sociopaths-gone-wild economy has been very rewarding to sociopaths, actual sociopaths are certainly involved here. I would be available to assist in the jury selection, if you wish.

      1. No sociopaths on the Jury. Guess that rules out any Wall Streeters.

        Nice to see people step up and volunteer. That has to be very unnerving to the dark side.


    In the preliminary versions of Reg SHO, to their credit, the SEC insisted on the policy known as “withholding the mark”. The “mark” refers to the money of the investor buying yet to be delivered securities. “Withholding the mark” refers to the rather obvious policy of disallowing the seller of securities access to the funds of an investor UNTIL that which was sold got delivered by the seller. DTCC “participants” and their lobbyists fought this concept tooth and nail and sure enough the SEC cowered under the pressure. There was now a disconnect between a seller gaining access to the funds of an investor and the seller needing to deliver anything. Let’s refer to this as “OOPS #1”.

    OOPS #2 involves UCC Article 8’s allowing of the purchaser of yet to be delivered shares to sell that which he paid for EVEN IF THAT WHICH HE PUCHASED NEVER EXISTED AND WILL NEVER BE DELIVERED. The account of the purchaser of even nonexistent securities that will never be delivered is credited with a readily sellable share price depressing “security entitlement”. Why? It’s because the default assumption of the NSCC is that their “participants” never misbehave and that the delivery failure is really no more than an ultra-short termed “delivery delay”. This policy allows the purchaser of nonexistent shares to remain blindfolded to the fact that what he purchased not only will never be delivered but never even existed in the first place. When you combine OOPS #1 and #2 you get the sellers of nonexistent shares gaining access to the funds of the investor being defrauded without the investor learning that he’s been defrauded and without anything needing to be delivered.

    OOPS #3 involves exempting “bona fide” MMs from needing to execute pre-borrows or “locates” before making admittedly “naked” short sales. Why? Because they are theoretically injecting much needed “liquidity” into the markets of especially thinly-traded securities ostensibly because there often isn’t time to execute pre-borrows or “locates” in fast moving markets. In other words they are put on the honor system (a multi-trillion dollar OOPS) to “promptly” deliver that which they sold so that the trade can “promptly settle” as per the mandate of Section 17 A of the ’34 Exchange Act.

    OOPS #4 involves the NSCC policy of merely mandating that the sellers of yet to be delivered shares collateralize the monetary value of the failed delivery obligation on a daily marked-to-market basis.

    What’s the result of the 4 “OOPSES”? Opportunistic criminals pretending to be acting in the capacity of a “bona fide” MM can now sell nonexistent securities all day long and merely REFUSE (not just fail) to deliver that which they sold. The invisible accumulation of the readily sellable share price depressing “security entitlements” in the share structure of the corporation under attack will predictably manipulate the share price AND THEREFORE THE MARKED TO MARKET COLLATERALIZATION REQUIREMENTS downwards so that the funds of the previously “blindfolded” investor flow to the parties intentionally selling nonexistent securities while pretending to be injecting beneficial “liquidity”. So much for the policy of having no need to “withhold the mark” until delivery is made and putting MMs and the hedge funds that direct them order flow in exchange for access to all of these OOPSES on the “honor system”.

    How do we recognize these crimes in real time in our markets? Truly bona fide MMs that LEGALLY access that universally abused exemption stay close to a net neutral position. Sometimes they’re net long and sometimes net short depending upon the need to inject buy side or sell side liquidity in order to address order imbalances. In the markets of corporations under attack you’ll notice that sometimes hundreds of times more buy orders are needed to move the share price up perhaps 2% than the number of sell orders needed to drop the share price by 2%. This is the phenomenon we see all day long every day in the markets of the smaller U.S. corporations trying to survive while going through the various stages of development wherein they are relatively defenseless against these attacks.

    1. I think there is a fundamental disconnect where brokerages don’t believe they have a fiduciary responsibility to actually own what investors believe is being held for them in trust.

      You have to look no further than “internalization” where a brokerage effectively takes their investors’ money, prints the trade, but doesn’t bother buying any shares. They think it is okay to only fractionally back their customers’ share ownership as if shares are some kind of fiat currency issued by Wallstreet.

      To see internalization in action, find a penny stock with a big spread and buy volume at the offer. Your own brokerage won’t bother buying from the selling market maker, because they expect you to lose money and they’ll keep the trade for themselves. You can usually see evidence of this as the market maker associated with your brokerage will immediately go on the bid hoping to cover the shares they shorted to you.

  9. Anonymous,

    Point well made! Because of internalization the “big 5” MMs have “first dibs” on naked short selling into 95% of all buy orders. Why wouldn’t they naked short sell into any buy orders at their trading desk (“internalize” the buy orders or “desk” them) that they have visibility of when the buy order is for development stage securities that can’t fight back. It’s free money due to the 4 “OOPSES”. In order to encourage order flow from corrupt hedge funds they can always aim some of these NSS opportunities in their direction on a quid pro quo basis.

    If any of these corrupt “fraternity brothers” should get into trouble in bankrupting a corporation after running up an enormous naked short position then all of them would be expected to join the wall of selling at various share price levels. One thing about any wave of buy orders is that it eventually has to come to an end at which time the whole group can methodically “walk down” the share price to lower levels to keep their collateralization requirements in check. What the SROs and regulators need to keep in mind is that the mere collateralization of the monetary value of a failed delivery obligation has nothing to do with that securities transaction legally “settling” which the law mandates occurring on a “prompt” basis.

    1. One of the fraternity is obviously Nite and it is obvious the big ones steal orders from smaller market makers making a mockery of MM price competition.

      Who are the other four?

      To me, payment for order flow is corrupt. They should have to go with the high bid or low offer and not just get their buddy mm to match it.

      In terms of fighting the counterfeiting, it occurs to me we should concentrate on taking away the tools the thieves use. We should concentrate on getting things like payment for order flow, internalization, fractional custody, etc. banned one state at a time. In particular, I think they should have to put a disclaimer on the brokerage statement.

      Something like:

      * Your ownership in XYZ is only 85% backed by real shares in XYZ because there is a 15% failure to deliver at our custodian for this symbol. When you vote, you will only receive .85 of a real vote if everyone entitled to vote actually votes.


      * the reason we use the phrase “securities held long” is because you don’t actually own Jack S_T. Thanks for your cash, sucker.

    2. “One thing about any wave of buy orders is that it eventually has to come to an end at which time the whole group can methodically “walk down” the share price to lower levels to keep their collateralization requirements in check.”

      What if the wave of buying doesn’t end? I’m aware of a one time development stage company that lost money for ten years, then went crazy profitable and they keep a wall of selling at a low PE multiple and it just trades on the offer day after day, always on the ask for over a year now. FINRA Daily SHO reports show that 70-100% of this selling is shorting each day.

      They have no choice but to keep shorting more because there is no way to cover as there haven’t been any significant real sellers for a few years as the company is so undervalued and insiders have been buying heavily above current prices. They don’t try to push it down. They just keep selling more at their average short price and never try to sell less than that.

      It tends to dry up the buying as they drop the bid (they don’t show real bids to 60% of the ask price despite great buying volume and occassionally trade 100 shares below real bids to trade it down to show a huge Friday closing loss) and the large spread and impossible ceiling discourages buyers.

      The market makers all moved to the pinksheets, so the OTC market rarely trades. The pinksheet bids and offers don’t show up on quotes.

      It could come to a point where the PE falls to 1 or less and it seems like that wouldn’t stop the wall of selling. You would think a buy back would be the solution, but companies are only allowed to buy back 5% of their stock per year, can’t buy more than 20% of daily trading volume and can’t pay more than the last trade.

      The company is regularly approached with opportunities for big investment (more than $10 million), but they turn the money away as investors don’t want to pay more than the current share price and the company doesn’t want to sell so cheaply and the company doesn’t need the money as it is growing from cashflow. The company also turns down buy out offers where even a 100% premium would steal value from loyal shareholders and save the counterfeiters.

      It’s a Mexican stand off and it will be interesting to see how it plays out.

      The company could pay out a dividend, but I doubt that would do much as the counterfeiters would just match it and continue the game, leaving the company starved of that cash.

      It just makes a total mockery of what a public market is supposed to be.

  10. Anonymous,

    I’ve witnessed that “Mexican standoff” you referred to many times wherein the crooks absolutely refuse to cover and they and their colleagues simply apply a blanket of selling at the offer ad infinitum. Due to the 4 “OOPSES” cited above it is incredibly easy to run up an astronomically large naked short position. Most companies die but a few don’t because they really did “have the goods” and they were misdiagnosed as a scam.

    What happens is that your naked short position and therefore your daily marked to market collateralization requirements get so high that you can’t stop naked short selling even if you wanted to. Why? Because if you’ve been pretty much the only seller at super low share price levels and you should choose to stop your daily “maintenance” NSS-ing then the stock and your collateralization requirements will gap upwards. How in the world could you cover an astronomically high naked short position in a market that is already gapping upwards? Due to the collateralization requirements you can’t even stop your “maintenance” NSS-ing let alone actually cover your short position. The only option left is form a wall of selling and to do whatever it takes to bankrupt the company via various acts of tortious interference, get the company delisted or get the company’s registration revoked.

    There are no “time outs” on Wall Street or “tap outs” like you see in ultimate fighting matches. Due to the need to cover up these pandemic activities the SROs and the regulators will simply stand to the side and watch new investors being led to the slaughter. It’s either that or face the consequences of letting tens of millions of U.S. investors know that many of their investments in development stage corporations never did have a chance to succeed due to the rigging of the markets via the 4 “OOPSES”.

    The question then becomes, which is the bigger crime? Is it the initial theft of the investor’s money or is it the cover up of the fraud by the SROs and regulators congressionally mandated to provide investor protection which leads to a whole new flock of investors getting ripped off?

    1. Is there anything the company can do that would get through the wall?

      In a way, the naked shorts are doing investors that are able to buy at the wall and pull certs. a favor. At some point, the DTCC won’t own a single share. What happens then?

      Or is a regular dividend the answer?

  11. Anonymous,

    In regards to your comment: “At some point, the DTCC won’t own a single share. What happens then?”

    What happens then is the NSCC will predictably put a “chill” on the delivery of demanded for shares. UCC Article-8 says that an investor that bought yet to be delivered shares is to have his account credited with a “security entitlement”. It also states that an “entitlement holder” has the right to file an “entitlement order” demanding delivery of paper-certificated shares. What a “chill” does is circumvents a buy-in. The fear of a forced “buy-in” is the ONLY source of deterrence to these crimes and the ONLY solution available when the seller of (nonexistent) securities absolutely refuses to deliver that which he sold. Putting on a “chill” for servicing “entitlement orders” is obviously forbidden by the spirit of UCC-8 and is 180-degees antipodal to the congressionally mandated “prompt and accurate clearance and settlement” of securities transactions as per Section 17 A of the ’34 Exchange Act.

    Through the years the DTCC has attained a monopoly on 15 of the 16 sources of legal empowerment to effect buy-ins when the sellers of securities absolutely refuse to make delivery. Yet to this day, the DTC and NSCC management plead that they are “powerless” to effect buy-ins. They claim that they only get involved AFTER a trade is completed and that FINRA and the SEC are the parties that should be mandating buy-ins not them. In reality, the fact that the DTCC management can with 100% certainty be counted on to claim to be “powerless” to effect buy-ins AFTER attaining a monopoly on the sources of legal empowerment to buy-in delivery “refusals” forms the foundation for this entire crime wave.

    This behavior should not be surprising when you recall that the DTC and NSCC management are employees of the parties refusing to deliver that which they sold to Main Street investors. Having your employees in essence forgive your failed delivery obligations owed to Main Street investors is a “racket” beyond description.

    Anonymous- do not encourage management to declare and distribute share dividends. The NSCC will merely credit yet more “security entitlements” to the accounts of those Main Street investors that never got delivery of that which they paid for. They have to do this otherwise buy-ins would be needed to level the books and they need to be circumvented at all costs. If your company could induce covering of these naked short positions by simply declaring and distributing share dividends then it would serve as a template for thousands of other victimized companies and that’s not going to be allowed to happen lest this entire house of cards collapses and we all learn that a large percentage of our investments in relatively defenseless development stage issuers never did have a chance to succeed. I’m just full of good news today aren’t I!

  12. ron doc,

    If the company has cash then the first thing they have to do is compute their approximate book value per share (BVPS) which is assets minus liabilities divided by the # of shares outstanding. If they are trading at severe discounts to BVPS then instead of distributing cash dividends you want to buy back and retire shares UNTIL their share price reaches about 80% of BVPS. In other words you focus your efforts on the denominator of the BVPS equation. This way once you do distribute cash dividends they will be that much larger on a PER SHARE basis. This is what needs to be matched by the shorts. When you’re trading well below BVPS with each and every share you buy back and retire your BVPS goes up a “notch”. The larger the disparity between your PPS and your BVPS the larger are the “notches”.

  13. Sure wish I could read the redacted portions of that Motion and the accompanying affidavit(s).

    Did the judge require that the juicy parts be hidden from the public’s view?

    Will OSTK counsel seek sanctions or penalties against GS and ML for their failure to honor OSTK’s subpoenas, in obvious bad faith? Judges used to take a dim view of such things.

  14. This is disturbing but doesn’t surprise me unfortunately too many are like sheep and believe whatever the mainstream media feed us.
    Patrick followed your company for a while best of luck!
    Jason Baudendistel CEO Bored Student Records.

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