“The Global Bust-Out Series (Chapter 7): Michael Milken and the “Insider Trading” Network (as of 2013)

The “insider trading network” that the FBI is currently investigating is similar to an “insider trading” network that the FBI investigated in the 1980s–and the network is involved in much more than just “insider trading.”

This is Chapter 7 of a multi-chapter series. On your right is a Table of Contents to all chapters published so far.

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In earlier chapters of this series, we learned about an incredible enterprise known as the Bank of Credit and Commerce International (BCCI), which was operated by oligarchs with ties to the Muslim Brotherhood in partnership with governments that were among the Muslim Brotherhood’s principal state sponsors. We also learned that the BCCI enterprise operated with the consent and protection of Washington even though it not only counted among its partners numerous mobsters and global terrorists, but was also operating what amounted to a transnational organized crime syndicate involved in everything from the trafficking of narcotics and nuclear weapons components to terrorism and the perpetration of destructive financial crime.

In addition, we learned that BCCI counted among its most important business partners some of the leading figures of the American establishment, including Michael Milken, who was, during the 1980s, the most powerful financial operator on Wall Street. As we know, Milken and some of his closest associates, in league with the BCCI enterprise, perpetrated the “bust-outs” of numerous savings and loan banks, thereby contributing to the devastating savings and loan crisis that began in the late 1980s, and which ultimately cost taxpayers more than $2 trillion in bailouts—a portent of bigger and better things to come.

Also involved with these “bust outs” were (see earlier chapters of this series) some of the nation’s leading organized crime figures, such as Carlos Marcello, who was then the top Mafia boss in the city of New Orleans. Meanwhile, we know, BCCI was involved with a global network of brokerages, most of them operated by people with ties to organized crime, and most of them specializing in the “bust outs” of small to medium-sized publicly listed companies. As a judge remarked after BCCI shut its doors in 1991, the BCCI enterprise singlehandedly “shattered the integrity of the global financial system.”

And history did not end in 1991, when BCCI was shut down.

Most of BCCI’s former principals and their partners (“the larger BCCI enterprise”) continued in the years that followed to involve themselves with similar enterprises, the only difference being that the enterprises came to include some new and younger players, while the enterprises innovated new and more destructive financial schemes. Indeed, we will see that people formerly involved with the BCCI enterprise, along with their newly acquired business partners, contributed significantly to the great meltdown of 2008, and are presently threatening to deliver a repeat performance.

This might be one reason why the president of the United States was recently moved to take the unprecedented step of declaring a state of “National Emergency” in response to certain conditions that currently prevail in the American markets. See Chapter 1 of this series for more on the “National Emergency,” but I will remind readers that in the summer of 2011, President Barack Obama, in explaining why he had declared a “National Emergency,” stated that there was a clear “nexus” between transnational organized crime syndicates, the intelligence services of several unnamed countries, and the world’s leading terrorist organizations.

In addition, the president explained that transnational organized crime syndicates (and, we can confirm, others in the “nexus,”) had “penetrated” the “legitimate financial sector” (i.e. Wall Street). Not only that, but the president stated that this was a “National Emergency” because transnational organized crime syndicates with ties to terrorist organizations (presumably with help from the “legitimate” financial sector on Wall Street) were “undermining markets” to such an extent that they now posed a serious and imminent “threat to stability of the global financial system.”

Unfortunately, officials in Washington have yet to prosecute any of the people (e.g. mobsters, terrorist financiers, and miscreants on Wall Street) who account for our present “National Emergency.” Indeed, as was the case in the 1980s, when BCCI and its partners owned many of America’s leading politicians (including multiple U.S. presidents), it presently seems to be the case that Washington has been “deep captured” by a network (or “nexus,” as the president calls it) that includes the world’s leading mobsters, billionaires with ties to terrorist organizations, and the “legitimate” miscreants on Wall Street who do business with mobsters and terrorists.

In addition, officials in Washington have done little to crack down on the sorts destructive financial weapons (e.g. the “bust outs” of major banks and associated schemes, such as manipulative short selling, self-destruct CDO’s, mortgage fraud, death spiral finance, toxic debt, etc.) that nearly destroyed the world in 2008, and which are now, once again, threatening to collapse the global financial system.

Later chapters of this series will discuss in much greater detail the “global bust-out” that accounts for our current predicament, but first it will be useful to review a bit more history so far as it concerns the network of Michael Milken, formerly known as the most powerful man on Wall Street, later known as one of history’s most destructive financial criminals, and presently known (to readers of the major U.S. newspapers and officials in Washington) as one of Wall Street’s all-time greatest heroes and a “prominent” fixture of the American establishment, worthy of our respect and admiration.

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When Michael Milken was indicted in 1989, the major U.S. news organizations reported that he and one of his co-conspirators, Ivan Boesky, were the central figures in a nationwide “insider trading” network. In addition, the major U.S. news organizations reported that Milken was indicted thanks mostly to the fact that Boesky had cooperated with the government, providing the key evidence that allowed prosecutors to expose the “insider trading” network. It was true that Milken and Boesky were involved in “insider trading,” but the reports by the major U.S. news organizations contained some important omissions.

For starters, Milken and his network were involved in much more than “insider trading.” As we know from earlier chapters of his series, Milken and his closest associates, including Boesky, conspired with the BCCI enterprise and some of the nation’s leading organized crime figures to “bust out” (i.e. loot and destroy) many of the nation’s leading savings and loan banks. We also know that Milken was involved with numerous brokerages (some of them linked to the BCCI enterprise) that specialized in perpetrating the “pump and dump” bust-outs of small to medium-sized publicly listed companies.

In addition, a careful reading of Milken’s 99-count indictment (with many of those counts pertaining to his “bust-outs” of savings and loan banks and other companies, though he pled guilty to only seven counts) reveals that Boesky provided little of the information that was used to prosecute Milken. Instead, the government obtained the vast majority of the evidence used against Milken (and Boesky) in a 1989 raid of a major investment and brokerage operation called Princeton Newport, which had been a key component of the Milken network, involved not only in insider trading, but also the full panoply of other schemes that Milken and his network perpetrated during the 1980s. At the time, Princeton Newport was operated by man named Edward O. Thorpe, who was most famous for having worked with the Genovese Mafia family to develop a method for beating the black-jack tables in Las Vegas (Thorpe has never been charged with any crime, and he is presently one of the nation’s most prominent hedge fund managers).

Pulitzer Prize winning author James Stewart similarly reported in “Den of Thieves” (the seminal work on the government’s prosecution of Milken) that Boesky provided little information to the government. According to Stewart, Boesky told the government that he could not testify against Milken because he was afraid of what might happen to him. As Boesky put it, Milken had “friends in Vegas” – an apparent reference to the Mafia. As Stewart also reported, soon after Boesky expressed his fears, one of Milken’s closest associates, John Mulheren, got into his car and headed towards Boesky’s house. Police officers had been watching Mulheren, and knew that he had a gym bag in his car loaded with two handguns, a 12-gauge shotgun, and a .233 caliber Galil assault rifle.

Suspecting that Mulheren planned to murder Boesky, the cops arrested Mulheren and put him in jail, where Mulheren spent most of his time conversing with Anthony “Fat Tony” Salerno, who had been the top boss of the Genovese Mafia family until he was jailed on charges of manslaughter. Mulheren himself was investigated for his alleged role in Milken’s network, so it is possible that Mulheren thought about killing Boesky to keep Boesky from providing the government with information about his own (Mulheren’s) activities. Alternatively, it is possible, as some have reported, that Mulheren was simply on the wrong psychiatric medications and didn’t know what he was doing.

Either way, Mulheren was never charged for his suspected role in Milken’s insider trading (and “bust out”) network, and nor was he charged for trying to kill Boesky. He was quickly released from prison, and he subsequently reconciled with Boesky. Contrary to the message put forth by Milken’s public relations machine (which maintains that Milken despises Boesky, and that Milken was convicted only because Boesky was a dirty rat who provided the government with false information about Milken’s activities), Milken also reconciled with Boesky, and after Milken was released from prison (he served two years of a ten year sentence), he and Boesky began again to do business together.

Meanwhile, Mulheren c0-founded, with a trader named Izzy Englander, a hedge fund called Millennium Management, and though Mulheren died in 2003, Millennium is presently one of the most powerful hedge funds in the nation.

In 2010, the media began reporting that the FBI was once again investigating what the FBI described as a “network” of financial operators who were involved in “insider trading.” According to the FBI, this was, in fact, the biggest “insider trading” investigation in FBI history. This investigation is presently ongoing, and a key focus of the investigation, according to media reports, is the giant hedge fund SAC Capital, which is run by Steve Cohen. Back in the 1980s, Cohen was investigated by the Securities and Exchange Commission (SEC) for allegedly trading on inside information that he received from Milken’s shop at Drexel Burnham Lambert, and back in the 1980s, Cohen and all the others in Milken’s insider trading “network” were, of course, involved in much else (e.g. manipulative short selling, the “bust-outs” of publicly listed companies, etc.) besides insider trading.

Similarly, the “insider trading network” that the FBI is presently investigating has been involved in much else besides insider trading. Previous DeepCapture stories have provided ample evidence that SAC Capital and other hedge funds in its “network” have perpetrated a great deal of manipulative short selling, and they have, along with others, including Michael Milken (who is. to this day a key figure, along with SAC Capital and others, in an “insider trading” network), perpetrated the “bust-outs” of publicly listed companies. Cohen himself has not been charged with any crime, but multiple traders have been indicted for insider trading that they conducted while working for SAC Capital, and the media has reported that prosecutors are hoping to indict Cohen and SAC Capital, though the media continues to report that SAC Capital’s only alleged offense has been to trade on inside information.

Meanwhile, it is clear from SEC filings that SAC Capital and a larger “network” of other hedge funds (many of which employ former SAC Capital traders, and many of which have ties to Milken going back to the 1908s) regularly trade in the same stocks, and many of these hedge funds have not only coordinated their manipulative short selling attacks, but have also come under closer scrutiny during the course of the FBI’s investigation into what the FBI continues to describe as a “network” of financial operators.

One hedge fund in this “network” is Millennium Management, the outfit that was founded by Mulheren and Izzy Englander. The FBI has not publicly implicated Millennium in the “insider trading” network, but Millennium has acknowledged that it is concerned about the greater scrutiny. Indeed, soon after the FBI investigation became big news, Millennium hired an advisory board whose job is to make sure the hedge fund remains in compliance with regulations. Millennium’s advisory board includes former FBI Director Louis Freeh, former SEC enforcement division chief Stanley Sporkin, and former SEC Chairman Harvey Pitt (who has been a leading advocate of reform to address the problem of manipulative short selling).

Hopefully that advisory board will keep Millennium in compliance with the rules, and it will certainly keep Millennium immune from further scrutiny on the part of the FBI and the SEC, but it is clear that Millennium and SAC Capital, along with others in their “network” of hedge funds, have continued to collaborate with Milken, investing in companies that Milken was promoting, and attacking companies that Milken was seeking to undermine or destroy. Some details can be found in my recently published book (title: “The Dendreon Effect: How Felons, Con-men, and Wall Street Insiders Manipulate High-tech Stocks”) which also provides other information about the techniques used by a network of powerful hedge funds (and Michael Milken) to undermine the markets and hurt individual investors.

As we will see in later chapters of this series, this same crowd (i.e. Milken and the “network” that the FBI is now investigating, though so far with no prosecutions of any big fish) contributed to the meltdown of 2008, and continue to pose a threat to the markets today.

For our present purposes, we need to stress that Boesky was right when he said that Milken had “friends in Vegas.” Milken’s best friend in the world, according to Milken, is Steve Wynn, the Las Vegas casino mogul. Meanwhile, Wynn’s friends, according to Scotland Yard, have included the dons of the Genovese Mafia family. Indeed, according to a declassified report written in the late 1980s by Scotland Yard investigators, Wynn had “been operating under the aegis of the Genovese Mafia since he first went to Las Vegas in the 1960s.” Scotland Yard noted that both Wynn and his father had a long standing relationship with Genovese Mafia boss Anthony “Fat Tony” Salerno (the mobster with whom Mulheren spent most of his time convening during his stint in jail).

Wynn, however, denies any relationships with the Mafia, and he has won a defamation lawsuit against a Las Vegas newspaperman who published a book (title: “Running Scared”) that advertised itself as “explaining why a confidential Scotland Yard report calls Wynn a front man for the Genovese crime family.” Wynn also filed a suit against the book’s publisher, Lyle Stuart, who had published other controversial books, such as the “Anarchist Cookbook,” and “Turner Diaries,” which is a fictional account of home-grown rebels overthrowing the “Zionist” government of the United States. In explaining why he had filed a lawsuit against the publisher, Wynn said, “I want to put Lyle Stuart out of business. Every law enforcement agency has always vouched for me that any suggestion of me and organized crime is preposterous. I know one thing: If anybody says any different, they’re a fucking defendant.”

It is true that law enforcement agencies (other than Scotland Yard) have vouched for Wynn. Indeed, former FBI Director Louis Freeh (the same fellow who is employed by Millennium Management) is presently employed by Wynn. Freeh is helping Wynn investigate one of Wynn’s former business partners, a Japanese billionaire named Kazuo Okado. Meanwhile, Wynn has won multiple other defamation lawsuits against people and journalists who have accused him of having ties to the Mafia. For example, Wynn has successfully sued Joe Francis, creator of the “Girls Gone Wild” porn empire. Francis had said that Wynn wanted to “hit me in the back of the head with a shovel and bury me in the desert.” Wynn said that was a “terrible lie,” and that his friend, the Dalai Lama, taught him to be a man of peace and calm.

The takeaway, we must conclude, is that Wynn has no ties to the Mafia. As for Milken’s other closest friends and business partners, however, there can be no doubt that many of them have ties to the Mafia. As we know from earlier chapters of this series, Milken’s closest business partner is Gene Phillips, who was the central figure in the junk bond merry-go-round that Milken operated in the 1980s, and which was a key component of the larger operation to “bust-out” savings and loan banks. Phillips operated (and still does operate) an outfit called Southmark Corporation, which was the largest recipient of Milken junk bond finance in the 1980s. The largest subsidiary of Southmark in the 1980s, meanwhile, was San Jacinto Savings and Loan, which was “busted-out” with help from such Mafia luminaries as Herman Beebe and Carlos Marcello (the top boss of the New Orleans Mafia).

The man whom Gene Phillips appointed as the chief loan officer of San Jacinto Saving and Loan was named Joseph Grosz. Aside from being a banker, Grosz was a leading mobster, affiliated with the Chicago Syndicate, according to prominent journalist Pete Brewton, who is one of the nation’s leading experts on the involvement of organized crime in the savings and loan crisis. Brewton has also reported that San Jacinto’s parent, Southmark, was “used as a mob dumping ground to buy the investments of mobsters,” including not only Herman Beebe and Carlos Marcello, but also organized crime figure Harry Wood, and Morris Shenker, a former lieutenant of Meyer Lansky, then the most powerful mobster in the nation.

In 2000, Phillips was arrested and charged with manipulating stock prices in league with other leading figures in La Cosa Nostra. More specifically, Phillips was arrested as part of Operation Uptick, which was described by FBI spokesmen as the largest Mafia bust in U.S. history. More than 120 people, all with ties to organized crime, were arrested in Operation Uptick, and FBI officials described them as being part of nationwide “network” of stock manipulators, some of whom had committed various other crimes, which included (according to an FBI statement): “controlling and infiltrating broker-dealers…and employing tactics of violence, including threats, extortion, physical intimidation, and the solicitation of murder…”

Some of the 120 people arrested in Operation Uptick were members of Russian organized crime syndicates, while others were, variously, described by the FBI as having ties to each of La Cosa Nostra’s five major families—Genovese, Colombo, Gambino, Bonanno, and Lucchese. Among the 120 defendants, aside from Phillips, were: Robert “Little Robert” Lino, a capo in the Bonanno crime family; Anthony Stropoli, a soldier in the Colombo crime family; Frank “Frankie” Persico, a Colombo Mafia family capo; Sebastian “Sebbie” Rametta, an associate of the Colombo crime family; Robert Gallo, an associate of the Genovese crime family; and John Black, an associate of the Lucchese crime family.

The DOJ charged that Phillips, in league with various members of La Cosa Nostra, had manipulated the stock of one of his companies, an outfit called Transcontinental. Aside from Phillips, the largest shareholder in that company was Michael Milken. Meanwhile, the Dallas Business Journal reported that Phillips “allegedly met with two associates of New York’s legendary Bonanno organized crime family to discuss a plan to bilk a couple of ‘very friendly’ union pension funds through the sale of inflated stock.” However, Phillips was acquitted on all charges. In addition, most of the other people who were arrested as part of Operation Uptick got off with nothing worse than small fines, though this was the biggest Mafia bust in history, according to then FBI director Louis Freeh (who, of course, is now employed by Wynn and Millennium Management).

That same year, 2000, the media reported that an outfit called Sinex Bank was linked to the Bank of New York scandal, which saw the Bank of New York laundering upwards of $10 billion ($3.9 billion of which passed through Sinex Bank) for organized crime syndicates. The syndicate most closely linked to that scandal was the Mogilevich organization, the leader of which was (and is) a Russian (actually Ukranian, but he is a Russian citizen) named Semion Mogilevich, widely known as “the most dangerous mobster in the world.” What the media did not report was that the money laundering involved a network of brokerages that first invested dirty cash into the “bust outs” of publicly listed companies, with the money coming out partially cleaned as short selling profits that were delivered onwards to cooperative banks, including Sinex Bank and the Bank of New York.

Also linked to that money laundering was a brokerage called Sinex Securities, which was a subsidiary of Sinex Bank. Sinex Securities was controlled by Gene Phillips, though it was registered in the name of his son, Brad Phillips (Sinex changed its name to National Alliance Securities when it was linked to the Bank of New York scandal). SEC filings show that Transcontinental (the Phillips outfit whose largest shareholder was Milken, and which was at the center of the Operation Uptick charges) had placed more than 700 thousand of its shares with Sinex as “collateral for borrowings”. That is to say, a chunk of the cash that went through Sinex was delivered, as collateral, to Transcontinental shareholders. However, neither Sinex nor Phillips were charged with any crime related to the Bank of New York scandal.

With the exception of Mogilevich himself, nobody else of any significance was charged with any crime related to the Bank of New York scandal, and Mogilevich (“the most dangerous mobster in the world”) subsequently hired a lobbyist in Washington. Mogilevich’s lobbyist is William Sessions, formerly director of the FBI. The FBI still lists Mogilevich as one of the “Ten Most Wanted” criminals in the world, but there is no evidence that the FBI has ever tried to arrest Mogilevich, and others in the Mogilevich organization continue to this day to operate openly in the United States.

Some of them, we will see, are key figures in the Milken network.

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Back in the 1980s, another of Milken’s closest business associates was Fred Carr, who, like Phillips, was a central figure in the junk bond merry-go-round that was part of the larger scheme (that had help from BCCI) to “bust out” numerous savings and loans banks. Fred Carr used Milken junk bond finance to seize control of Executive Life, and that financial institution (like most of the other savings and loans that Milken’s closest associates took over with Milken junk bond finance) was subsequently looted and demolished (that is, “busted out”).

Prior to taking control of Executive Life, Carr had been a principal with Investors Overseas Service, which had ties to BCCI, and which was, at the time, the biggest Ponzi scheme in history. Investors Overseas had been founded by a financier named Bernard Cornfield, and later involved a criminal named Robert Vesco, who subsequently fled to Cuba and became involved (according to CIA reports) in trafficking drugs with Cuban dictator Fidel Castro. (Castro later claimed that Vesco had been imprisoned in Cuba).

One of Investors Overseas Services’ key “feeders” (that is, one of the people who “fed” the Ponzi much of its money) was Sylvian Ferdman, a Genovese Mafia courier, who routed money into the Investor’s Overseas racket from clients in South America. Another Investors Overseas feeder was John Pullman, whom the U.S. government had named as a close associate of Genovese Mafia boss Anthony “Fat Tony” Salerno. That’s the same “Fat Tony” who was later conversing with Mulheren in prison, and whom the Scotland Yard report linked to Wynn (The Scotland Yard report, however, was false, according to Wynn, and U.S. law enforcement officials have not accused Wynn of having ties to organized crime).

Another key component of Milken’s junk bond merry-go-round in the 1980s was MDC Global, an insurance and savings and loan company that (see Chapter 6 of this series) had been co-founded by a BCCI subsidiary. MDC Global, meanwhile, controlled a brokerage called Blinder Robinson, which specialized in “busting out” small to medium-sized publicly listed companies. MDC Global, of course, was itself “busted out,” and in 1989, Blinder Robinson was indicted, along with its founder, Meyer Blinder.

Blinder Robinson was known as “Blind’em and Rob’em” because it was not only a key player in a nationwide stock manipulation network, but also among the most crooked brokerages in America. Among the miscreants who manipulated stocks in league with Blinder Robinson were (according to various indictments) Thomas Quinn and Arnold Kimmes, both of whom (as we know from earlier chapters) had operated a number of brokerages linked to BCCI. Quinn, recall, was an associate of the Genovese Mafia family, while Kimmes had been identified in a 1973 FBI report as a “major organized crime figure.”

When Kimmes was arrested, he escaped prison by ratting on Meyer Blinder, who did not escape prison (though he was quickly released). In 2000, Richard Walker, then the SEC’s director of enforcement, gave testimony to Congress in which he described Blinder Robinson as being part of a “network” of brokerages — including D.H. Blair, Rooney Pace, FN Wolf, A.R. Baron, and many others – that were tied to organized crime. Most of these brokerages had been financed by Michael Milken and/or his close associates.

The proprietor of Rooney Pace, which was financed directly by Milken, was Randolph Pace, who was later indicted for running a $200 million stock manipulation scheme with a man named Judah Wernick. Many of the other brokerages mentioned in the SEC’s Congressional testimony – including D.H. Blair, A.R. Baron, and FN Wolf — were financed by Zev Wolfson, a Milken business associate who also financed Millennium, the hedge fund co-founded by Boesky’s prospective assassin John Mulheren.

D.H. Blair was particularly close to Milken. It was founded by Morty Davis, and run with help from Davis’s son-in-law, Lindsay Rosenwald, who served as vice chairman. After Milken went to prison in 1991, one of Milken’s top Drexel Burnham employees, Richard Maio, became president of D.H. Blair. In 2000, D.H. Blair was charged on multiple counts of stock manipulation and forced to shut its doors. To describe the full extent of D.H. Blair’s relations with La Cosa Nostra and Russian organized crime, I would have to bore you with a list of names so long that this story would begin to read like a telephone directory. But to give you just a small sampling, I will mention that the people indicted in just one of the hundreds of stock manipulation schemes perpetrated by D.H. Blair included: Frank Coppa, a capo in the Bonanno Mafia family; Edward Garafola, a soldier in the Gambino Mafia family; Daniel Persico, a capo in Colombo Mafia family; and Ernest Montevecchi, a soldier in the Genovese Mafia family.

After Milken got out of prison, he hooked up again with D.H. Blair’s former vice chairman, Lindsay Rosenwald, who is now one of the most powerful hedge fund managers in America, and perhaps the single biggest player in the world of biotech stocks. As described in my book (“The Dendreon Effect”), Milken and Rosenwald have sought to destroy biotech companies that were developing promising medicines while promoting dubious companies (financed by Rosenwald and Milken) whose medicines were killing people.

Many other powerful hedge fund managers operating today got their start in the 1980s working for Milken-financed brokerages with ties to organized crime. SEC filings and other evidence compiled by DeepCapture show with perfect clarity that all of the hedge fund managers in this network regularly trade in unison, investing in (or, more often, attacking) the same companies.

This does not mean that they have necessarily broken any laws, but, again, press reports suggest that some of the biggest players in this “network” are currently the targets a massive FBI investigation said to be targeting a “network” of financial operators suspected of insider trading. As I mentioned, one of them is SAC Capital’s Steve Cohen, who was investigated in the 1980s for trading on inside information that he allegedly received from Milken’s shop at Drexel. Cohen has been described by BusinessWeek magazine as “The Most Powerful Trader on the Street.”

When Cohen was investigated for trading on inside information that he received from Drexel, he was not yet a famous hedge fund manager, but he was among the select traders who effectively ran Gruntal & Company , a Mafia-tied brokerage that received much of its finance from Michael Milken.

There were just a few other traders who had special partnership agreements with Gruntal, and who effectively ran the place. I will name most of them, beginning with Maurice Gross, who handled the accounts of the Gambino Mafia family. Gross later founded his own operation with a Pakistani trader and former BCCI figure named Mohammad Ali Khan, who (according to a case filed by the New York attorney general) alighted with some of the Gambino family’s cash. This was no doubt much to the dismay of Gruntal CEO, Howard Silverman, who had come to depend on the Mafia’s good graces.

As of 2008, Silverman was running one of the nation’s biggest “dark pool” trading platforms, an outfit that enabled his hedge fund clients to conduct trading in total anonymity. It should be a matter of concern that a guy who once ran a brokerage with ties to the Mafia went on to run a major “dark pool”–especially since experts such as the authors of a report (see Chapter 1 of this series for details) commissioned by the Department of Defense say that such platforms could easily be deployed to do serious damage to the markets.

One of the people Silverman brought in to help run his brokerage – another of the select traders with special partnerships at Gruntal – was a fellow named Felix Sater, who was (and is) a Russian mobster and a member of the Mogilevich organization (controlled by Semion Mogilevich, often described as the “most dangerous mobster in the world”). While still at Gruntal, Sater was charged with stabbing a Wall Street trader in the face with the broken stem of a wine glass (actually, it was martini glass, according to a man who witnessed the attack).

While still at Gruntal, Sater and several other former Gruntal traders founded a brokerage called White Rock Partners. Most of White Rock’s employees were former Gruntal employees, and there is no doubt that White Rock’s partners all had ties to organized crime. In 1996, the FBI discovered a locker at a Manhattan Mini-Storage in Soho that belonged to Evgeny Klotsman, a White Rock principal who was formerly among the select traders who had effectively run the Milken-financed Gruntal & Company. The FBI announced that the locker contained guns and documents that linked Klotsman and Sater to a “global market manipulation and money laundering network controlled by Russian organized crime.”

In 1999, White Rock (renamed State Street Capital Partners) was indicted for orchestrating stock manipulation schemes in league with the above-mentioned D.H. Blair and A.R. Baron (financed by Zev Wolfson) and five members of La Costa Nostra, including a Genovese Mafia soldier named Ernest Montevechi, and Danny Persico, a capo in the Colombo Mafia family (and the son of Alphonse “Allie Boy” Persico, the top boss of the Colombo Mafia family). White Rock’s principals, in fact, included some of the top bosses of the Colombo Mafia family, among them not only Danny Persico (who was arrested, along with Gene Phillips, in Operation Uptick), but also a Colombo Mafia capo named Greg Scarpa, to whom we will return.

According to one of Felix’s White Rock partners (and according to The New York Times, which lent credence to the story), Felix escaped indictment (he was named only as an unindicted co-conspirator in the White Rock case) because Felix and his other partner, Evgeny Klotsman , had ties to the Russian intelligence services, and promised the U.S. government that they could work with Russian intelligence to buy Osama bin Laden’s stockpile of Stinger missiles (thereby preventing Al Qaeda from using the missiles to shoot down commercial airlines).

It should not be surprising that Felix Sater, a member of the Mogilevich organization, would have ties to Russian intelligence, and it is equally unsurprising that he would be capable of cutting a deal with Al Qaeda. As the White House national security staff made clear in August 2011, when the president announced that organized crime had “penetrated” the financial system (thereby inspiring the president to officially declare an “Emergency Order”), the Mogilevich organization has close ties to both the Russian intelligence services and to multiple terrorist organizations, including Al Qaeda.

A 1996 classified FBI report (since made public) noted that the Mogilevich organization was involved in everything from major league market manipulation to prostitution, Afghan heroin, and trafficking in nuclear weapons materials. This is why Semion Mogilevich sits high on the FBI’s list of “Ten Most Wanted” criminals. But, of course, Mogilevich has a good lobbyist (i.e. a former director of the FBI, the outfit that publishes that “Most Wanted” list), and few, if any, members of the Mogilevich organization are presently in jail. Many of them are residents of the United States, and we will see that many of them, including Sater, remain active in the U.S. markets.

Multiple reports from law enforcement, the United Nations, non-governmental organizations in Russia, and the mainstream media in London (distinct from the mainstream media in the United States, which has a peculiar reluctance to publish anything interesting) state unequivocally that members of the Mogilevich organization have been selling conventional weapons to Al Qaeda for many years. On at least one occasion, the Mogilevich organization tried to sell highly enriched (nuclear bomb grade) uranium to Al Qaeda. This is a matter of dispute for some “experts”, but European Union officials confirm that it is true, and there is evidence that members of the Mogilevich organization did, at a minimum, claim in meetings with Al Qaeda operatives in Europe that they could obtain the nuclear materials.

Felix, through Russian intelligence, was prepared to cut a deal with Osama bin Laden, but the CIA balked when Klotsman demanded that the U.S. government pay him and Felix $3 million for each Stinger missile. Nonetheless, Felix escaped doing jail time, and some of his other associates say that this is because he and his Russian intelligence associates promised that their relationship with Al Qaeda would eventually be put to use for the U.S. government. However, if American officials believe Felix is helping the U.S. government, they are certainly mistaken. Indeed, it is a bit unsettling that this dangerous criminal is still on the loose. Not only was Felix once charged with stabbing a Wall Street trader in the face with the broken stem of a wine glass (actually, a martini glass), but Felix has also threatened to kill multiple other people. For example, Felix Sater has threatened to kill DeepCapture founder Patrick Byrne.

According to one of Felix’s White Rock partners (who has written about this in a book called “The Scorpion and the Frog”), Felix also once threatened to kill a short seller named Alain Chalem, who then ran a brokerage called Taluca Pacific in partnerships with DeCalvacante Mafia capo Phil Abramo, who was widely known at the time as “The King of Wall Street.” As we know from earlier chapters of this series, Abramo had formerly been involved with brokerages linked to the BCCI enterprise.

Felix’s partner says that Felix did not ultimately kill Chalem, and we should assume that he did not, but soon after the threat (in late 1999), Chalem was, in fact, murdered, execution-style, in his New Jersey mansion. The FBI has yet to prosecute anyone for the murder, but media reports have suggested that one suspect was Danny Persico, the Colombo Mafia capo who was a partner in Felix’s White Rock Partners. Other media have reported that the FBI believes the murder was related to Chalem’s dealings with Russian organized crime.

In later years, Felix co-founded a real estate and mortgage outfit called Bayrock. As we will see in later chapters, Bayrock played a role in the larger “bust out” of the mortgage markets, but for the purposes of this chapter, I will note that Bayrock’s former CFO, Jody Kriss, has alleged that Bayrock is a massive money laundering operation. In 2009, Kriss filed a lawsuit to this effect, and noted that Felix had once threatened to have him (Kriss) tortured and then murdered.

One of Bayrock’s co-founders was Tevfik Arif. In 2011, Arif was arrested in Turkey after Turkish commandos raided a party that Arif was holding on a yacht that had once belonged to Mustafa Kemal Ataturk, Turkey’s founding president. Arif, a native of Kazakhstan, was arrested along with a small harem of prostitutes and some unnamed government officials from Central Asia. (It is unclear why the commandos raided the yacht; the media has reported that Arif was charged only with illegally hiring prostitutes, a crime that does not usually result in commando raids).

Another Bayrock partner was Tamir Sapir, a billionaire real estate investor whose real estate portfolio was managed by a man named Frederick Contini, whom the government has named as an associate of the Genovese Mafia family. In 2008, Contini entered a secret plea to racketeering. He has also faced charges for stabbing a man in the face with the stem of a broken wine glass. It seems to be the thing to do.

As Tamir Sapir himself has admitted, he spent his formative years running a company that specialized in selling high-tech electronics equipment to KGB operatives in New York. As Sapir has not admitted (though public records show that it is true), Sapir’s partner in his espionage operation was Semyon Kislin, who was (according to the FBI) a “member” of the Russian organized crime syndicate run by Vyacheslav Ivankov, then the top boss of the Russian mafia in the United States. In 2009, Ivankov was assassinated on a Moscow street, but not before admitting that his organized crime syndicate (which had close ties to the Mogilevich organization) had long been employed by the Russian intelligence services.

It is clear that Felix Sater has maintained relationships that he developed while working as a trader for Gruntal & Company. For example, he remains a close associate of SAC Capital’s Steve Cohen, and a man involved with a private investigation of Felix’s Bayrock says that Felix has laundered money for Cohen and other hedge fund managers. (Cohen presumably would deny this, and he has not been charged with any wrongdoing).

Meanwhile, Bayrock has had partnerships with several investment funds, nearly every one of which is controlled either by Milken’s former top employees at Drexel Burnham, or by others among the small band of people who are Milken’s closest associates. One of Bayrock’s partners, for example, is Apollo Real Estate, part of Apollo Management, a private equity fund controlled by Leon Black, who is one of the most powerful investors in America. Leon Black is the son of Eli Black, who was, in the 1970s, the head of United Brands, formerly known as United Fruit, a company that was accused of everything from bribing tin-pot dictators to dealing with La Cosa Nostra and funneling money to Latin American narco-terrorists.

In 1975, Carl Lindner, another of Milken’s closest associates and a key participant in Milken’s junk-bond merry-go-round and “bust out” scheme , used Milken finance to take over United Brands. In the midst of this takeover, Eli Black crashed through a plate glass window on the 44th floor of the Pan Am Building in New York, and fell to his death (the death was reported as a suicide). After this incident, Eli’s son, Leon Black, was named head of mergers and acquisitions at Drexel Burnham, the investment bank effectively controlled by Milken. The two men became friends, and after Milken’s criminal indictments, Black insisted that Drexel defend his friend at all costs. Even after Milken’s indictments resulted in Drexel’s collapse, Black continued to insist that Milken was innocent, and today the two men are close friends, involved together in multiple business ventures (some described in my book). Milken’s son, Lance, is a partner at Apollo, the Leon Black fund.

Another of the most powerful financiers in America (and also among Milken’s closest associates) is Carl Icahn. In the early 1980s, Icahn was the head of the options department at Gruntal & Company (the outfit whose key clients included the Gambino Mafia family, and whose key traders, such as Felix Sater and Evgeny Klotsman, were major Russian organized crime figures). After leaving Gruntal, Icahn started his own investment outfit, funded mostly by Michael Milken and Zev Wolfson (Wolfson being the guy who funded Mulheren and the above-mentioned Mafia-tied brokerages, which were indicted for schemes they perpetrated with La Cosa Nostra and Felix Sater).

As soon as he launched his investment fund, Carl Icahn hired several key employees: Harvey Houtkin, Allen Barry Witz, Gary Siegler, and Alan Umbria. Meanwhile, Umbria, who represented Icahn on the floor of the American Stock Exchange, served as the front-man for the Genovese Mafia in a New York restaurant called Crisci’s, which was featured in the movie “Donnie Brasco”—a movie about an undercover FBI agent who infiltrates the Mob. Umbria was also the Mafia’s front-man in another New York restaurant — The Court of the Three Sisters.

One day in the late 1980s, Umbria’s close business associate walked into The Court of the Three Sisters and found Umbria presiding over a meeting in one of the restaurant’s private rooms. The business associate was asked to leave before he could hear what was discussed at this meeting, but the businessman knows who was in attendance – namely, Alan Umbria, a collection of Genovese Mafia thugs, and Louis Micelli, who was a stock broker until his untimely death in 2005. In addition to being a stock broker, Micelli was a major league narco-trafficker with deep connections to the drug cartels of Colombia, and to a Paraguay cell of Hezbollah, the jihadist outfit that takes its directions from the regime in Iran.

It was the Paraguay cell of Hezbollah that helped Iran blow up a synagogue in Argentina, and for a long time, this cell trafficked in cocaine from bases in Ciudad del Este and other cities in the “tri-border” region where Brazil, Argentina, and Paraguay meet. That region has since come under greater scrutiny, so Hezbollah’s drug kingpins have moved deeper inside Paraguay, but they continue to traffic coke, working with Hezbollah jihadis resident in North America – especially in Toronto, Detroit, New York, and my hometown, Chicago. Hezbollah’s trafficking operation continues to be a partnership with La Cosa Nostra, the Russian mafia, and (yes) some stock brokers, more of whom we will meet later.

* * * * * * * * *

Back to Gruntal & Company, the brokerage that was financed by Milken.

As we know, there were just a few traders who had special partnerships with Gruntal, and who effectively ran the place. In addition, we know, all of these traders had close ties to Milken. One of them, of course, was Steve Cohen, future founder of SAC Capital. Another was the Russian crime figure Evgeny Klotsman. And yet another, of course, was the Russian mobster Felix Sater, who, along with Klotsman, was, in 1996 linked to what the FBI described as a “global market manipulation and money laundering network controlled by Russian organized crime.” Other key figures in that “global market manipulation and money laundering network” were, of course, members of La Cosa Nostra, several of whom were involved, along with Felix, Klotsman and other Gruntal principals, in White Rock Partners.

There were just a few other traders who effectively ran Gruntal, and one of them was Andrew Redleaf, whose wealthy family did a lot of business with Milken’s operation at Drexel. Redleaf got his job at Gruntal on Milken’s recommendation. After leaving Gruntal, Redleaf invested in Sun Country Airlines in partnership with Tom Petters, who was arrested in 2008 and indicted for orchestrating a massive Ponzi scheme in cahoots with Michael Catain, the son of a famous Genovese Mafia enforcer named Jack Catain. Redleaf currently runs a large hedge fund called Whitebox Partners, another of the hedge funds that regularly trade in unison with SAC Capital and others in the network. (Neither Whitebox nor its principals has been charged with any crime).

Another one of the hedge funds in this network is the massive and eminently powerful Cerberus Capital, run by Stephen Feinberg and Ezra Merkin. In the early 1980s, Feinberg was one of Michael Milken’s top employees at Drexel Burnham. In the mid-1980s, Milken asked Feinberg to move to Gruntal & Company to help the others (namely, Russian mafia boss Felix Sater, Evgeny Klotsman, Gambino Mafia broker Maurice Gross, and Steve Cohen, among a few others) oversee Gruntal’s operations, which had become important to Milken’s nationwide network. But aside from the SEC’s investigation of Steve Cohen, regulators did not catch on to Gruntal’s criminality until the mid-1990s, when it was forced to pay the largest fines in SEC history after a series of scandals that saw some of its other managers charged with embezzlement and cooking the books. By then, the traders who really ran the place in the 1980s had moved on to much bigger projects, one of which, we know, was Feinberg’s Cerberus Capital.

In 2006, Mainichi Shimbun, Japan’s most respected business newspaper, reported that Cerberus was tied to the Japanese Yakuza. Feinberg said it wasn’t true and he sued the Japanese newspaper for libel, but there is no doubt that Mafia outfits worldwide are becoming more closely intertwined, and I think we would be justified in asking whether Feinberg came into contact with various Mafia outfits while working for Gruntal & Company (which was effectively controlled by a select number of traders, some of whom were mobsters). Feinberg’s partner in Cerberus, Ezra Merkin, meanwhile, has been charged with civil fraud for his role in the massive “Ponzi” scheme (in fact, it was not just a “Ponzi” scheme, but more on that later) perpetrated by the infamous Bernie Madoff. One of Merkin’s other funds, Ascot Partners, was the second biggest “feeder” to the Madoff criminal operation.

Other big “feeders” to Madoff’s operation were, according to court documents, “made” members of the Mafia. One of them was Ralph Mafrici, who had a joint account with Madoff’s investment fund in the name of Eleanor Cardile, a relative of Madoff’s right hand man, Frank DiPascali. Mafrici was a Genovese Mafia capo who allegedly ordered the assassination of another Mob boss named Albert Anastasia. Since Anastasia was getting his hair cut at the time, the assassination was famously dubbed “The Barber Shop Hit.” In fact, Madoff’s operation had extensive ties to organized crime, as we will see in later chapters, wherein we will also see that Madoff’s brokerage was a key component of the Milken network (and had, in the 1980s been a key component of the larger BCCI enterprise). First, though, let us meet some of the other characters in the “network” that will feature in our later discussion of the 2008 meltdown.

Another of the traders who, in the 1980s, effectively ran Gruntal & Company was Sam Israel, who later became the proprietor of a criminal hedge fund called Bayou. When Israel was indicted in 2008, Bayou was said to be the “biggest Ponzi scheme in history.” Before that, the biggest Ponzi schemes in history had been the Ponzi schemes run by the above-mentioned Fred Carr and Tom Petters. Unfortunately, in December of 2008, Sam Israel’s Ponzi was topped by Bernard Madoff, who turned himself in to the FBI and announced that his “Ponzi” scheme (which absconded with upwards of $65 billion) was bigger.

When it came time for Israel to show up for prison, Israel instead parked his car on a bridge and left a note in the window that said, “Suicide is Painless.” Then he ran away.

After that, Israel had second thoughts and decided to turn himself in. Meanwhile, it emerged that Israel had been in business with Robert Booth Nichols, whom the FBI had identified as a close associate of both the Gambino and Genovese Mafia family and perhaps the key U.S. contact for the Japanese Yakuza. Back in the 1980s, Nichols had been involved with BCCI, and he was tied to a big scandal surrounding a software program called Promis.

The developers of Promis alleged that the software was stolen from them by the U.S. government, which (according to the developers) modified it so that it included a back door feature that would allow the U.S. government to access information on computers that had installed the software. At the time, the media gave considerable credence to this story, and suggested that the U.S. government had sold Promis software to multiple foreign governments. What has not been widely reported is that Mafia-tied Robert Booth Nichols also managed to gain rights to sell Promis software, and Nichols handed those rights to the famous Saudi arms dealer and market manipulator Adnan Khashoggi, who had been a key figure in the larger BCCI enterprise.

As a document obtained by DeepCapture shows, Khashoggi, in turn, licensed the software to Sheikh Khalid bin Mahfouz, then the largest shareholder of BCCI and executive director of the bank. (Recall from earlier chapters of this series that Sheikh Mahfouz was, until his death in 2009, also one of Osama bin Laden’s most important business partners). Mahfouz proceeded to sell this software to major banks around the world, raising the question of whether he used its back-door feature to obtain confidential information from the computer systems of banks that used the software.

The bizarre nature of the business that Nichols and Israel later did together has been reported in an entertaining book called “Octopus: Sam Israel, the Secret Market, and Wall Street’s Wildest Con,” which suggests that Israel was conned by Nichols into believing that he, Israel, could recoup his hedge fund losses by tapping into a “secret market” that was, according to Nichols, controlled by 13 powerful families who also controlled the whole world. The book, of course, casts doubt on the notion that the 13 families actually control a secret market, much less the whole world, and the book reports further that Israel was scammed by Nichols into paying a large sum of money to get his hands on U.S. Treasury notes with a face value worth billions.

The Treasury notes were said to be linked to “Yamashita’s gold,” which was reputed to be gold that had ostensibly been stashed in the Philippines by the Japanese just prior to the end of World War II, and later recovered by a secret U.S. government operation. This, too, seems an unlikely proposition, but there might, in fact, be more to this story than a tale of a hapless hedge fund manager (Sam Israel) who lost millions to a clever con-man (Nichols). Which is not to say that 13 families actually control the world (though, of course, anything is possible), but as court documents obtained by DeepCapture show, Nichols and Israel had, in fact, obtained U.S. Treasury notes valued at $250 billion (as in a quarter-of-a-trillion dollars).

Israel and Nichols told people that their $250 billion in Treasury notes were secured by 2,500 metric tons of gold (serial number SC 3040-20) at the Atlanta Federal Reserve. In fact, physical gold in this quantity was not sitting with the Federal Reserve, but Nichols and Israel said the Atlanta Federal Reserve had issued a serial number in confidence that the gold would be forthcoming, much of it from the Philippines.

More specifically, Nichols and Israel told people that many of their $250 billion in Treasury bonds were secured by “Yamashita gold” that had been located years earlier by then Philippine dictator Ferdinand Marcos, who had moved the gold to a new hiding place in the jungles of Mindanao, an island at the south end of the Philippine archipelago. According to Nichols, Adnan Khashoggi (who was once indicted for laundering money on behalf of Imelda Marcos, then widow of the former dictator) had reported that this gold was now in the possession of the Abu Sayyaf terrorist group on Mindanao, and that his associates were traveling to the Philippines to retrieve the gold.

Nichols later changed the story and said that the $250 billion in U.S. Treasury bonds were related to long-standing U.S. government obligations to the offspring of Chinese nationalist leader Chiang Kai-shek. Specifically, Nichols said the obligations had been confirmed by Tansri Teong, a representative of the Maiwah family, descendents of Chiang Kai-shek who lived in Luxembourg. However, Nichols began telling the Chiang Kai-shek story after Israel was arrested, perhaps to distract investigators from the fact that their scheme revolved primarily around Khashoggi’s assurances concerning the Yamashita gold in the Philippines.

In either case, while Khashoggi had spoken of this gold in the past, many considered the story to be rather implausible. Of course, anything is possible, but it is equally possible that the $250 billion Treasury bonds were a fake. Nonetheless, according to journalist Cheryl Seymour (who first reported parts of this story, though not the information about the gold in the Philippines), bankers around the world were convinced that the Treasury notes were real. And, again, they had a face value of a quarter trillion dollars—which is around 60% of what the U.S. government pays each year in interest on the national debt. It’s also around 60% of the U.S. government’s annual defense expenditures. Moreover, Nichols and Israel circulated the story about this supposed massive obligation just as the U.S. financial system was beginning to weaken.

That is, just as the system was weakening in 2008, Israel and Nichols claimed that they were going to cash in notes that would (if it they were real) effectively bankrupt the U.S. government and fuel panic with regard to any major banks that had liens on Treasury notes. As one banker told Seymour, this “shook the financial foundation around the world.” Other bankers reiterated that statement: Sam Israel’s claim (whether true or false) to have $250 billion in Treasury bonds linked to a stash of gold in the Philippines actually rocked the global financial system (though, of course, there were other activities that did quite a lot more to rock the global financial system).

After Israel was arrested, he and Nichols filed lawsuits against each other. Soon after, in 2009, reports emerged that Nichols had been found dead in Switzerland. People close to Nichols insist that Nichols faked his own death, but the truth remains unknown. It is also unlikely that we will learn whether the U.S. Treasury notes were fake because soon after Nichols and Israel filed their lawsuits, the notes vanished. They had been briefly entered into the public record, but they are not there anymore. There is no doubt, though, that the notes (whether they were counterfeit or not) did exist. And some bankers apparently did take them seriously.

No doubt I will be ridiculed as a conspiracy theorist simply because I have told this true (albeit weird) story, but I have been accused of worse, and I will note that an almost precisely similar story (though with a different set of protagonists) was recently discussed on the floor of the British parliament.

* * * * * * * *

Before he got involved with the bizarre $250 billion Treasury note scheme, and after he left Gruntal & Company, Israel spent time working for one of Michael Steinhardt’s hedge funds. In that capacity, Israel helped Steinhardt corner the market for U.S. Treasuries, posing a threat to economic stability until the government threatened to press criminal charges, convincing Steinhardt to back off.

John Lattanzio, the manager of Steinhardt’s hedge fund, was extremely secretive. There wasn’t much information on him until a court case revealed that Lattanzio once proposed marriage to a Russian hooker and gave her a $289,275 diamond ring. Nothing wrong with that (marriage is a wonderful thing), but the interesting development in this case was that the lovers quarreled, Lattanzio wanted his ring back, and the prospective wife told the judge that Lattanzio had big-time Mafia connections. She also said that Lattanzio “would not hesitate to use [the Mafia] to harm me.” Which is not surprising because the man who launched Lattanzio’s career, Michael Steinhardt, also has big-time Mafia connections.

When it became evident that Steinhardt’s ties to the Mafia might become public, Steinhardt preemptively published a book in which he revealed (as if were no big deal) that his father, Sol “Red” Steinhardt, had done time in Sing-Sing prison because he was, in the words of a Manhattan district attorney, the “biggest Mafia fence in America.” In fact, as noted in earlier chapters of this series, Steinhardt’s father was effectively the chief financial officer for the Genovese Mafia family. In his book, Steinhardt admitted that the first and most important investors in his first hedge fund were: the Genovese Mafia family; Ivan Boesky (Milken’s most famous criminal co-conspirator); and Marc Rich (who then shared office space with Boesky).

In previous chapters of this series, I discussed Marc Rich’s ties to BCCI and the Iranian regime, noting that Steinhardt’s lobbying helped convince President Bill Clinton to pardon Rich from his indictment for illegal trading with Iran. Although Rich was pardoned, he still owes the U.S. government taxes, so he lives in Switzerland, where his palatial home is guarded by a private army of mercenaries.

Rich has done quite a lot of business with companies, such as Highland Capital, that were under the control of Russian organized crime boss Semion Mogilevich, and Rich was linked to the late 1990s scandal that saw Russian organized crime syndicates (most notably the Mogilevich organization) launder more than $10 billion through the Bank of New York. This was the same scandal that involved Sinex, which handled around $3.9 billion of that money, most of it belonging to the Mogilevich organization. Rich was not charged in the Bank of New York affair, and nor were any of the other oligarchs (many of them previously linked to the BCCI enterprise) who were implicated in the Bank of New York affair.

Of course, Steinhardt was also among Milken’s closest associates. Nowadays, Steinhardt runs a big exchange traded fund (ETF) outfit called Wisdom Tree Investments. His partner in that operation is Jonathan Steinberg, son of Saul Steinberg, who was a key player in the junk bond “bust out” scheme that Milken ran in the 1980s. Steinberg used Milken junk bonds to seize Reliance, a giant insurance and financial services firm, which was subsequently looted and destroyed (i.e. “busted out”). Steinberg was not charged with any crime.

As noted in Chapter 6 of this series, a Wall Street Journal story published in 1985 (read it, as it was the last serious investigative report on short-side market manipulation published before the media started describing these miscreants as heroes worthy of our admiration) identified Steinhardt as being part of a “network” of short sellers who regularly attacked public companies using unscrupulous tactics, such as posing as journalists to obtain inside information and conspiring to cut off victim companies’ access to credit.

Among the others identified as being part of that “network” was Jim Chanos, who is now the proprietor of a famous hedge fund called Kynikos Capital, and the head lobbyist for the hedge fund industry. Chanos is also a favorite source for the New York financial media, one reason why the media no longer publishes stories about short-side market manipulation (which does not occur, according to the lobby headed by Chanos). When DeepCapture first started reporting on Chanos’s ties to Michael Milken and associates, Chanos went to lengths to distance himself from Milken, telling journalists that he had identified the fraud at Milken-financed companies.

In an email to some of his associates (the email was obtained by lawyers for the Canadian financial institution called Fairfax Financial, and later obtained by DeepCapture), Chanos outlines the party line, suggesting to the recipients of the email (namely, a long list of Milken-tied hedge fund operators and billionaires, such as Carl Icahn, who owed their careers to Milken) that they communicate the fact that he, Chanos, had been a short seller of companies financed by a “certain junk bond king” (i.e. Milken). But while Chanos, Steinhardt, and others in their “network” were certainly short sellers of Milken-financed companies, their short selling was always beneficial to Milken, and was simply the tail-end of the “bust-out” schemes that I have described, noting that every “bust-out” ends in a wave of short selling.

Indeed, as was revealed in the 1985 Wall Street Journal story, Chanos got his big start by shorting a company called Baldwin United. According to this story, Chanos went so far as to go to Baldwin’s bankers with false information that convinced the bankers to cut off Baldwin’s access to credit. As a result, Baldwin went bankrupt, and Milken got himself named as the advisor to the bankruptcy. According to a well-known and highly respected businessman who was involved in the bankruptcy proceedings, Milken abused his advisory role and ensured that all of Baldwin’s assets were delivered to his cronies at firesale prices. This success brought Chanos to the attention of Michael Steinhardt.

At the time, Chanos (who is now revered by The Journal) was working for a Mafia-tied brokerage called Gilford Securities. In 2000, five Gilford brokers were arrested (along with Phillips) in Operation Uptick, which was, of course, then the biggest Mafia bust in the history of the FBI. Gilford’s brokers were charged with manipulating stocks in league with ten members of La Cosa Nostra and a corrupt New York cop. By then, though, Chanos had left Gilford to start his own hedge fund, receiving his initial finance from Steinhardt (son of the biggest Mafia fence in America) and Steinhardt’s limited partner, Ivan Boesky (Milken’s most famous co-conspirator). Steinhardt’s other limited partner, Marty Peretz, introduced Chanos to Dirk Ziff, another powerful hedge fund manager (Och-Ziff Capital and Ziff Brothers), and for a while Chanos ran his hedge fund out of Ziff’s offices.

While Chanos was launching his hedge fund, future CNBC reporter Jim Cramer (who had once planned to work in partnership with Boesky) was running a hedge fund out of Steinhardt’s offices. Later, Cramer and Chanos were the biggest fundraisers for the political campaign of New York Governor Elliot Spitzer, who had been Cramer’s college roommate. For a time, Spitzer’s favorite hooker, “Ashley Dupree” lived (rent free) at Jim Chanos’s beachside villa. She called him “Uncle Jim.” As Patrick Byrne once said, Ashley should be ashamed of herself for associating with this crowd.

SEC filings make it clear that Chanos regularly trades in league with other hedge funds in the Milken network, and in 2006 they were attacking Fairfax Financial, one of the largest financial institutions in Canada. Fairfax filed a lawsuit against others in his “network,” including SAC Capital, and some of its affiliates, such as Exis Capital and Sigma Capital. (A judge has ruled that SAC Capital should be dropped from the suit, but Sigma and Exis are still in litigation, and Fairfax has appealed the ruling).

Emails obtained by Fairfax’s lawyers make it clear that these hedge funds were using the same tactics (such as trying to cut off the company’s access to credit) that they had been using since the 1980s.In one email, an employee of Exis Capital (a SAC Capital subsidiary) wrote that “the way to get this thing [Fairfax] down is to get them where they eat, like the credit analysts and holders. We’re taking this baby down for the count.” This email was addressed to Jonathan Kalikow, son of Peter Kalikow, who had, in the 1980s, been one of largest investors in Ivan Boesky’s criminal arbitrage fund (or “hedge fund,” as it would now be called).

Kalikow is also a former owner of The New York Post. At the time, the newspapers’ fleet of delivery trucks was controlled by La Cosa Nostra. The operation was run by Bonanno Mafia soldier Richard “Shellack-head” Cantrella. Soon enough, the New York Post delivery fleet began transporting cargos of smuggled weaponry and cocaine, in addition to newspapers. (Kalikow was not charged with any crime, and it is possible he was unaware that his delivery trucks were controlled by the Mob).

At any rate, back in 2006, this network was going to take Fairfax “down for the count.” Fortunately, though, Fairfax was a strong company. Its bankers did not cut off access to credit, and it had the good luck to buy a lot of credit default swaps that massively boosted its profits.

However, two years later, Bear Stearns, Lehman Brothers, and other banks were taken “down for the count.” The public attack on Lehman began in May, 2008 with a speech by David Einhorn, a famous short seller who got his start working for Gary Siegler, one of the first people whom Carl Ichan hired after leaving Gruntal & Company. Einhorn is, for all intents and purposes, Ichan’s boy, and when he gave his Lehman speech, he was standing by Icahn’s side, just as he was standing by Ichan’s side when he initiated previous attacks on public companies.

In his speech and subsequent media tour, Einhorn cited data from a strange firm called The Markit Group to support his exaggerated contention that Lehman had improperly accounted for the value of its property and collateralized debt obligation holdings. See my earlier DeepCapture story, “The Markit Group: A Black Box Company that Devastated Markets,” which notes that this company was founded by a few hedge funds, which the company refuses to identify. It was, in 2008, run by two former Canadian bankers and a developer of Bulgarian property, and seemed to cherry-pick its data, which was provided by a few investment banks that are passive investors in the company.

The Markit Group is wholly without transparency, and yet it essentially dictates perceptions of market prices for collateralized debt obligations and other instruments (including credit default swaps) that are important barometers of health in the banking sector. And during the crisis of 2008, it consistently churned out wildly overstated valuations on credit default swaps, while valuing all collateralized debt obligations based on a sampling of CDOs that included only the worst of the worst (or more specifically, the “synthetic” CDOs that had been designed by short sellers to self-destruct).

The Markit Group’s wildly off-base statistics fueled the panic that helped bring down Bear Stearns, and it was a useful tool for Einhorn, when he initiated his attack on Lehman. That attack was akin to the launch of a new Ipod, with much-hyped speeches and a whirlwind media tour handled by a public relations firm, which presented Einhorn as the boy-wonder fraud-buster who had proved his mettle in an earlier battle with a financial services firm called Allied Capital. (See DeepCapture’s story, “Notes on David Einhorn: The Predator in a Cute T-Shirt,” for a fuller deconstruction of Einhorn’s blatantly dishonest attack on Allied Capital, which was perpetrated in league with Michael Milken and Carl Icahn).

While Einhorn was on his media tour, most of the other hedge funds in his network initiated a short selling attack on Lehman. After Lehman’s collapse, the bank’s creditors filed a lawsuit against the above-mentioned Steve Cohen and Dirk Ziff, alleging that the two hedge fund managers (along with Citadel Investment) helped destroy Lehman with manipulative short selling.

To be continued…Click here to read Chapter 7

Mark Mitchell is a journalist who spent most of his career working as a correspondent for mainstream media publications before joining DeepCapture.com. Mitchell is the author of a recently published book: The Dendreon Effect: How Felons, Con-men, and Wall Street Insiders Manipulate High-tech Stocks, which is available from most major online booksellers.

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3) Go here for additional suggestions: “So You Say You Want a Revolution?

  1. She is the 1999 recipient of the MILKEN Institute Award for Distinguished Economic Research

  2. U.S. Senator Orrin Hatch spoke at the Milken Institute in May 2010. A senior member of the Senate committees on Finance, the Judiciary and Health, Education, Labor and Pensions, Hatch gave a wide-ranging view of current public-policy debates in Washington. After his talk, Hatch turned to Mike Milken and said, “Thank God for the Milken Institute and what you’re doing. You’ve been a hero of mine for many years. I think if more people like you would get involved, we could bring a better spirit to America…and it’s time we do that.” Watch an excerpt from Senator Hatch’s remarks.

  3. The coward that he is.. It was easy to destroy companies, but it ain’t that nice when your world falls apart is it now? Now maybe he is feeling a little of what pain he inflicted on thousands of companies. I want them (The regulators) to take all his money next that he stole from people!!!

    “Steven A. Cohen, summoned to testify before a grand jury about allegations of insider trading at his SAC Capital Advisors LP, invoked his Fifth Amendment right not to incriminate himself, said two people familiar with the matter.”


    1. well well, i’m actually surprised because if he had done nothing wrong, why does he worry about incriminating himself?
      lma(zz)o …Fifth Amendment
      If a “target” of a government investigation refuses to testify on Fifth Amendment grounds, they don’t normally need to appear before a grand jury, according to government manual. A “target” is a person as to whom the prosecutor or the grand jury has substantial evidence linking him or her to a crime and who is considered to be is a putative defendant, the manual says….from
      Cohen Stays Silent as SAC Executives Meet Prosecutors
      By Katherine Burton & Saijel Kishan – Jun 28, 2013 5:21 PM CT

  4. more about The Einhorn Family…
    …pressure on Bain Capital owned Clear Channel to take the advertisements down. [4] Clear Channel took down the advertisements, officials from Clear Channel explained that the billboards violated the company’s policy of displaying anonymous political ads. When Clear Channel requested that the Einhorn Family Foundation identify themselves on the advertisements, the Einhorn family then chose to have the advertisements taken down. [5]…

  5. more about The Einhorn Family…
    Walker’s Pay-to-Play Government of the FUTUUUUURE!
    Tuesday, December 11, 2012 14:13
    …SEC rules adopted in 2010 “prohibit an advisor from providing advisory services for compensation – either directly or through a pooled investment vehicle – for two years, if the adviser or certain of its executives or employees make a political contribution to an elected official who is in a position to influence the selection of the adviser.”…

  6. more about The Einhorn Family…
    …pay to play …question about whether the arrangement violated federal conflict of interest rules

    done before the Gov Walker recall vote
    On July 1st 2011 functions once performed by the Wisconsin Department of Commerce were assigned to other state agencies and the Wisconsin Economic Development Corporation….

    Sat Dec 01, 2012 1:45 pm Gov. Walkers WEDC “loses” over $8 million in loans

    January 29, 2013 Scott Walker’s Scandal-Plagued Wisconsin Economic Development Corporation Announces New Tea Party CEO

    Audit an Embarrassment for Wisconsin Economic Development Corp. May 3, 2013

    Walker is a political stick of dynamite in many ways who shitcanned The Wisconsin Dept of Commerce to create an unaccountable Wisconsin Economic Development Corporation embarrassment while his sheeple like the Einhorn Family probably give him a wink and nod to be the next president of the United States!

  7. Looks like a major bear raid just took place on BBRY. Short positions of 35 percent of the stock. Pump and dump media.
    Trouble is that unlike most of the raids where control is sought, BBRY has no debt and is cash flow positive. So expect a major DTCC fubar where the new owners somehow own 200 percent of the stock.

    1. Hacked- you are not serious, are you?. That was not a bear run. That was a product cycle miss. Every wall street buy side nerd has been downgrading the stock over the last two market sessions. So, please. – Enough with the it’s always the shorts stuff. Sometimes, companies screw the pooch. It happens to the bet of them.

      1. The 35 percent short position was of May 31, long before last weeks earnings release. What is the fails to deliver on BBRY? How many different ways does the DTCC fail to show the true shorts? Are they still selling wash options to their buddies and then the DTCC allows the “market makers” to do the naked short with indefinite failure to deliver? What did Cramer say? This is a tip for Michael and Judd, there is a lot of smoke in BBRY.

  8. Yes Sean. The beginning of a trend

    Litigation Release No. 22489 / September 21, 2012

    SEC v. Revolutions Medical Corp. and Rondald L. Wheet, Civil Action No. 1:12-cv-03298-TCB (N.D. Ga.)


    On September 20, 2012, the Securities and Exchange Commission filed a civil injunctive action in U.S. District Court for the Northern District of Georgia, charging Revolutions Medical Corp. (“Revolutions Medical”), a medical device company based in Charleston, South Carolina, and the company’s CEO, Rondald L. Wheet (“Wheet”) with fraudulently issuing false and misleading press releases concerning the company’s flagship product, a retractable, medical safety syringe (“safety syringe”).

    The Commission’s Complaint alleges that, between approximately August 2010 and July 2011, Revolutions Medical and Wheet issued a series of misleading press releases that contained statements designed to convey the impression that, among other things, Revolutions Medical had finalized the development of a safe and effective syringe, the syringe was slated for imminent mass manufacturing and commercial distribution, and Revolutions Medical had entered into, or was on the cusp of entering into, binding mass sales and distribution agreements, including a sales agreement with the U.S. Department of Defense. However, contrary to the statements made in the company’s press releases, Revolutions Medical had not developed a safe and effective syringe ready for mass manufacturing or commercial distribution, and had not entered into any binding agreements for the sale and distribution of such a final product. The Commission’s Complaint further alleges that, through the press releases, Revolutions Medical and Wheet artificially inflated the price of Revolutions Medical’s shares, and that Revolutions Medical sold shares to a third-party hedge fund at inflated prices.

    In its Complaint, the Commission alleges that Revolutions Medical and Wheet violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder. The Commission further alleges that Wheet aided and abetted certain of Revolutions Medical’s violations of Section 10(b) of the Exchange Act and Rule 10b-5.

    # # #

    SEC Complaint in this matter


    Home | Previous Page Modified: 09/21/2012

  9. BTW Sean,

    Rondald L. Wheet career as a stock broker was also at some of the most notorious boiler rooms. Some of which Mark Mitchell has written about

    Would’nt it be nice if this were to be the beginning of a trend!!!

  10. Si-ravenseye.. Good stuff. I hope she strips him of every dime he has ever stolen/made!! Thanks again for info.

  11. Silver Manipulation Update: Ted Butler: The New Law of Supply and Demand….. Simply put, the new law of supply and demand has the price determining supply and demand and not vice-versa as it should be. This may sound like a game of words at first blush, but it goes to the heart of the matter. When price determines how much is produced and consumed, instead of supply and demand being the determinant of price, that’s just another way of describing price manipulation.

    Please don’t misinterpret what I am saying. I am not saying gold and silver prices will remain here or go lower; I have been stating the opposite (and have been wrong to date).

    What I am saying is that it is crazy (and illegal) for speculators on the COMEX to be establishing prices that will cause great harm to legitimate producers. The COMEX has bastardized and turned upside down the law of supply and demand and all the owner of the COMEX, the CME Group, does about it is announce trading volume records. All the CFTC does is waste valuable and limited resources on pointless lawsuits with a political agenda (against Jon Corzine).

    The reason I bring up this new and distorted version of the law of supply and demand is that it confirms and verifies everything I have alleged about silver being manipulated for the past 30 years.

    Again, with a straight face, I’d like to see someone explain how the mining industry is in trouble due to any overproduction on its part of gold and silver. I’d like to see someone deny how the price of the resource is not the most important factor for any producer and how the crooks at the COMEX are not setting the price.


  12. For Release:
    Contacts: July 11, 2013
    Michelle Ong (202) 728-8464
    Nancy Condon (202) 728-8379

    Newedge USA, LLC AWC – FINRA
    Newedge USA, LLC AWC – Nasdaq
    Newedge USA, LLC AWC – BATS
    Newedge USA, LLC Decision – Arca and NYSE

    FINRA Joins Exchanges in Fining Newedge USA, LLC $9.5 Million for Supervisory, Regulation SHO, and Books and Records Violations
    WASHINGTON — The Financial Industry Regulatory Authority (FINRA), along with BATS Exchange, Inc.1, New York Stock Exchange LLC2, NYSE Arca, Inc. and The NASDAQ Stock Market LLC, announced today that they have censured and fined Newedge USA, LLC of Chicago $9.5 million for failing to supervise trading by clients that directly accessed U.S. equities markets through Newedge’s order routing platform and/or internet service providers (known as “direct market access,” or “DMA”) or routed orders directly to market centers (known as “sponsored access,” or “SA”). In addition, Newedge also violated Regulation SHO (Reg SHO) and SEC Emergency Orders concerning short sales, and failed to obtain and retain books and records.

    Thomas Gira, Executive Vice President of Market Regulation at FINRA, said, “If a firm is going to turn a blind eye toward potentially manipulative trading unleashed upon the market by one of its customers, this case shows that there will be serious consequences. It is imperative that firms giving customers access to the marketplace function as responsible gatekeepers and implement reasonable supervisory programs and procedures to monitor their customers’ trading to ensure market integrity. As there were many triggers for this case, including referrals and information from BATS, NASDAQ and the NYSE, this case also illustrates how FINRA and the exchanges can effectively pursue activity that spans multiple markets.”

    FINRA and the exchanges found that Newedge did not have sufficient procedures, adequate surveillance tools, or necessary information to monitor DMA and SA client trading. Newedge’s supervisory violations occurred over a four-year period, during which numerous internal documents noted the firm’s deficiencies. Even after these “red flags” were raised, Newedge did not take adequate steps to satisfy its supervisory obligations.

    In one example, FINRA also found that Newedge did not have adequate procedures or controls to monitor which clients used DMA and SA to trade in the equities markets. Newedge failed to reasonably and effectively monitor for certain types of potentially manipulative trading, such as wash trading, despite numerous requests from its own compliance department to implement a wash trading surveillance report. Also, Newedge could not adequately monitor certain clients’ trading because it did not receive any order data reflecting their activity. Newedge also lacked essential knowledge about the beneficial owners of certain accounts directly accessing U.S. markets through firm affiliates, knowledge that was necessary for Newedge to properly monitor for potentially manipulative or suspicious activity. In addition to failing to obtain or retain required records, such as certain order data and client documentation, Newedge failed to retain certain email and text message data.

    Newedge’s failure to supervise its DMA and SA business also impacted its ability to supervise compliance with federal securities regulations regarding short sales, including the Emergency Orders issued by the SEC in July and September 2008 restricting or prohibiting short sales in certain securities. During the financial crisis in 2008, Newedge permitted its clients to submit numerous orders for short sales in securities that were prohibited by the SEC. FINRA found that Newedge violated Reg SHO by accepting customer’s short sale orders without a reasonable basis to believe the securities could be borrowed, could not determine its net position for appropriate sell order marking in a given security, and could not reasonably determine whether sell orders entered by clients were accurately marked.

    In concluding this settlement, Newedge neither admitted nor denied the charges, but consented to the entry of FINRA’s findings. Newedge also consented to retain an Independent Consultant to conduct a comprehensive review of the adequacy of the firm’s policies, systems and procedures relating to the specific areas of violative conduct identified by FINRA and the exchanges. Newedge will pay a total of $9.5 million in fines, including a $4 million fine to FINRA, a $1.75 million fine to The NASDAQ Stock Market LLC, a $1.75 million fine being paid to the BATS Exchange, Inc., a fine of $1.125 million to the New York Stock Exchange LLC, and an $875,000 fine to NYSE Arca, Inc.

    FINRA’s investigation was conducted by the Departments of Enforcement and Market Regulation.

    Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA’s BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2012, members of the public used this service to conduct 14.6 million reviews of broker or firm records. Investors can access BrokerCheck at http://www.finra.org/brokercheck or by calling (800) 289-9999. Investors may find copies of this disciplinary action as well as other disciplinary documents in FINRA’s Disciplinary Actions Online database.

    FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and firms. For more information, please visit http://www.finra.org.


    1 The settlement with the BATS will become final and conclusive on July 31, 2013, unless called for review pursuant to BATS Rule 8.10(c).

    2 The settlement with the NYSE will become final and conclusive on July 22, 2013, unless called for review pursuant to NYSE Disciplinary Rule 476(g).
    .Sitemap Privacy Legal ©2013 FINRA. All rights reserved. FINRA is a registered trademark of the Financial Industry Regulatory Authority, Inc.

  13. Bill Black: The Banks Have Blood on Their Hands

    And our regulators are too fearful to act
    by Adam Taggart
    Saturday, July 13, 2013, 9:13 PM

    We invited Bill Black to return to explain whether the level of systemic risk due to fraud in our financial markets has improved or worsened since the dire situation he painted for us in early 2012. Sadly, it looks like abuse by the big players has only flourished since then.

    In the U.S., our regulators have publicly embraced a “too big to prosecute” doctrine. We are restraining, underfunding, and dismantling regulatory oversight in the interest of short-term stability for the status quo. Which, as a criminologist, Black knows with certainty creates an environment where bad actors will act in their self-interest with assumed (and likely real, at this point) impunity.

  14. Silver Manipulation Update: Ted Butler– HFT disruptive and manipulative price rigging in gold and silver [and other futures markets] has never been more pronounced. So what happens? Regulators pounce on the HFT operators [Newedge] in the relatively calm stock market and completely ignore the blatant price-fixing in silver and gold as well as the unprecedented price smashes, particularly in silver. I suppose one must keep a sense of humor to handle the hypocrisy, but I may lose my mind if I hear Bart Chilton give another speech about cheetah traders while he flat-out ignores the increasingly obvious price rigging going on in silver and gold. – Silver analyst Ted Butler…13 July 2013

  15. Nothing can stop the wheels from falling off this truck.. Patrick promised guys with guns and badges will come for these miscreants.. I think that this will be the next step.. Thanks to Patrick and D.C. for all their hard working in putting these criminals out of business!!

    SEC Sues Steve Cohen For Failing To Prevent Insider Trading, Seeks Bar
    Submitted by Tyler Durden on 07/19/2013 – 14:09
    And in the category of most made up charges by the SEC against a hedge fund billionaire we have:

    All of the above was known to our readers since December 2010. Thus Steve Cohen’s forced conversion to a “friends and family” office is now complete. And since hedge funds make money not on portfolio upside (and certainly not downside) but on the management fees, the chapter of Blue Eyes’ information arbitrage glory days are now over.


  16. The noose is tighening… can you feel it? Maybe not but the Miscreants can!! LOL!!! “Men with Guns and Badges….”

  17. Sean – please put down your little drum and sit upright in your chair. Please look outside the circle you have been seemingly stuck in for maybe a decade now. About 10 years ago – what you said was certainly true. About 5 years ago – it might have still been partially true, but it was also highlighted for its hypocrisy and that was noticed by those in certain political positions that were involved in the process of losing that political power. So – the voices of the new minority of power – desperately wanting the power back – rose up and the many failings of the financial system began to be clearly called out. Certainly, people who needed issues to grind against opponents also began to listen. For instance, take the situation of John Mack. His getting blown sideways though an obvious lie – and not getting an allowance for his position or seniority – in other words not being allowed to get away with his insider tip – has a lot to do with the Zen of the moment you should be able to witness in and around the Spring of 2014 with Goldman. When Mack got called out as an individual, that was news. The actions then taken against his accuser had a very important effect on the system. (But, apparently not on you.) Because of the history of these many, many decades of mistakes and omissions and error were associated with no real assignment of blame … changes were needed. You can say ‘finally’ or you can say that the system has evolved. I don’t care what shade you choose to paint your world – but, I think you just take a step forward in your thinking. The rest of us already have.

    Beginning just over 1 year ago – actions you had better be that are well aware of – were taken to make a provision for a proof of fact. A direct link to what penalty was being assigned and an admission of certain guilt. No more of the cute and catchy ‘neither admit nor deny’. That gift was no longer going to be allowed in cases where there is obvious and egregious acts. That is a good thing. You know: start with the low hanging fruit and make change happen. So, fast forward to the present day. Where the people around you are making this change happen – people that live with and clearly understand how slow those wheels of change do indeed turn. But, they are honest people who also appreciate that those wheels do actually revolve. You can doubt me all you want, but you speak in your many, many posts here like you are a dinosaur. Check back in about 6 to 9 months. Hopefully, at that time you should be reading in the Wall Street Journal about how shocked the Goldman Lawyers are at the answer they have just received from the SEC is not pleasing them. How they are confused about the location of the usual paragraph on the non-admission is located. When they ask the SEC for a solid favor – and allow them to just simply settle the charges that are quickly rising up against them. Charges that they DELIBERATELY slowed down a market transaction to ensure a unearned profit for a riskless position. When they ask why there will be NO allowable clause for them to fall back on that says ‘neither admit nor deny’ – you will have your victory. Or, maybe not. You seem like you are enjoying being mad.

    So, in my humble opinion, that is what is new. I think you need to stop living like you have not been paying attention.

  18. Not behind you.. well said and with a modicum of respect I might add. So I will return in kind.. with a lot less words and subtle “putdowns” and in my own dinosaur way lay it down the way it really is. The system is corrupt, has been corrupt and without some drastic even will remain corrupt. These minor changes that may or may not be implemented are meant to appease the masses so that they (the powers that be) call lull us into ANOTHER sense of false security. Myself and others sounding the alarm will let it be known that “This not not gonna happen captain”. The Titans of Industry that have perpetrated this massive fraud of Global proportions need to be incarcerated and their ill gotten gains stripped from their estates. I know your handlers don’t like my rough and gruff method of informing all about their shenanigans but what the hey, I will continue to do it even more so now that I have illicited such a verbose response from a miscreant of your caliber. So with all due respect I will continue to be mad at a system that strips the moral and financial fiber from the middle class so that they can drive ferraris and have homes in the Hamptons purchase with stolen monies and snort cocaine with impugnity (sp) just to let others know how smart they are. In finishing, my self appointed job is to spread the word and I will continue to do so with vigor and thanks to email and Deepcature I have a forum in which to do so. The day is coming when you and your ilk will cease to exist and I hope the the small part that I play will have something.. however small to do will your downfall. This too shall pass!! Peace.

    1. Sean,
      Thank you for addressing a poster that wants to seem as tongue in cheek and allowing all to see they actually have that body part parked a little lower on the miscreants anatomy
      . Where, I might add, it might be inadvisable to be soon as $it IS gonna happen.
      As to this posters advice to lighten up on the rhetoric I disagree the angry voices of the people who have been defrauded will not decrease and eventually the sound of righteous anger will prevail.

  19. Thank you – to both of you – for making my point. This is a moderator controlled message board. If what I wrote was not acceptable to the moderator, then it would not have been allowed to be published. while they might not agree with my pillaring of your view, they must agree with the central point: it’s better and you seem to be stuck in the past.

    So, scream all you want. Cry foul. Write your State Senator. It’s just that you are crying the same tears as you did 5 and 10 years ago. Any movement in a forward direction on this topic seems to be lost on your side of the computer screen. Simply put: I am of the opinion that you need to update your message.

  20. Deepcature and what its really about. Do they think we are stupid? Well we’re not. Spread the word people this MUST STOP!!!

    SEC Revolving Door Leads To $5 Million Payday For Former Chief Enforcer
    Submitted by Tyler Durden on 07/23/2013 – 08:00
    The name Robert Khuzami is well-known to Zero Hedge readers: the former top SEC enforcer is perhaps best known not for what he did (judging by how many Wall Street bank executives ended up in jail following the Great Financial Crisis, very little), but for what he didn’t – namely pursue any action against his former employer, Deutsche Bank, where he was a general counsel and where under his watch Greg Lippmann was “shorting your house.” The reason, among others, extensive deferred comp linked to DB stock as we reported all the way back in May 2010. But Bob didn’t care about what he did, or didn’t do at the SEC – he was much more interested in what he would do after he left the regulator, which he did in January of this year. Because Bob, courtesy of his DB days, realized the massive paycheck potential of a revolving door job at the head of the government’s enforcement unit. Sure enough, as the NYT reports, he has capitalized on just that following a $5 million a year contract (with a 2 year guarantee) with legal behemoth Kirkland & Ellis where he will be a partner and “will represent some of the same corporations that the S.E.C. oversees.”


  21. Copperfieldian.. a perfect word and description for what Notbehindhimself tried to impress on us in his one and only (so far) post!! Perfect segway for what has come out in print today! And thank u bbhind you for your compliment. More to come!!! Below is an excerpt from the Zerohedge story from my previous post.

    Others, however, with a semi-working frontal lobe, realize that all of the above is precisely the reason why the SEC will never truly prosecute those responsible for Wall Street’s criminal ways: after all who will dare to bite the hand that might one day feed them?

    And that is why, despite all Copperfieldian distractions to the contrary, nothing will ever change until not only Wall Street, but its regulatory system is either eradicated (as all it does is consume taxpayer funds with no practical results), or rebuilt from scratch.


  22. Notbehindevenyourself.. If that’s the best retort you can muster up then so be it.. but it was weak.. VERY WEAK!!! Both myself and bbhind you will remain with what we said .. but thanks for the response and maybe we will see you in another 5 or 10 years. Take care and now we can get back to the business at hand and expose this corrupt system and its regulators for what it truly is!! Peace!!

  23. NNNNIIIICCCCEEEE!!!! Men with GUNS and BADGES are finally coming!!! Alot of Hedge Fund managers are sweating serious bullets tonight, right Notbehindyourself (or Behindbarsoon)LOL!!! Chanos, Loeb,Paulson, Ican,Einhorn and Milken. Just for starters.

    The Final Straw For SAC: Criminal Charges To Be Filed This Week
    Submitted by Tyler Durden on 07/23/2013 – 22:18
    It would appear the camel’s back of the career of Steve Cohen and his firm SAC Capital has received its last straw. As the WSJ reports, Federal prosecutors plan to bring criminal charges against the firm as early as this week. This spells trouble for SAC which, while still reeling from the SEC’s attempt to effectively shut it down, will now have to fight a two front war; defending its key executives against criminal charges as well, including the risk of jail time for what is most likely going to be a securities fraud charge. While a disgraced Steve Cohen may, in theory, run his or whatever employees’ he has left, money as a “family office”, it would take a very strong wi-fi signal to do that from even a minimum security prison should he finally suffer Martha Stewart’s fate.


  24. No one too big to indict.
    Love it

    I especially like this part:

    He cited accounting firm Arthur Andersen as an example of the challenges these cases face.
    The Justice Department ultimately lost its case against the accounting firm for its role in the Enron scandal, but not before pushing Arthur Anderson into bankruptcy. Bharara said he’s aware of the “collateral consequences” that such indictments could cause and said his office does take into account the possibility of ending thousands of jobs. SAC currently has roughly 1,000 employees.

    What do you think the short selling sharks are gonna do about the fact that these charges are like opening a main artery into the water?
    Think they will ignore the blood in the water because Stevie is to big to devour?
    SAC may be the biggest shark out there, but that does not mean they can stop the death by a thousand shorts they have helped inflict on so many others.
    Poetic justice !
    Or Stevie COULD start telling tales out of school on all the rest of the shark pack so there is so much blood in the water the sharks attack others besides SAC [ not that SAC will not get attacked ] so that he will get his butt short shark chewed but not enough to be fatal, as there will be just too many bleeding targets to pick from.
    Come on Stevie chose. Let the pack you lead take you down or use your ‘inside information’ to make the pack bloody and you MIGHT survive.
    Best shark week ever! Not found in major media outlets!!

  25. Note on style: stop putting ‘terms of art’ in quotes (full OR semi). It interferes with the ‘readability’ of the text. The first 2 or 3 times are okay but after that we ‘get it already’.

    So you get it? You say you got it? Good.

  26. Hey Geoduck, why don’t you put this is in quotes!! LOL

    SAC Indicted By Federal Grand Jury In New York – Full Indictment


    Is’nt beautiful when a plan and justice comes together. The tried to destroy Fairfax and Overstock and failed but suceeded in destroying thousands of others and looked what happen to them. There is a God and he sits up high and looks down low.

    1. Yeah, that got me smiling big time. And they’re indicting the fund. It couldn’t be sweeter!!! I hope they take the whole thing in fines, balance the budget with it, etc.

    2. Glad I took time out from my busy Sunday (mom’s Alzheimers etc) to check the comments. Glad to know that you think SAC’s been shot dead.

      I think this is why suddenly ‘everyone’s’ worried about the NSA and privacy. I know for sure they’re not worried about MY privacy. I’m just another loser who held onto some shares too long.

  27. The dominoes are starting to fall in a hurry..The fallout maybe catastrophic.. at least 10 to 100 times worst than Lehman in my humble opinion.

    SAC’s Real Gross Exposure: Up To $44 Billion
    Submitted by Tyler Durden on 07/25/2013 – 12:29
    While the conventional way of looking at hedge fund assets has traditionally been to simply add up the assets under management to estimate gross exposure, as so often happens conventional wisdom is wrong. Because what the “traditional” approach simplistically looks at is merely a fund’s equity and ignores all leverage through assorted generic and “shadow” conduits such as repo, loans, rehypothecation, “hedging” and others. Luckily, as a result of Dodd-Frank, hedge funds were required to present their full market exposure when netting leverage as per an annual SEC form known as Form PF. It is here that we learn that SAC’s market exposure, something very relevant now that the firm is facing an imminent or eventual winddown, is likely orders of magnitude above what the market believes.


  28. ….In addition to the Indictment, today the Government filed a civil forfeiture action (the “Forfeiture Complaint”) in Manhattan federal court, seeking the forfeiture of assets held by investment funds to which the SAC Companies served as investment advisors, assets held by affiliated investment funds, and assets held by the SAC Companies themselves. The Forfeiture Complaint alleges that the SAC Companies engaged in money laundering by commingling the illegal profits from insider trading with other assets, using the profits to promote additional insider trading, and transferring the profits with the assistance of financial institutions…..
    above quote todays press release:

    Manhattan U.S. Attorney And FBI Assistant Director-In-Charge Announce Insider Trading Charges Against Four SAC Capital Management Companies And SAC Portfolio Manager


    Thursday, July 25, 2013

    SAC Management Companies Allegedly Engaged in Decade-Long Insider Trading Scheme on a Scale Without Known Precedent in the Hedge Fund Industry @

  29. Silver Manipulation Update: Ted Butler– Based upon the most recent COT report, as of July 16, I estimate JPMorgan’s net long position in COMEX gold futures to be 75,000 contracts. After subtracting 77,000 spread positions from total open interest of 440,283 contracts, true net open interest in COMEX gold futures is just over 363,000 contracts. Therefore, JPMorgan’s 75,000 contract net long position represents more than 20% of the entire COMEX gold futures market on the long side. First, JPMorgan had a 14% market share on the short side and now they flipped that into a 20% share of the long side, as a result of JPMorgan manipulating the price of gold nearly $500 lower. These are extraordinary and dominant market shares…and unprecedented price rigs to the downside. To not see them as cause and effect is to miss the obvious. – Silver analyst Ted Butler…24 July 2013

  30. Come on Mark, give us the rest of the story. We can handle it. We can, they can’t. Tremendous work, as usual. Thanks for all you do!!!

  31. Silver Manipulation Update: –BANKSTER MARKET DOMINANCE by TED BUTLER… One market participant, JPMorgan, determines what will happen price-wise in gold and silver (and other commodities).

    This is a crooked bank that has no business controlling the gold and silver markets by its easy to document dominant market position.

    It’s encouraging that there is wide discussion on the unnatural control that big banks have on LME metal warehouses and that the Fed is reconsidering the wisdom of allowing banks to deal in physical commodities.

    But the most obvious danger of all is allowing JPMorgan to hold dominant market shares in regulated futures markets….


    1. LOVE IT !!!
      So much for needing to change our tactics, as some posts here recently recommended.
      And as for this recent quote:
      ” So, scream all you want. Cry foul. Write your State Senator. It’s just that you are crying the same tears as you did 5 and 10 years ago”
      I just gotta say. ‘ Who’s crying now “.
      Thank you Mr. Byrne, for fighting a long time in the dark to bring the light of truth shining through.
      Appreciation to all who have brought the turn in tide of this battle. Mark Mitchell, Matt Taibbi and all the researchers and writers who did not quit, no matter how they were ridiculed by the ‘main stream press’.
      Also a big thank you to all the people who read the truth and refused to stop spreading the word.
      May the light we are just beginning to see be the start of a beautiful day of truth.

      1. Have you have ever wondered why I selected the name ‘Notbehindyou’ as my choice in replies to your childish rants?

        It is simply because I am way, way out ahead of you.

        As is Dr. Byrne.

        Evolve or die. Make a choice. He certainly did.

        1. First they ignore you, then they laugh at you, then they fight you, then you win.

          Exactly which stage are you at now.
          I will let the readers decide.

  32. “[Y]ou start to follow the money, and you don’t know where the f@#k it’s gonna take you.” – Det. Lester Freamon, The Wire

  33. And the hit just keep on comin!!

    Patrick follows up on his WSJ mocking of Cohen

    OVERSTOCK.COM CEO: Steve Cohen Is Directly Responsible For Corruption That Has Cost Hundreds Of Thousands Of People Their Jobs

    Overstock.com CEO Patrick Byrne colorfully explained in his own words why he took out a full page ad in the Wall Street Journal mocking SAC Capital’s Steve Cohen yesterday.

    “Cohen’s life work is being destroyed,” he wrote in a note to Business Insider, “I feel good. Shooting SAC Capital dead and throwing all of its employees into the streets is simply civilization scraping some dog— off its shoe. I felt it was time I spent position: absolute;00k on a derisive ad in order to say that.”

    Rest of story with much more from PB:

    1. Glad I took time out from my busy Sunday (mom’s Alzheimers etc) to check the comments. Glad to know that you think SAC’s been shot dead.

      I think this is why suddenly ‘everyone’s’ worried about the NSA and privacy. I know for sure they’re not worried about MY privacy. I’m just another loser who held onto some shares too long.

  34. Geo..in a few months ..where you’re going, you may not have internet. So you might as well enjoy it while you can!! LMAO

  35. Typo on the date…

    Meanwhile, it is clear from SEC filings that SAC Capital and a larger “network” of other hedge funds (many of which employ former SAC Capital traders, and many of which have ties to Milken going back to the 1908s) regularly trade in the same stocks, and many of these hedge funds have not only coordinated their manipulative short selling attacks, but have also come under closer scrutiny during the course of the FBI’s investigation into what the FBI continues to describe as a “network” of financial operators.

  36. it’s getting better every day…

    Manhattan U.S. Attorney And FBI Assistant Director-In-Charge Announce Insider Trading Charges Against Former Equity Research Analyst


    Tuesday, July 30, 2013

    Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), today announced conspiracy charges against SANDEEP AGGARWAL, a former equity research analyst for a financial services firm located in San Francisco, California (“the Firm”), for his alleged involvement in an insider trading scheme. As alleged, AGGARWAL provided material, nonpublic information (“Inside Information”) concerning a strategic partnership in internet search and advertising between Microsoft Corporation (“Microsoft”) and Yahoo! Inc. (“Yahoo”) (the “Partnership”) to at least two different hedge funds. AGGARWAL was arrested yesterday in San Jose, California, and will be presented today in federal district court in the Northern District of California.

    Manhattan U.S. Attorney Preet Bharara said: “As alleged, Sandeep Aggarwal leveraged his contacts in the technology industry to obtain an illegal edge in the form of inside information about a highly anticipated development, and then lied about his criminal conduct. With his arrest today, we continue our work to investigate and prosecute privileged professionals who think the laws requiring honesty and fair play do not apply to them.”

    FBI Assistant Director-in-Charge George Venizelos said: “Like many others before him, Sandeep Aggarwal allegedly broke the law and provided material non-public information on a Microsoft-Yahoo deal. When questioned by his employer about the source of the information, he lied. Yesterday’s arrest is the latest step in the FBI’s long-running investigation into insider trading in the hedge fund industry.”

    In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against AGGARWAL.

    According to the Complaint unsealed today in Manhattan federal court:

    On the evening of July 9, 2009, AGGARWAL learned from a friend who was an employee of Microsoft that discussions about the Partnership had recommenced and that a transaction was likely within the next few weeks. The next day, AGGARWAL provided information about the Partnership to at least two different hedge funds, including to Richard Lee, then a portfolio manager at SAC Capital Advisors LP. On July 10, 2009, AGGARWAL told Lee, in substance, that he had heard from a source – whom AGGARWAL described as “a senior guy at Microsoft” – that (a) senior Yahoo executives had been meeting with senior Microsoft executives at Microsoft’s offices; (b) senior Microsoft executives were making requests for information that suggested to the sources that a deal was likely to be completed soon; (c) the success of Microsoft’s Bing search engine had caused Yahoo to move closer to Microsoft’s offer; and (d) it was likely that the deal could be announced within the next two weeks. Thereafter, Lee’s hedge fund purchased several hundred thousand shares of Yahoo stock, and Lee purchased 25,000 shares of Yahoo stock in his personal account.

    The complaint further alleges that, when the Firm’s management questioned AGGARWAL on July 10, 2009 about the information he was providing to hedge funds concerning the Partnership, AGGARWAL falsely denied having any Inside Information and claimed that his source was a person who had been retired from Microsoft for two years.

    * * *

    AGGARWAL, 40, of Gurgon, India, is charged with one count of conspiracy to commit securities fraud, and one count of conspiracy to commit wire fraud. The conspiracy to commit securities fraud count carries a maximum sentence of five years in prison and a fine of the greater of $250,000, or twice the gross gain or loss from the offense. The conspiracy to commit wire fraud count carries a maximum sentence of 20 years in prison and a fine of the greater of $250,000, or twice the gross gain or loss from the offense.

    Richard Lee pled guilty on July 23, 2013 to a criminal Information charging him with one count of conspiracy and one count of securities fraud in connection with insider trading between April 2009 through 2010, while he was employed by SAC Capital Advisors LP.

    Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission. He also noted that the investigation is continuing.

    This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which U.S. Attorney Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit http://www.StopFraud.gov.

    The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys John J. O’Donnell and Arlo Devlin-Brown are in charge of the prosecution.

    The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.


  37. not only did the doj act today, but so did sec….

    SEC Charges Tipper of Confidential Information to S.A.C. Capital Portfolio Manager

    Washington D.C., July 30, 2013 —
    The Securities and Exchange Commission today charged the tipper of confidential information to a S.A.C. Capital portfolio manager who has been charged with insider trading.

    The SEC today amended its complaint against Richard Lee, who was charged last week, to additionally charge Sandeep Aggarwal, a sell-side analyst who tipped Lee in advance of a July 2009 public announcement about an Internet search engine partnership between Microsoft and Yahoo. Lee purchased large amounts of Yahoo stock in the S.A.C. Capital hedge fund that he managed as well as in his personal trading account on the basis of the inside information.

    In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Aggarwal, who lives in India but recently returned to the U.S….
    read the rest at

    Litigation Release No. 22763 / July 30, 2013
    Securities and Exchange Commission v. Richard Lee and Sandeep Aggarwal, Civil Action No. 13-CV-5185 (SDNY) (RMB)
    SEC Charges Tipper of Confidential Information to S.A.C. Capital Portfolio Manager

    amended complaint

  38. A tad off topic but VERY relevant to this cause of leveling the playing field!! A MUST watch video!!!

    Reenacting Glass-Steagall will mean orchestrating the largest market crash in human history. We present six detailed steps that describe how we will clean up our banking system. Glass-Steagall is not the full recovery, it does not guarantee economic growth, but it is the first step forward–and it will ruin Wall Street.


  39. How quickly the dominoes are falling.. Some “Canary must be doing a lot of singing!! LOL!! Roll early and Roll often!! LMAO!!

    US regulators ‘find evidence’ of banks fixing derivative rates

    Aug 2 2013
    US regulators have reportedly been handed evidence that traders at some of the world’s biggest banks manipulated a key rate for derivatives, pocketing millions at the expense of pension funds in the process.

    The Commodity Futures Trading Commission (CFTC) is probing 15 banks over allegations that they instructed brokers to carry out trades that would move ISDAfix, the leading benchmark rate for interest rate swaps.

    Pension funds and companies who invest in interest rate derivatives often deal with banks to insure against big movements in the ISDAfix rate or to speculate on changes to interest rate swaps

    ISDAfix is published each morning after banks submit bids for swaps via Icap, the inter-dealer broker, in a number of currencies. The CFTC has been investigating suggestions that the banks deliberately moved the rate in order to profit on these deals.

    Given the hundreds of trillions of dollars worth of interest rate derivatives trades that occur annually, even the slightest manipulation can have a substantial effect. The CFTC, which started to investigate ISDAfix after last summer’s Libor scandal has now been handed emails and phone call recordings that show the rate was deliberately moved, according to Bloomberg.

    Barclays has reportedly handed the CFTC information, while employees at Icap and Citigroup have also been questioned. In its interim results statement yesterday, Royal Bank of Scotland also said it was co-operating with authorities regarding the investigation.

    “Icap is cooperating with the CFTC’s wider inquiry into this area and due to its pending nature, we will not be commenting further,” a spokesman for the broker said, while Barclays, Citigroup and the CFTC did not comment.

    The regulator began investigating ISDAfix last year after probes into the London interbank offered rate were extended into other benchmark rates.


  40. August 2, 2013
    Big Fish, Little Fish, and the S.E.C.
    Posted by Michael A. Santoro
    ….One part of the finding in the Tourre case has been largely overlooked. On one count, the jury found that Tourre had substantially assisted his employer in committing fraud; to find him liable, the jury had to first determine that Goldman itself committed fraud. Doing so was their way of acknowledging the case’s missing defendant—Goldman Sachs….

  41. Like I said Fast and Furious..

    Goldman Sued For Monopolizing US Aluminum Warehousing Market
    Submitted by Tyler Durden on 08/04/2013 – 09:57
    Over two years after Zero Hedge first accused Goldman and JPMorgan of becoming monopolists in the commodity warehousing business (see “Goldman, JP Morgan Have Now Become A Commodity Cartel”), and two weeks after the NYT’s reminder the world of just this leading to the latest Kangaroo Court congressional hearing on the matter, which may or may not have resulted in JPMorgan announcing it would exit the physical commodities business, the long overdue legal fight began this Friday when lead plaintiff Superior Extrusion sued Goldman and London Metal Exchange owner HKEx for engaging in “anticompetitive and monopolistic behaviour in the warehousing market in connection with aluminium prices” and accusing the firms of violating the Sherman anti-trust act. Precisely what Zero Hedge said, some 26 months ago.


    These criminals are also doing this to Oil/gas supplies!!!

  42. Gold/Silver Manipulation Update: In simple terms, JPMorgan holds more than 25% of the entire COMEX gold futures market on a true net basis.

    There has never been a more concentrated net long position in any major regulated futures market in history. Not even the Hunt Brothers in COMEX silver in 1980…or the Sumitomo copper trader, both found to have manipulated markets by means of a corner, held as much of a share of the market as JPMorgan holds now in COMEX gold futures.

    THere’s very recent account of the Sumitomo copper manipulation, by a trader named “Mr. 5%”. Keep in mind, that JPMorgan’s concentration in COMEX gold futures is five times the copper manipulation level.

    If a 25% net share of a market does not represent a corner, then that term has no meaning. I’m not alleging that JPMorgan owns 25% of all the gold in the world, as that would be impossible. Heretofore, I would have insisted that owning 25% of the COMEX gold market was impossible, but no longer.
    – Silver analyst Ted Butler…03 August 2013

  43. Gold / Silver Manipulation Update: … This may seem hard to believe, but JPMorgan’s current corner on the COMEX gold market is the second market corner in the gold market by this bank in the last nine months and among many prior corners over the past five years in gold and silver. JPMorgan is a serial market manipulator and now swings both ways in cornering markets; usually on the short side of markets until the current long corner in gold.

    Based upon COT and Bank Participation Reports data, last December 4, JPMorgan had a net short position in COMEX gold futures of approximately 75,000 contracts. This position represented 20.5% of the true net open interest on that date (once 68,648 spread contracts were removed from total open interest of 434,416 contracts). On that date, the price of gold was $1700. While it is difficult for many (including the CFTC) to grasp the concept that a corner could exist on the short side of the market, surely no one would argue against a 20.5% concentrated share of a major regulated futures market by a single entity would constitute manipulation and a corner.

    It was this corner on the short side of COMEX gold futures by JPMorgan that provided the incentive and led to the subsequent $500 decline in the price of gold into the end of June. On the historic price decline in gold over the first half of 2013, JPMorgan booked profits on their short side gold market corner (of over $2 billion in my estimate) and continued to rig prices lower in order to establish their current long side corner of 85,000 contracts, or 25% of the true net open interest in COMEX gold futures (minus spreads).

    You can’t go from being 75,000 contracts (7.5 million oz) net short to 85,000 contracts (8.5 million oz) net long in an instant or in a week or a month….


  44. Hedge Funds | Legal/Regulatory August 9, 2013, 6:43 am
    Facing Loss of Capital, SAC Is Said to Talk of Layoffs

    …Prosecutors, however, are expected to demand that SAC forfeit money that is tied to any illicit trading, a sum that could reach several billion dollars, a person briefed on the case said. Still, the protective order gives the government the flexibility to pursue a larger amount if new insider trading activity surfaces while the case wends its way through the courts….

  45. The crooks are at it again..

    The Securities and Exchange Commission today issued a Risk Alert to help market participants detect and prevent options trading that circumvents an SEC short-sale rule.

    Washington D.C., Aug. 9, 2013 —

    The SEC’s Office of Compliance Inspections and Examinations (OCIE) issued the alert after its examiners observed options trading strategies that appear to evade certain requirements of the short-sale rule. The alert describes the strategies used by some customers, broker-dealers and clearing firms, summarizes related enforcement actions, and notes practices that some firms have found to be effective in detecting and preventing trading intended to evade the rule, known as Regulation SHO.

    Regulation SHO tightened requirements for short sales, which involve sales of borrowed securities. Short sellers profit from price declines by replacing borrowed securities at a lower price. Under Regulation SHO, short sellers who fail to deliver securities after the settlement date are required to close out their position immediately, unless they qualify as bona fide market makers for a limited amount of extra time to close-out. As noted in the alert, the trading strategies observed by the OCIE staff may give the impression of satisfying the Regulation SHO “close-out requirement,” while in effect evading it. These sham close-outs violate the SEC rule, which aims to ensure that trades settle promptly, thereby reducing settlement failures.

    “This Risk Alert encourages awareness of options trading activity used to avoid complying with the close-out requirements under Regulation SHO,” said OCIE Director Andrew Bowden. “The alert describes these trading activities in detail to help broker-dealers and their correspondent clearing firms avoid the regulatory and reputational risks that are posed by these activities.”

    In addition, the Risk Alert describes activities that the staff has observed that may indicate an attempt to circumvent Regulation SHO. These include:
    • Trading exclusively or excessively in hard-to-borrow securities or threshold list securities, or in near-term listed options on such securities
    • Large short positions in hard-to-borrow securities or threshold list securities
    • Large failure to deliver positions in an account, often in multiple securities
    • Continuous failure to deliver positions
    • Using buy-writes, married puts, or both, particularly deep in-the-money buy-writes or married puts, to satisfy the close-out requirement
    • Using buy-writes with little to no open interest aside from that trader’s activity, resulting in all or nearly all of the call options being assigned
    • Trading in customizable FLEX options in hard-to-borrow securities or threshold list securities, particularly very short-term FLEX options
    • Purported market makers trading in hard-to-borrow or threshold list securities claiming the exception from the locate requirement of Regulation SHO; often these traders do not make markets in these securities, but instead make trades only to take advantage of the option mispricing
    • Multiple large trades with the same trader acting as a contra party in several hard-to-borrow or threshold list securities; often traders assist each other to avoid having to deliver shares

    Eric Peterson and Tom Mester of the National Exam Program staff contributed substantially to the preparation of this Risk Alert. They received valuable input from the Division of Trading and Markets and the Division of Economic and Risk Analysis.


    1. …A CBOE spokesperson said erroneous trades were being adjusted and busted up until 7pm CT Tuesday….

      No press release @ cboe website about this supposed trading glitch as of yet! how many exchanges are working to clean up after options market maker goldman sachs?

  46. YOu ever get the feeling that the SEC and other “Regulators) want investors to lose their money? I do!!

    Tyler Durden’s picture
    SEC Charges Twitter’s First Ponzi Scheme Operator Anthony Davian With Fraud
    Submitted by Tyler Durden on 08/14/2013 – 08:31
    Once upon a time there was a Twitter-based, pump-and-dumping daytrading bucket shop posing as a “successful hedge fund manager” also known as Davian Letter/Davian Capital Advisors run by an Ohio gentleman known as Anthony Davian, which for reasons unknown even managed to run outside capital (somehow raking up to $1.5 million in idiot AUM), and which didn’t like Zero Hedge much. That’s ok because the feeling was mutual – we had advised the SEC in late 2009 that the Davian operation was nothing but a ponzi scheme. A few years later, said outside capital is gone, and moments ago, following a four year delay since our notice, the SEC finally acted on our suggestion and charged Anthony Davian with fraud.


  47. o plowing through the manure.
    wrong perception taking people for granted.
    lack of education does not mean stupid.
    regardless of race or nationality.

  48. Gold / Silver Manipulation Update:
    I feel like the proverbial man who screamed fire in a crowded theater. Only instead of there being no fire, there are two fires – the long market corner in COMEX gold and the short market corner in COMEX silver both being run by the same crooked bank, JPMorgan.

    And instead of a panic resulting from screaming fire, the regulators at the CFTC and the CME, as well as the crooks at JPMorgan are pretending that a 23% or 15% market share by one entity is not the market corner it always has been in the past. But along with the pretending comes something else – silence in terms of a rebuttal.

    My greatest fear is in publicly humiliating myself with false analysis, and my second greatest fear is getting caught up in a legal tangle with the crooks at JPMorgan and the CME for incorrectly calling them crooks.

    The lack of a rebuttal to my allegations of JPMorgan cornering two markets does diminish my two fears.
    – by Silver analyst Ted Butler, 17 August 2013


  49. Ackman Acknowledges ‘Mistakes’ in Letter to Investors
    …In the letter, Mr. Ackman said he believed the government might be closer to taking action against Herbalife – an outcome that would bolster his thesis.

    “Over the past eight months, we have made material progress in attracting federal, state and international regulatory interest in Herbalife,” Mr. Ackman wrote. “We are not at liberty to disclose the nature of these developments, but we believe that the probability of timely aggressive regulatory intervention has increased materially.”….

    anyone following this saga knows sam E antar was subpoened by the the sec for his communications to journalists concerning herbalife and additional companies. might ackmans torch be lit by antar?

  50. A Question to ask Mike Milken Co-Founder and Chairman of Knowledge Universe, what’s this?
    lma(zz)o … CCC Rating

    S&P has a CCC rating on the company’s debt with a negative outlook, while Moody’s Investors Service has an equivalent Caa1 rating on its 2015 subordinated notes.

    A debt rated CCC is vulnerable to nonpayment and is dependent on favorable business, financial, and economic conditions for the borrower to meet its financial commitments, according to a ratings definition provided by S&P.

    The company, which was previously known as Knowledge Learning Corp., was spun off into a separate entity controlled by the same owners in 2011….

  51. Gold / Silver Manipulation Update:

    “The allegation that JPMorgan has cornered the COMEX gold futures market can’t be more important.

    A commodity market corner is the most serious market crime possible and this one is a crime in progress to boot, demanding immediate action or denial.

    Since the allegation is based upon public data from the CFTC, any denial must be in accordance with that data. To date, no denial has been offered and I don’t see how one may be forthcoming.

    Since the gold market corner is such a recent development, the regulators have a special opportunity to address it in a timely manner and avoid criticism for missing the most important event in the gold market in decades.

    Due to highly unique circumstances, regardless of how this plays out, I see silver as being the prime beneficiary in the end.”

    Commentary by Silver Analyst Ted Butler:

  52. Mark, can you give us some type of update? Did the gag order return? I check everyday to see if you have added anything. Please let us know you are okay.


  53. Marketplace strategists notice that it is sensible in direction of stop spending inside of a inventory versus its prevailing fashion for the reason that tendencies are likely towards persist. The moment the style turns down upon a $50 inventory, it might not change up yet again right up until following the inventory falls listed here $25. Why be reluctant toward perspective how much it will lose? Why not conveniently increase the posture When on your own continue to include utmost of your financial? Endorsing at a 20% decline and quickly shifting upon towards a improved circumstance may perhaps include things like a tiny agony, however it is preferable in direction of keeping upon in the direction of a declining inventory that sooner or later loses 50% (and then in the direction of commence retaining upon towards it for an excess 2 decades even though it recovers). Making use of the preceding course of action, we could possibly crack even inside of 6 weeks or significantly less. Applying the latter process, we may well split even within just 2 or a few a long time (assuming that the inventory of course recovers). That’s why, we are suggesting for all those who are not buyers and who consist of no spelled out provide system, that they attempt taking a offer solution primarily based upon the 150-working day relocating regular and in direction of seek the services of 20% as the utmost decline. If the course of action based mostly upon the 150-working day going normal turns into on your own out in advance of a reduction of 20% takes place, therefore substantially the improved. If it does not just take by yourself out in advance of the reduction reaches 20%, then maybe it is season towards pull the plug in any case.

  54. Gold / Silver Manipulation Update:

    Comparisons between the London Whale derivatives trade and JPMorgan’s activities in COMEX gold and silver are revealing.

    The Whale trade is over; COMEX gold and silver manipulation is still a crime in progress.

    Which is more deserving of priority attention from the CFTC?

    Additionally, the CFTC only learned about the Whale trade after it blew up, and that’s when JPMorgan’s potential manipulation came into focus.

    With silver and gold, the agency reports the proof [of their manipulation] weekly in its reports on market concentration.

    – Silver analyst Ted Butler: 18 September 2013


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