Tag Archive | "Daniel Loeb"

Blue Kryptonite and naked short selling

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Blue Kryptonite and naked short selling


bizarro-code

The Bizarro World Code

Within minutes of my introduction to the world of short selling hedge funds, I encountered the analogy that remains the best suited to describe the truth to which they subscribe: Bizarro World.

A planet that appears from time to time in the DC Comics universe, Bizarro World is noteworthy for its utter opposition to everything associated with reality on Earth (in fact, another name for Bizarro World is Htrae – “Earth” spelled backwards).

Bizarro World made very infrequent appearances in the DC Comics universe; however what few insights we’ve been able to gain have been telling.

For one, we know that the residents of Bizarro World adhere to a simple moral code: “Us do opposite of all Earthly things! Us hate beauty! Us love ugliness! Is big crime to make anything perfect on Bizarro World!”

bizarrosuperman

Bizarro Superman

For another, consistent with its black-is-white nature, the alpha-superhero of Bizarro World – a Superman-like figure appropriately named ‘Bizarro’ – is in fact a super villain, and one of many.

Fortunately, or possibly unfortunately, the Bizarro World of short selling hedge funds sits side-by-side with our own. Yet, true insights into how it actually operates have been startlingly rare.

Possibly the best behind-the-curtains view came in December of 2006, with Jim Cramer’s infamous admission as to how short selling hedge funds do (and indeed, according to Cramer, “must”) operate, moving the Bizarro World citizenship of that group from theory to undeniable fact.

See for yourself:

Cramer: “You can’t foment. You can’t create yourself an impression that a stock’s down. But you do it anyway because the SEC doesn’t understand it. So that’s the only sense that I would say that it’s illegal.”

Bizarro translation: “Us do opposite of all Earthly things! Us can break law to make money because regulator not understand regulations!”

Cramer: “Look what people can do. I mean that’s a fabulous thing! The great thing about the [stock] market is that is has nothing to do with the actual stocks. Look, over maybe two weeks from now the buyers will come to their senses and realize everything they heard was a lie…”

Bizarro translation: “Us hate beauty! Us pervert capital markets to make them hostile to small, promising businesses and technologies! Us stock market has nothing to do with actual stocks!”

Cramer: “These are all what’s really going on under the market that you don’t see. What’s important when you’re in that hedge fund mode is to not do anything remotely truthful – because the truth is so against your view, that it’s important to create a new truth to develop a fiction.”

Bizarro translation: “Us love ugliness! Us hate truth! Us prefer fiction!”

Cramer: “I think that it’s important for people to recognize the way that the market really works is to have that nexus of ‘hit the brokerage houses with a series of orders that can push it down’, then leak it to the press, and then get it on CNBC (that’s also very important), and then you have kind of a vicious cycle down. It’s a pretty good game.”

Bizarro translation: “Is big crime to make anything perfect on Bizarro World! Us make money by wrecking public companies! And here on Bizarro World, Jim Cramer not even pretend to be friend of small investor! Oh yeah…CNBC official network of Bizarro World!”

(Lest any suppose these clips have been taken out of context, I strongly encourage everybody to download and view the 10 minute conversation in its entirety.)

On Bizarro World, villains are treated like celebrities while the law-abiding are scorned and ostracized. So it should come as no surprise that on CNBC (the official network of Bizarro World), short selling hedge fund managers are called “titans” while those who question them are dismissed with a wink and a smirk.

Of course, this would seem consistent with the seemingly inverted reality that is short selling, where – as opposed to traditional investors who earn profits when they buy low and later sell high – shorts aspire to do the same by first selling high and then buying low.

While on the surface short selling might appear to have been invented on Bizarro World, that’s not true. Shorting is (as has been stated time and again on this blog) a healthy part of a normal market.

What was invented on Bizarro World, however, is shorting’s insidious doppelganger: naked short selling, which is a practice ripped straight from the Bizarro World welcome guide. Unlike legitimate short selling, which requires first borrowing the shares one sells short, naked shorting skips that step, allowing criminals to sell not only something they do not own, but something that does not even exist, except as a tradable electronic ledger entry which they themselves conspire with corrupt brokerages to create.

This, in turn has the effect of artificially increasing the supply of a company’s shares. In other words, on Earth, only companies get to issue stock, whereas on Bizarro World, it’s the naked short sellers that issue shares of a company’s stock, with impunity, sometimes in quantities rivaling the number of legitimate, company-issued shares in circulation (with the expected impact on share price).

Or, should I say, naked short sellers used to be able to do this.

The truth is, since shortly after the onset of the economic crisis naked short sellers themselves helped to spark, naked shorting has become an increasingly difficult crime to commit.

The result?

Despite the fact that we’re in the midst of an epic bear market – when one would normally expect short sellers to thrive – the biggest short selling hedge funds are getting hammered.

Today, Reuters business writer Svea Herbst-Bayliss has a shocking overview of the breadth of the situation, which she begins by comparing to Waterloo – the battle which forever put an end to Napoleon’s aspirations of world domination.

Based on insiders’ insights into forthcoming letters to investors explaining their performance over the first and second quarters of 2009, Herbst-Bayliss predicts that “To anyone considering hedge fund investments in the coming months, the data will illustrate that these managers who cashed in on last year’s financial markets crash now rank as the $1.4 trillion hedge fund industry’s worst performers.”

Specifically, Herbst-Bayliss notes, “In the first six months of 2009 [short selling hedge funds] lost 9.38 percent, compared with the 9.55 percent that other hedge funds gained.”

Most notably, the story quotes Brad Alford, a professional hedge fund advisor and investor, who says, “Every few years short-sellers have their day in the sun. Then things revert to normal where the markets rise and life becomes so difficult for them that many just go out of business,” he added.

In case you missed it, you might want to re-read Alford’s quote to make sure you catch what makes it so telling: that a rising market can be bad for short sellers.

But how can that be, given the recently-ended bull market – possibly the greatest in economic history – saw short selling hedge funds such as SAC Capital, Kynikos Associates and Third Point Capital experience mind-boggling growth, while a month-long rise in what is otherwise shaping up to be one of the greatest bear markets in economic history (when the shorts should be thriving) may prove to be their ultimate doom?

Talk about Bizarro World investing!

The difference, I suspect, is naked short selling: a crutch-like tool that allowed the shorts to defy gravity while the market soared, the effective removal of which has left them atrophied and uncoordinated when forced to fend for themselves in a market where capable, legitimate short sellers should thrive.

Blue vs. Green Kryptonite Click to see full version.

Blue vs. Green Kryptonite: Click to see full image

Or maybe a more apt metaphor is that of Kryptonite, the green version of which makes Superman weak and Bizarro strong, while the blue version has the opposite effect. For a long time, a captured media and SEC equipped short selling hedge funds with a big, fat slab of green Kryptonite, which their own hubris has caused to be replaced by a bit of the Bizarro-toxic blue stuff.

Will July of 2009 be the short sellers’ Waterloo?

Will short selling hedge funds’ greed simply assume another form?

Will the economy recover before it’s too late to matter?

Find out what happens in the next episode of Deep Capture!

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Fairfax and just the facts, Ma’am.


In July of 2006, Fairfax Financial Holdings (NYSE: FFH) filed a lawsuit alleging stock manipulation on the parts of several hedge funds, contract hedge fund operatives, and John Gwynn, an analyst with stock brokerage Morgan Keegan & Co.

The complaint is very enlightening and detailed in its claims, which can be broadly summarized as follows: certain hedge funds, which stood to profit by scuttling Fairfax’s stock price, illegally conspired and acted to do as much.

More specifically, the complaint says:

As a result of [S.A.C. Capital]’s frequent communications with Morgan Keegan and Gwynn, S.A.C. learns when Gwynn intends to issue reports and what they will say and, indeed, frequently directs Gwynn on when to issue reports and what to say. (p.14)

Also like S .A.C., Exis is a significant client of Morgan Keegan and has substantial influence over Gwynn, with whom Exis also collaborates closely. (p.15)

…[convicted hedge fund operative Spyro Contogouris] orchestrat[ed] negative analyst coverage — particularly through Gwynn… (p.18)

Gwynn collaborated with certain hedge funds, including Enterprise member Trinity Capital, in developing extreme criticisms of Fairfax to support both short-term and long-term shorting strategies dubbed “the Fairfax Project.” Gwynn communicated these developed criticisms and his intention to release a highly negative report containing those criticisms in a series of road show presentations to major hedge funds including, among others S.A.C., Lone Pine, Kynikos, Highfields, Greenlight Capital, and Perry Capital . The hedge funds participating in this discussions understood at their conclusion that Gwynn intended to initiate coverage of Fairfax with an extremely critical report, they understood and contributed to the substance of the criticisms to be included in the report, and they understood that the report’s release would be timed to provide them an opportunity to establish their short positions. These critical Morgan Keegan clients also understood that once they had established a short position in Fairfax, Gwynn would continue to support that position with negative reports until they covered. This understanding was critical because the Fairfax Project contemplated short-term and longer term components, the latter of which involved enormous potential exposure to the Enterprise if the stock price increased substantially. (p.20)

The S.A.C. Defendants, Exis Defendants, Lone Pine Defendants, Rocker Defendants, Third Point Defendants and Trinity Defendants…frequently had communications and coordinated with [John Gwynn] and caused [Gwynn] to disseminate [his] reports to numerous clients, investors, journalists, and media outlets… (p.62)

Reading the complaint in full, it’s clear that Gwynn’s actions played a pivotal role in the execution of the defendant hedge funds’ manipulation efforts.

So clear, in fact, it may have contributed to Gwynn’s decision, six months later, to terminate coverage of Fairfax Financial (a fact bemoaned by Herb Greenberg, not surprisingly one of Gwynn’s biggest fans).

As expected, the suit’s many named defendants responded to the complaint with indignant denials and, in the case of John Gwynn, a countersuit filed in November of 2007, accusing Fairfax of making him “a scapegoat” for the company’s “financial, legal and accounting problems.”

Today, ten months after Gwynn’s countersuit was filed, a spokesman for Morgan Keegan told Bloomberg that Gwynn has been fired “for violation of a firm policy relating to his apparent advance disclosure of his pending research coverage of Fairfax Financial Holdings.”

In other words, Fairfax was correct about what Gwynn was doing.

Given that fact, what are the chances Fairfax was not also correct about who benefited from Gwynn’s corruption: mega hedge funds such as S.A.C. Capital, Third Point Partners, Greenlight Capital, Rocker Partners, et al?

And, supposing that aspect is true, there would appear to be quite a bit of coordination between short-selling hedge funds and shady stock research outfits.

And that sounds suspiciously like the claim Deep Capture reporter Patrick Byrne has been making, ad nauseum, for over three years.

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Fairfax and just the facts, Ma'am.


In July of 2006, Fairfax Financial Holdings (NYSE: FFH) filed a lawsuit alleging stock manipulation on the parts of several hedge funds, contract hedge fund operatives, and John Gwynn, an analyst with stock brokerage Morgan Keegan & Co.

The complaint is very enlightening and detailed in its claims, which can be broadly summarized as follows: certain hedge funds, which stood to profit by scuttling Fairfax’s stock price, illegally conspired and acted to do as much.

More specifically, the complaint says:

As a result of [S.A.C. Capital]’s frequent communications with Morgan Keegan and Gwynn, S.A.C. learns when Gwynn intends to issue reports and what they will say and, indeed, frequently directs Gwynn on when to issue reports and what to say. (p.14)

Also like S .A.C., Exis is a significant client of Morgan Keegan and has substantial influence over Gwynn, with whom Exis also collaborates closely. (p.15)

…[convicted hedge fund operative Spyro Contogouris] orchestrat[ed] negative analyst coverage — particularly through Gwynn… (p.18)

Gwynn collaborated with certain hedge funds, including Enterprise member Trinity Capital, in developing extreme criticisms of Fairfax to support both short-term and long-term shorting strategies dubbed “the Fairfax Project.” Gwynn communicated these developed criticisms and his intention to release a highly negative report containing those criticisms in a series of road show presentations to major hedge funds including, among others S.A.C., Lone Pine, Kynikos, Highfields, Greenlight Capital, and Perry Capital . The hedge funds participating in this discussions understood at their conclusion that Gwynn intended to initiate coverage of Fairfax with an extremely critical report, they understood and contributed to the substance of the criticisms to be included in the report, and they understood that the report’s release would be timed to provide them an opportunity to establish their short positions. These critical Morgan Keegan clients also understood that once they had established a short position in Fairfax, Gwynn would continue to support that position with negative reports until they covered. This understanding was critical because the Fairfax Project contemplated short-term and longer term components, the latter of which involved enormous potential exposure to the Enterprise if the stock price increased substantially. (p.20)

The S.A.C. Defendants, Exis Defendants, Lone Pine Defendants, Rocker Defendants, Third Point Defendants and Trinity Defendants…frequently had communications and coordinated with [John Gwynn] and caused [Gwynn] to disseminate [his] reports to numerous clients, investors, journalists, and media outlets… (p.62)

Reading the complaint in full, it’s clear that Gwynn’s actions played a pivotal role in the execution of the defendant hedge funds’ manipulation efforts.

So clear, in fact, it may have contributed to Gwynn’s decision, six months later, to terminate coverage of Fairfax Financial (a fact bemoaned by Herb Greenberg, not surprisingly one of Gwynn’s biggest fans).

As expected, the suit’s many named defendants responded to the complaint with indignant denials and, in the case of John Gwynn, a countersuit filed in November of 2007, accusing Fairfax of making him “a scapegoat” for the company’s “financial, legal and accounting problems.”

Today, ten months after Gwynn’s countersuit was filed, a spokesman for Morgan Keegan told Bloomberg that Gwynn has been fired “for violation of a firm policy relating to his apparent advance disclosure of his pending research coverage of Fairfax Financial Holdings.”

In other words, Fairfax was correct about what Gwynn was doing.

Given that fact, what are the chances Fairfax was not also correct about who benefited from Gwynn’s corruption: mega hedge funds such as S.A.C. Capital, Third Point Partners, Greenlight Capital, Rocker Partners, et al?

And, supposing that aspect is true, there would appear to be quite a bit of coordination between short-selling hedge funds and shady stock research outfits.

And that sounds suspiciously like the claim Deep Capture reporter Patrick Byrne has been making, ad nauseum, for over three years.

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Was Dan Loeb’s capital allied with David Einhorn’s?


Mega-hedge fund manager Daniel Loeb recently disclosed a double-whammy to his investors: substantial losses early in the third quarter of 2008, and the initiation of a formal SEC investigation into the operation of Loeb’s fund, Third Point Partners.

Loeb blamed part of his firm’s losses on the unfortunate fact of being short financial stocks just when the SEC decided to temporarily enforce existing laws prohibiting illegal naked short selling of a handful of such firms.

Loeb blamed the SEC investigation on a perception that his communications with other hedge funds violate securities laws.

While nobody outside the SEC can know with certainty just what it is about Loeb’s communications with other hedge funds that might be problematic, based on my observations of Loeb’s stock message board postings, I do have a theory.

In this installment, we’ll examine apparent coordination between Daniel Loeb and David Einhorn, manager of mega-hedge fund Greenlight Capital.

According to his book, Fooling Some of the People All of the Time, Einhorn established his much-storied short position in Allied Capital (NYSE:ALD) in early May of 2002. Einhorn first publicly outlined his short thesis on the late afternoon of May 15, 2002. The next morning, Allied held a conference call to address Einhorn’s claims. Interestingly, Einhorn himself did not participate in that call, however the first several questions – which achieved a much greater level of specificity and detail than Einhorn offered the night before – were asked by Daniel Loeb.

Either Loeb is an unusually quick study, or he and Einhorn had communicated substantially on the subject of shorting Allied Capital in advance.

Interestingly, on Allied’s Yahoo Finance message board, one of the biggest proponents of the Einhorn thesis also turns out to be Daniel Loeb.

In this message, for example, Loeb’s alter-ego, senor_pinche_wey (as proven here), confronts a poster who questions the veracity of Einhorn’s claims regarding Allied.

A few weeks later, Loeb’s alter-alter ego, mr_pink_esq (also proven here), says of Einhorn’s analysis:

“Looks like Einhorn has this one nailed. Einhorn has one of the best reputations in the business. He would hate to be on the wrong side of this trade.”

And lest you think Loeb was just offering his buddy Einhorn moral support, consider this post, in which Loeb wonders aloud (in the third person) how he might spend the “millions He will make on his ALD short. He was considering purchasing Himself a new car. However He is torn between the Aston Martin DB9, the Bentley GT and the Ferrari 360 Spyder…Maybe if this thing goes bust He can buy Himself a Mercedes Maybach.”

In all, Loeb, with the direct support of known paid message board basher Yolanda Holtzee (using such account names as ms_mint_green_esq and regulators_have_been_notified) personally posted scores of such messages over three years.

This appears to be an example of Loeb and Einhorn coordinating their efforts on the short side.

Coming soon: a clear-cut example of Loeb coordinating efforts with another hedge fund manager in his role as a so-called “activist investor” (and in so doing, skirting key securities laws while holding a metaphorical gun to a target company’s head).

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Was Dan Loeb's capital allied with David Einhorn's?


Mega-hedge fund manager Daniel Loeb recently disclosed a double-whammy to his investors: substantial losses early in the third quarter of 2008, and the initiation of a formal SEC investigation into the operation of Loeb’s fund, Third Point Partners.

Loeb blamed part of his firm’s losses on the unfortunate fact of being short financial stocks just when the SEC decided to temporarily enforce existing laws prohibiting illegal naked short selling of a handful of such firms.

Loeb blamed the SEC investigation on a perception that his communications with other hedge funds violate securities laws.

While nobody outside the SEC can know with certainty just what it is about Loeb’s communications with other hedge funds that might be problematic, based on my observations of Loeb’s stock message board postings, I do have a theory.

In this installment, we’ll examine apparent coordination between Daniel Loeb and David Einhorn, manager of mega-hedge fund Greenlight Capital.

According to his book, Fooling Some of the People All of the Time, Einhorn established his much-storied short position in Allied Capital (NYSE:ALD) in early May of 2002. Einhorn first publicly outlined his short thesis on the late afternoon of May 15, 2002. The next morning, Allied held a conference call to address Einhorn’s claims. Interestingly, Einhorn himself did not participate in that call, however the first several questions – which achieved a much greater level of specificity and detail than Einhorn offered the night before – were asked by Daniel Loeb.

Either Loeb is an unusually quick study, or he and Einhorn had communicated substantially on the subject of shorting Allied Capital in advance.

Interestingly, on Allied’s Yahoo Finance message board, one of the biggest proponents of the Einhorn thesis also turns out to be Daniel Loeb.

In this message, for example, Loeb’s alter-ego, senor_pinche_wey (as proven here), confronts a poster who questions the veracity of Einhorn’s claims regarding Allied.

A few weeks later, Loeb’s alter-alter ego, mr_pink_esq (also proven here), says of Einhorn’s analysis:

“Looks like Einhorn has this one nailed. Einhorn has one of the best reputations in the business. He would hate to be on the wrong side of this trade.”

And lest you think Loeb was just offering his buddy Einhorn moral support, consider this post, in which Loeb wonders aloud (in the third person) how he might spend the “millions He will make on his ALD short. He was considering purchasing Himself a new car. However He is torn between the Aston Martin DB9, the Bentley GT and the Ferrari 360 Spyder…Maybe if this thing goes bust He can buy Himself a Mercedes Maybach.”

In all, Loeb, with the direct support of known paid message board basher Yolanda Holtzee (using such account names as ms_mint_green_esq and regulators_have_been_notified) personally posted scores of such messages over three years.

This appears to be an example of Loeb and Einhorn coordinating their efforts on the short side.

Coming soon: a clear-cut example of Loeb coordinating efforts with another hedge fund manager in his role as a so-called “activist investor” (and in so doing, skirting key securities laws while holding a metaphorical gun to a target company’s head).

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Roger and Me: insights into the dark world of stock manipulation


The first several posts published on AntiSocialMedia.net dealt with former BusinessWeek reporter Gary Weiss and his abuse of blogs, Wikipedia and message boards in defense of illegal stock market manipulation.

Almost immediately after publishing the first such post, I began to receive email from readers who were confident that any scam involving Gary Weiss was all but certain to involve a fellow named Floyd Schneider, as well.

Curious, I googled “Floyd Schneider”, and quickly found the 2002 BusinessWeek story entitled “Revenge of the Investor”, in which Floyd is painted as a crusading folk hero fighting against corporate fraudsters.

With that, I concluded that Floyd Schneider could not possibly be an associate of Gary Weiss.

Time passed, and I began to gain a better understanding of how Gary Weiss was not only a corrupt blogger, but how he had also been a corrupt reporter, often using his by-line at BusinessWeek to further the interests of his short selling patrons by casting black as white, and white as black.

Indeed, as anybody who’s followed his career knows, the First Law of Gary Weiss is: If Gary says something is bad, it’s probably good; and vice versa.

I’m ashamed to admit that the obvious “A-ha!” moment finally came in December of 2006. That’s when it occurred to me – rather randomly – that I ought to take another look at the 2002 piece on Floyd Schneider…particularly the story’s by-line (which BusinessWeek.com tends to print at the end of stories).

Looking back, what I found probably should have come as no surprise…

story written by Gary Weiss

…the author of the story lionizing Floyd Schneider was Gary Weiss himself. Indeed, Floyd is also lovingly featured in Weiss’s second book.

Those facts, when viewed in the context of the First Law of Gary Weiss, were all I needed to know that the individuals who suggested Floyd Schneider was involved in the coordinated public attacks I had observed against Patrick Byrne and other opponents of illegal naked short selling, were correct.

At that point, I sought to determine which message board aliases Schneider was using at the time. The answer was to be found in this legal opinion filed in one of the (multiple) lawsuits brought against Schneider by companies defamed and libeled by his message board posting.

It reads:

…“Floydtheoneandonly,” “charlesp0nzi,” “thetruthseekercom,” are [stock message board] pseudonyms used by Floyd Schneider…

From there, the Dissembler Sorting Algorithm revealed that on Yahoo Finance alone, additional Schneider aliases included strethoechasity, returnofstockdung, baloneymarch, wackypat, zorro20934 and china39846.

As an aside, the alias zorro20934 was used by Schneider to post attacks (since deleted) against Matrixx Initiatives, in direct violation of an agreement Schneider signed stipulating that he would not do so.

Over time the vast majority of Schneider’s message board contributions have been deleted for their abusive nature. Possibly the best and most recent example of this appeared briefly on Yahoo’s INVESTools board, in a series of posts in which Schneider attempted to blame INVESTools management for former employee David Ragsdale’s tragic decision to murder his wife earlier this year.

Analysis of the thousands of posts made by Schneider revealed that they attacked – almost without exception, companies appearing on the Reg SHO Threshold Securities list – which is comprised of firms targeted by hedge funds engaged in manipulative naked short selling.

In addition, Floyd’s posting patterns tended to be very abnormal; meaning, he would focus intensely on one or two companies for a time, then abruptly shift focus to attacking another and never return to the prior. This, I reasoned, was what one would expect of someone being directed in their efforts, as opposed to someone whose attention naturally evolved over time.

The next breakthrough came when I discovered this message board post made to SiliconInvestor.com by former Schneider business partner and convicted stock manipulator Anthony Elgindy, reading:

From: Anthony@Pacific
4/21/2001 8:28:44 PM

Notice of termination of all association with The truthseeker.

As of Yesterday.

I wish him luck in his current business venture as a paid researcher/basher..

I dont pay for any posts..period and I’m not gonna start ever doing that.
Please dont ask me to elaborate , just know that he is being paid now by outside parties.
He has done some good work and we have had some good times , but all good things must come to an end..someday.

I first wrote about what I had discovered, vis-à-vis Floyd Schneider, in December 2006.

In early April 2007, a mysterious comment was added to the Schneider post, claiming to have been made by Floyd’s long-deceased father. It read…


The Truthseeker is incapable of ever telling the truth!

How do I know? That’s easy I was his father. Currently my wife and other 4 sons have completely disowned him and will have nothing to do with him anymore.

I passed away on 2/7/1996, let me tell you some of my own experiences with my 3rd son, Floyd D. Schneider.

TIMELINE:

1976-1979 while attending the University of Miami he has gambled with bookies losing thousands of dollars I had to bail him out of, and committed credit card fraud stealing credit card numbers.

1982 stock broker for Moore Schlay, embezzled monies from family and friends brokerage accounts and lost it all buying options, He was fired and I had to bail him out again.

1983 stockbroker for Shearson American express, again he did the same thing and he was fired, I had to mortgage my house this time to bail him out.

1983- 1988 in between this time there were a few more bets with bookies and in 1988 he married a con artist and became her 6th husband. They both ran an Insurance agency in Bradley Beach, NJ “The F. D. Schneider Insurance Agency” This was a total disaster, they both were issuing insurance cards to people and had them make out their premium checks directly to them and cashing the checks for money for themselves, never putting the policies through and having these people driving with no car insurance without them knowing.

Yup again this cost me money in 1991, my whole half years retirement package in fact to bail him out of this mess.

Floyd came home to live again and in 1992 became a Mortgage broker for Weichert Realtors. He got in more trouble in those years by having people sign lock-in agreements and not locking the interest rate in, hoping rates would go down and lock it in then making loads more money for himself. Problem was more often the interest rates went up and he had to arrange to pay large lump sums of money to the borrowers to keep them from getting him fired.

Thank goodness he was a “so called” top producer, giving him them means pay his way out of a mess for himself for once. Floyd is a compulsive liar and you never can get the Truth from him, always nothing but another lie after another. Guess that’s why now he feels a need to seek truth from others, lord knows he could never seek it from himself.

He has a very convoluted way of justifying things. I remember back in 1983 when he was with Shearson in that mess, he forged a signature from his Godfather’s account, when I sat down with him to explain he did something very wrong all he told me was:  “dad I never forged anything, I just signed the check Floyd Schneider, it’s my fault Shearson didn’t check to see if it was the right Floyd Schneider or not, so really it’s their fault not mine!” You see Floyd was named after his uncle and Godfather “Floyd Schneider” of Carpenter and Smith Oil in Monroe, NY.

I never could convince him he did anything wrong either, he really believes he has never done a wrong thing in his life. I died 6 months after Floyd was married to his second wife. His father-in-law has no idea of what his daughter married! I am starting to feel I am the lucky one now six feet under, but finally in peace!!!

Not feeling comfortable with a comment from a dead person appearing on my blog – particularly one leveling such extreme accusations – I removed it and contacted its author: not to ask for proof of the claims, but to discern with reasonable certainty that he or she was actually in a position to know whether or not they were true.

What resulted was a long and fruitful conversation with Roger Schneider, Floyd’s brother and – until days before – Floyd’s boss at the Ramsey, NJ branch of mortgage brokerage Nationwide Equity.

The circumstances behind Floyd’s dismissal from Nationwide provide what might be the most interesting and valuable bit of insight yet gained in my effort to prove that contrary to their repeated claims, some individuals are indeed paid to “bash” public companies on stock message boards on behalf of short selling hedge funds seeking to profit from a drop in the target company’s share value.

Here’s how Roger Schneider himself describes the situation:

“Floyd was writing up invoices on Nationwide Equity’s letterhead to Magic consulting instructing Magic to pay Nationwide for some phony service he made up, and too have Magic consulting make out the checks payable directly to Floyd D. Schneider. He did this many times before it was discovered and he was fired.”

(More on Michelle McDonough and Magic Consulting in a moment)

As Roger described the above scene to me, when Floyd was presented with the evidence of his history of illegally disguising payments from Magic Consulting as mortgage brokerage commissions, Floyd’s only defense was to point out that in this most recent case (the one for which he was caught), Magic owner Michelle McDonough had instead opted to pay him directly as a contract “stock researcher.”

This is a vital detail, because it confirms Anthony Elgindy’s claim that Floyd had engaged in a “business venture as a paid researcher/basher.”

It was while cleaning out Floyd’s desk a few days later that Roger discovered a print version of the same legal filing I had found online months before, and the partial listing of Floyd’s confirmed message board aliases. Then, while seeking additional information on what he’d found, Roger happened upon AntiSocialMedia.net and my post about his brother.

As it turns out, Floyd left behind many compelling insights into his relationship with Michelle McDonough’s Magic Consulting.

It seems that when hedge fund Third Point Capital needed some dirt spread about specific companies, they would enlist the help of McDonough, who would in turn enlist the help of individuals such as Floyd Schneider. McDonough would provide Floyd with a list of “talking points” and, moments later, these were the things Floyd would begin posting on stock message boards across the web, including Yahoo Finance, Raging Bull, and Silicon Investor.

Very soon, these were also the things business reporter Roddy Boyd (currently of Fortune, previously of the New York Post) was writing damning stories about.

Very frequently, Boyd would contact Floyd, asking for help digging up negative information on officers of specific companies. In every case, these companies were known to be under active and vicious attack by short selling hedge funds.

On one occasion, Roddy Boyd refers directly to Michelle McDonough as an acquaintance of his and Floyd’s…which is what makes the following email exchanges between Boyd and myself so strange:

Judd Bagley: “…What do you know about a woman named Michelle McDonough?”

Roddy Boyd: “re Michelle M: nothing. Should I? google has about 1mm entries for that name.”

Judd Bagley: “She used to go by the name Michelle Sarian. Today she runs “Magic Consulting.” I think she did a year in prison back in 2001.”

Roddy Boyd: “re sarian or mcdonough…youre [sic] concern, not mine.”

And later…

Judd Bagley: “While I’ve got you…you recently denied knowing Michelle McDonough (formerly Sarian). Is that still your position?”

Roddy Boyd: “sorry judd, im [sic] not talking to you about anything else, period. if youre [sic] not comfortable with me asking the questions-fine. but im [sic] not anwering [sic] yours.”

We’ve since learned yet more about Michelle McDonough and Magic Consulting.

Most notable is the fact that McDonough apparently offers her services to multiple hedge funds, not just Third Point Capital, as originally suspected.

It’s also emerged that, prior to leaving for prison, McDonough (then known as Michelle Sarian) was a very active message board poster, herself. Sources suggest that in those days, she primarily attacked the companies targeted by Evan Sturza, a former hedge fund manager who went on to publish Sturza’s Medical Investment Letter.

Based on evidence he saw, Roger Schneider estimates McDonough paid Floyd at least $14,000 in 2006 alone. A few years before that, Roger observed Floyd receive at least one payment of $10,000 from Paul C. Harary, who – it should come as no surprise – was recently imprisoned for securities manipulation.

Paul C. Harary.

Michelle McDonough.

Anthony Elgindy.

Sam E. Antar.

All convicted securities manipulators.

All past and present associates of paid stock message board basher Floyd Schneider.

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Daniel Loeb’s First Amendment Riot


In late 2005, I spent over four hours interviewing Overstock.com CEO Patrick Byrne as part of a podcast series on entrepreneurship I created.

After I published the audio of the interview, somebody posted a link to it on the Yahoo Finance message board dedicated to Overstock.com.

Seeking the origin of the resulting surge in downloads led to my first stock message board visit.

It was really strange.

What first struck me was the flurry of responses to the original posts in which users with foul mouths and bad attitudes warned that the linked mp3s contained computer viruses.

Of course, no mp3 has ever carried a virus, as I’m fairly certain the posters knew.

These were followed up by all manner of lies meant to discourage others from listening to any of the three Byrne interviews I would eventually publish.

Worse, they posted all manner of lies about Patrick Byrne personally – something I was in a unique position to recognize having just interviewed him at length.

Intrigued, I started examining the posting histories of the most prolific sources of this disinformation, trying to identify patterns that might in turn reveal their underlying motives and, often enough, their real identities.

Well over two years later, I remain engaged in the same pursuit. And, to be frank, I suspect that by now, I understand it better than anybody else, largely because of a few methods I’ve developed and the great amounts of information I’ve received from others.

What follows is a little bit about what I’ve learned.

First: just as there are dishonest people paid to post lies on stock message boards for the purpose of artificially boosting share prices, there are also bad people paid to post lies on stock message boards for the purpose of artificially lowering prices.

In the case of the latter, they are either paid outright as contract “stock researchers”, or paid in put options (which increase in value as a company’s stock drops in value).

Second: make no mistake, it’s short-biased hedge funds who are paying these stock “bashers” (as they’re often called).

Third: in some cases, it’s actually the managers of these short-biased hedge funds doing the bashing.

Consider the following notable example.

I’ve previously written about evidence received demonstrating that hedge fund Third Point, LLC contracted with convicted stock fraudster Michelle McDonough, whose duties included coordinating the efforts of message board bashers and inducing certain captured journalists to report negatively on targeted companies.

I’ve also written about Third Point founder Daniel Loeb’s well-known history of posting on the Yahoo and Silicon Investor stock message boards under the alias Mr. Pink.

Before getting to the rest of the story, here’s some background.

About the same time I first visited Yahoo Finance, a company called SFBC International (now PharmaNet Development Group) came under a blistering attack by Daniel Loeb, who very publicly announced Third Point’s sizeable short interest in the company.

SFBC got hit from all sides, and its share price withered.

In particular, there was a deluge of libelous (though tame compared to others I’ve seen) posts to Yahoo’s SBFC message board. Most notable were the attacks leveled against then-SFBC Chairwoman and President Lisa Krinsky.

Krinsky responded by filing a lawsuit against ten anonymous posters: Does 1 through 10.

In order to discover the identities of the ten Does, Yahoo was served with a subpoena.

In accordance with policy, Yahoo alerted the posters, giving them two weeks in which to contest the subpoena – an expensive proposition few bashers have the financial ability to pursue.

And indeed, none of the ten Does opted to put up a fight.

With one exception: Doe number 6, known on Yahoo Finance as Senor_Pinche_Wey (which is a slang Spanish term that is as obscene as you can imagine).

A typical post by Senor_Pinche_Wey reads:

“…I will reciprocate [fellatio] with Lisa [Krinsky] even though she has fat thighs, a fake medical degree, “queefs” and has poor feminine hygiene…”

Doe-6 fought the subpoena, was rejected, and appealed to California’s Sixth Appellate court.

Clearly, Doe-6 had some resources backing him up…to say nothing of a deep motivation not to be exposed.

And, fortunately for Doe-6, his appeal was successful and the subpoena was quashed.

This decision – handed down in February of this year – essentially affirms the First Amendment rights of message board bashers to say whatever they want about the officers of public companies. (An excellent analysis of the decision can be viewed here.)

In their decision, the Court noted:

We likewise conclude that the language of Doe 6’s posts, together with the surrounding circumstances — including the recent public attention to SFBC’s practices and the entire “SFCC” message-board discussion over a two-month period — compels the conclusion that the statements of which plaintiff complains are not actionable. Rather, they fall into the category of crude, satirical hyperbole which, while reflecting the immaturity of the speaker, constitute protected opinion under the First Amendment.

Interesting.

Daniel LoebReady for the other shoe to drop?

I’ve learned, through multiple sources, that the immature speaker in this case, Doe-6 (aka Senor_Pinche_Wey) was none other than Daniel Loeb himself.

As a matter of fact, Senor_Pinche_Wey is one of many abusive message board identities used by Loeb to harass officers of companies Third Point was shorting, often illegally.

On August 12, 2005, Patrick Byrne first publicly accused several hedge funds of working in coordination to illegally manipulate the share price of Overstock.com and many other small, public companies. Within 48 hours, armies of bashers arrived for the first time on the Overstock.com stock message boards across the web, all working off of a the same obvious set of talking points. Among the points these bashers took the greatest care to make, time and again: that Byrne was crazy for thinking that any two hedge funds would ever work together when shorting.

In case there are any doubts left regarding Byrne’s claims, I invite you to look at this message board exchange, between Senor_Pinche_Wey, LaseriumQueen, bobbingbargains, disgustedinvestor, kidstockjoec, jidoo, and Polytechnic_Trader.

What makes it so interesting is that at least 72% of the participants are hedge fund managers shorting the company they’re smearing.

Specifically, Senor_Pinche_Wey belongs to Daniel Loeb, while LaseriumQueen, bobbingbargains, disgustedinvestor, and kidstockjoec all belong to Robert Chapman, founder of hedge fund Chapman Capital.

Polytechnic_Trader and jidoo may or may not belong to Loeb or Chapman…I don’t know either way.

I do know that Chapman also posts under the aliases tautologicaltrader, ghaulty_lodgick, notably_absent, and herniatedgorilla – all of which can be seen, time after time, posting things I’m quite certain Chapman would not dare say in person.

Do hedge funds coordinate their attacks?

Yes.

And as you’ll read in a soon-to-be-published-post, message board bashing is only the beginning.

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Daniel Loeb's First Amendment Riot


In late 2005, I spent over four hours interviewing Overstock.com CEO Patrick Byrne as part of a podcast series on entrepreneurship I created.

After I published the audio of the interview, somebody posted a link to it on the Yahoo Finance message board dedicated to Overstock.com.

Seeking the origin of the resulting surge in downloads led to my first stock message board visit.

It was really strange.

What first struck me was the flurry of responses to the original posts in which users with foul mouths and bad attitudes warned that the linked mp3s contained computer viruses.

Of course, no mp3 has ever carried a virus, as I’m fairly certain the posters knew.

These were followed up by all manner of lies meant to discourage others from listening to any of the three Byrne interviews I would eventually publish.

Worse, they posted all manner of lies about Patrick Byrne personally – something I was in a unique position to recognize having just interviewed him at length.

Intrigued, I started examining the posting histories of the most prolific sources of this disinformation, trying to identify patterns that might in turn reveal their underlying motives and, often enough, their real identities.

Well over two years later, I remain engaged in the same pursuit. And, to be frank, I suspect that by now, I understand it better than anybody else, largely because of a few methods I’ve developed and the great amounts of information I’ve received from others.

What follows is a little bit about what I’ve learned.

First: just as there are dishonest people paid to post lies on stock message boards for the purpose of artificially boosting share prices, there are also bad people paid to post lies on stock message boards for the purpose of artificially lowering prices.

In the case of the latter, they are either paid outright as contract “stock researchers”, or paid in put options (which increase in value as a company’s stock drops in value).

Second: make no mistake, it’s short-biased hedge funds who are paying these stock “bashers” (as they’re often called).

Third: in some cases, it’s actually the managers of these short-biased hedge funds doing the bashing.

Consider the following notable example.

I’ve previously written about evidence received demonstrating that hedge fund Third Point, LLC contracted with convicted stock fraudster Michelle McDonough, whose duties included coordinating the efforts of message board bashers and inducing certain captured journalists to report negatively on targeted companies.

I’ve also written about Third Point founder Daniel Loeb’s well-known history of posting on the Yahoo and Silicon Investor stock message boards under the alias Mr. Pink.

Before getting to the rest of the story, here’s some background.

About the same time I first visited Yahoo Finance, a company called SFBC International (now PharmaNet Development Group) came under a blistering attack by Daniel Loeb, who very publicly announced Third Point’s sizeable short interest in the company.

SFBC got hit from all sides, and its share price withered.

In particular, there was a deluge of libelous (though tame compared to others I’ve seen) posts to Yahoo’s SBFC message board. Most notable were the attacks leveled against then-SFBC Chairwoman and President Lisa Krinsky.

Krinsky responded by filing a lawsuit against ten anonymous posters: Does 1 through 10.

In order to discover the identities of the ten Does, Yahoo was served with a subpoena.

In accordance with policy, Yahoo alerted the posters, giving them two weeks in which to contest the subpoena – an expensive proposition few bashers have the financial ability to pursue.

And indeed, none of the ten Does opted to put up a fight.

With one exception: Doe number 6, known on Yahoo Finance as Senor_Pinche_Wey (which is a slang Spanish term that is as obscene as you can imagine).

A typical post by Senor_Pinche_Wey reads:

“…I will reciprocate [fellatio] with Lisa [Krinsky] even though she has fat thighs, a fake medical degree, “queefs” and has poor feminine hygiene…”

Doe-6 fought the subpoena, was rejected, and appealed to California’s Sixth Appellate court.

Clearly, Doe-6 had some resources backing him up…to say nothing of a deep motivation not to be exposed.

And, fortunately for Doe-6, his appeal was successful and the subpoena was quashed.

This decision – handed down in February of this year – essentially affirms the First Amendment rights of message board bashers to say whatever they want about the officers of public companies. (An excellent analysis of the decision can be viewed here.)

In their decision, the Court noted:

We likewise conclude that the language of Doe 6’s posts, together with the surrounding circumstances — including the recent public attention to SFBC’s practices and the entire “SFCC” message-board discussion over a two-month period — compels the conclusion that the statements of which plaintiff complains are not actionable. Rather, they fall into the category of crude, satirical hyperbole which, while reflecting the immaturity of the speaker, constitute protected opinion under the First Amendment.

Interesting.

Daniel LoebReady for the other shoe to drop?

I’ve learned, through multiple sources, that the immature speaker in this case, Doe-6 (aka Senor_Pinche_Wey) was none other than Daniel Loeb himself.

As a matter of fact, Senor_Pinche_Wey is one of many abusive message board identities used by Loeb to harass officers of companies Third Point was shorting, often illegally.

On August 12, 2005, Patrick Byrne first publicly accused several hedge funds of working in coordination to illegally manipulate the share price of Overstock.com and many other small, public companies. Within 48 hours, armies of bashers arrived for the first time on the Overstock.com stock message boards across the web, all working off of a the same obvious set of talking points. Among the points these bashers took the greatest care to make, time and again: that Byrne was crazy for thinking that any two hedge funds would ever work together when shorting.

In case there are any doubts left regarding Byrne’s claims, I invite you to look at this message board exchange, between Senor_Pinche_Wey, LaseriumQueen, bobbingbargains, disgustedinvestor, kidstockjoec, jidoo, and Polytechnic_Trader.

What makes it so interesting is that at least 72% of the participants are hedge fund managers shorting the company they’re smearing.

Specifically, Senor_Pinche_Wey belongs to Daniel Loeb, while LaseriumQueen, bobbingbargains, disgustedinvestor, and kidstockjoec all belong to Robert Chapman, founder of hedge fund Chapman Capital.

Polytechnic_Trader and jidoo may or may not belong to Loeb or Chapman…I don’t know either way.

I do know that Chapman also posts under the aliases tautologicaltrader, ghaulty_lodgick, notably_absent, and herniatedgorilla – all of which can be seen, time after time, posting things I’m quite certain Chapman would not dare say in person.

Do hedge funds coordinate their attacks?

Yes.

And as you’ll read in a soon-to-be-published-post, message board bashing is only the beginning.

Posted in AntiSocialMedia with Judd BagleyComments Off on Daniel Loeb's First Amendment Riot

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Paid bashers: cracking the code


Third Point, LLC is a hedge fund run by Daniel Loeb, also known on stock message boards as “Mr. Pink.”

Michelle McDonough (formerly Michelle Sarian), is a convicted felon who has spent one year in prison for securities fraud. Today, as before going to prison, McDonough has a company called Magic Consulting.

Floyd Schneider is a prolific message board poster, whose many pseudonyms can typically be found repeating the same drumbeat of fraud and executive incompetence. Schneider’s posts frequently encourage shareholders to file SEC complaints and/or join shareholder lawsuits.

Yolanda Holtzee is also a prolific message board poster, most notably as Ms. Mint Green, who holds herself out at a close associate of Daniel Loeb/Mr. Pink. Holtzee is also frequently found to be encouraging shareholders to complain to the SEC and participate in shareholder lawsuits.

Roddy Boyd is a reporter for the New York Post and frequent online supporter and offline apologist of Floyd Schneider and Yolanda Holtzee.

AntiSocialMedia.net has learned that Third Point has, on multiple occasions, engaged Michelle McDonough to generate support for SEC investigations and/or class action lawsuits brought by shareholders against companies in which Third Point has substantial short interests. (Daniel Loeb refused to comment on the nature of his relationship with Michelle McDonough.)

McDonough, in turn, frequently engages Floyd Schneider and Yolanda Holtzee (among others) to foment and feign support for such shareholder actions on stock message boards. (McDonough refused to comment on the nature of her relationship with Schneider and Holtzee.)

Roddy Boyd has been asked on two occasions to comment on his relationship with McDonough. The resulting exchanges, via email with Judd Bagley, proceeded as follows:

Judd Bagley: “…What do you know about a woman named Michelle McDonough?”

Roddy Boyd: “re Michelle M: nothing. Should I? google has about 1mm entries for that name.”

Judd Bagley: “She used to go by the name Michelle Sarian. Today she runs “Magic Consulting.” I think she did a year in prison back in 2001.”

Roddy Boyd: “re sarian or mcdonough…youre (sic) concern, not mine.”

The second, more recent, exchange proceeded as follows:

Judd Bagley: “While I’ve got you…you recently denied knowing Michelle McDonough (formerly Sarian). Is that still your position?”

Roddy Boyd: “sorry judd, im (sic) not talking to you about anything else, period. if youre (sic) not comfortable with me asking the questions-fine. but im (sic) not anwering (sic) yours.”

That’s right…Roddy Boyd, a reporter, essentially twice gave me a reply of “no comment” when asked about any relationship he may have with Michelle McDonough.

Of course that response falls right in line with Daniel Loeb, Michelle McDonough and Yolanda Holtzee — who also ignored my requests for comment.

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At the time much of the content on DeepCapture.com was written, the Great Financial Crisis of 2008 was either on the verge of happening or had just occurred. In those days, emotions among this publication’s contributors were raw and, in an effort to get their warnings noticed and appropriate blame placed, occasionally hyperbolic language and shocking imagery were employed.

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Yet, being a record of a pivotal time in our global economic history, we’ve decided to leave the rawness unedited, with the proviso that readers take the context of the creation of certain posts into account, and that those easily offended re-consider the decision to read them.