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Yet another naked shorting disinformation campaign laid bare

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Yet another naked shorting disinformation campaign laid bare


It’s difficult to overstate the influence of Wikipedia these days, particularly when it comes to informing media coverage. A recent experiment, carried out by a student in Ireland, makes this very clear. So it should come as no surprise that those who wish to minimize the perceived impact of illegal naked short selling on markets and the economy as a whole have made the online encyclopedia a major point of focus.

Recently, yet another effort to infiltrate and alter the content of Wikipedia by a proponent of illegal shorting came to light and was foiled. As before, the infiltrator was former Business Week reporter Gary Weiss (whom a senior contributor recently termed “one of [Wikipedia’s] most slippery sockpuppeteers”), operating for over a year in complete defiance of an edict specifically banning him from the site based on his very well-documented history of abusing Wikipedia for his own conflicted purposes.

In the past (as you can read about here), we know Weiss spread misinformation relating to stock fraud via Wikipedia on behalf of the Depository Trust and Clearing Corporation (DTCC), the Wall Street firm considered a key enabler of illegal short selling. Exactly who’s sponsoring Weiss these days is unclear; however, as the evidence that follows will demonstrate, his concerted effort to whitewash DTCC’s Wikipedia article makes that company the prime suspect.

Now that his ruse has been uncovered – yet again – the focus becomes one of identifying and repairing the damage done. A brief review of some of the thousands of changes made by Weiss will give you a sense of both the scope of the problem and the nature of his motives. I’m organizing the following tiny sampling of Weiss’s Wikipedia edits by topic, with the content as it originally appeared on the left, with Weiss’s changes on the right. Words added or removed appear in red.

As you read what follows, ask yourself two questions:

  1. Which version, be it the left (before Weiss) or the right (after Weiss), better reflects reality and serves readers (particularly journalists) seeking to form an opinion?
  2. What might be Weiss’s motive for obsessively making these changes (and literally hundreds more like them)?
Wikipedia Article Before After
Depository Trust & Clearing Corporation While there is no dispute that illegal naked shorting happens, there is a fight as to the extent to which DTCC is responsible. Some blame DTCC as the keeper of the system where it happens, and charge that DTCC turns a blind eye to the problem. Critics blame DTCC as the keeper of the system where it happens, and charge that DTCC turns a blind eye to the problem.

Depository Trust & Clearing Corporation In 2007, WayPoint Biomedical sued DTCC for DTCC’s refusal to comply with a subpoena request for documents that Waypoint needs to track trades in the company’s shares.

Depository Trust & Clearing Corporation The DTCC has also denied having any relationship with financial journalist Gary Weiss. Weiss is alleged to have manipulated an account on Wikipedia, with assistance from several Wikipedia administrators, to promote naked short selling on the website from January 2006 to March 2008. (added by others and removed by Weiss five times)

Depository Trust & Clearing Corporation DTCC has been sued with regard to its alleged participation in naked short selling. Further allegations about DTCC’s possible involvement have been made by Senator Robert Bennett and discussed by the NASAA and in articles — disagreed with by DTCC — in the Wall Street Journal and Euromoney. DTCC has been sued over alleged participation in naked short selling.

Depository Trust & Clearing Corporation The U.S. Securities and Exchange Commission (SEC), however, views naked shorting as a serious enough matter to have initiated two separate efforts to restrict the practice.

Naked short selling Author and reporter Gary Weiss maintains that the SEC enacted Regulation SHO in part due to pressure from a handful of small and microcap companies. He also cites economic justifications for naked short selling and downplays its significance as a problem for the market.
(note: upon making this change, Weiss also added a link to his book, referring to himself as a source of “notable media opinions.”)

Naked short selling Amidst growing concern in 2008 about the effect of naked short selling on faltering companies, the SEC issued a temporary order restricting short-selling of the shares of 19 financial firms deemed systemically important. Shortly following the failure of Lehman Brothers in September of 2008, the largest bankruptcy in U.S. history, the SEC expanded the temporary rules to remove exceptions and to cover all companies. As part of its response to the crisis in the North American markets in 2008, the SEC issued a temporary order restricting fails to deliver in the shares of 19 financial firms deemed systemically important. In September of 2008, the largest bankruptcy in U.S. history, the SEC expanded the temporary rules to remove exceptions and to cover all companies.

Naked short selling During hearings on the 2008 financial crisis before the House Committee on Oversight and Government Reform, former Lehman Brothers CEO Richard Fuld said a host of factors including a crisis of confidence and naked short selling attacks followed by false rumors contributed to both the collapse of Bear Stearns and Lehman Brothers. During hearings on the 2008 financial crisis before the House Committee on Oversight and Government Reform, former Lehman Brothers CEO Richard Fuld said a host of factors including a crisis of confidence and naked short selling attacks followed by false rumors contributed to both the collapse of Bear Stearns and Lehman Brothers. However, Fuld’s testimony was generally derided as self-serving.

Naked short selling Rolling Stone magazine featured naked shorting in an article, “Wall Street’s Naked Swindle” by Matt Taibbi, in October 2009. In the article, it was reported that an unknown investor had shorted $1.7 million worth of Bear Stearns stock through a variety of options. For the item to make a profit, Bear Stearns would have had to have lost half its value or more in less than nine days. When Bear Stearns collapsed, the options were worth $270 million, or 159 times its previous value. Rolling Stone magazine featured naked shorting in an article, “Wall Street’s Naked Swindle” by Matt Taibbi, in October 2009.

Naked short selling Rolling Stone’s Matt Taibbi presentation on Naked Shorting

Naked short selling In an October 2009 article in Rolling Stone magazine, journalist Matt Taibbi wrote that there had been an attack on Bear Stearns and Lehman Brothers in March 2008 employing “naked short-selling”.

Naked short selling Effective September 18, 2008, amid claims that aggressive short selling had played a role in the failure of financial giant Lehman Brothers, the SEC made permanent and expanded the rules to remove exceptions and to cover all companies. Effective September 18, 2008, the SEC permanently removed an exemption for market making in options on stocks, and making an explicit anti-fraud regulation relating to that activity. The stringent delivery requirement is temporary.

Naked short selling https://www.deepcapture.com/ Blog devoted to naked shorting practices

Robertson v. McGraw-Hill Co. In the article, Weiss described…Weiss claimed…Weiss told how…Weiss described…Weiss’ report was distributed…Weiss’ predictions… The article described…it claimed…The article told how…it described…the article was distributed…the article’s predictions

Robertson v. McGraw-Hill Co. In the suit, Robertson requested $1 billion in damages for, in Robertson’s words, “false and defamatory statements” contained in Weiss’ article. Media response to the suit noted the unusually high damages demanded for a libel suit and speculated that the case would be watched with concern by the publishing industry. The suit was subsequently settled without payment of damages, and Robertson’s fund closed in March 2000.

Michael Milken Starting in June 2009, a series of articles by Mark Mitchell were published on a website called Deep Capture about Milken’s ties to a select group of hedge funds and the stock manipulation of a company called Dendreon (NASDAQ:DNDN). Dendreon has developed a drug called Provenge that enables the human body’s immune system to better fight prostate cancer. (removed by Weiss and replaced by others at least three times)

If there is a silver lining to this cloud, it’s the following: Wikipedia’s current ruling Arbitration Committee, which has the unenviable task of, among other things, dealing with Weiss and his continued efforts to subvert their authority, is genuinely interested in doing the right thing in this situation. Though you might take that for granted, I can assure you that this has not always been the case. Indeed, at one time, Wikipedia’s ArbCom seemed to go out of its way to enable Weiss’s abuse of this most important social media platform, resulting in (if you can believe it) an even greater number of yet more dramatically skewed and self-serving changes to these articles by Weiss.

Wikipedia has come a long way since then.

Finally, it seems unlikely that Portfolio.com, where he authors a business column, is aware of Gary Weiss’s actions. They would probably appreciate knowing more. If you agree, consider sending a brief and informative note to Condé Nast Publications Group President David Carey: David_Carey@condenast.com.

Postscript: If you’re at all unclear on why you should be bothered that DTCC seems to have hired former journalist Gary Weiss to cover-up the crime of illegal of naked short selling, I strongly suggest you check out Lila Rajiva’s recent post on the composition of that company’s board of directors.

_____________________

And now, for what long-time readers of DeepCapture.com will recognize as my favorite part of writing about Gary Weiss: a little running up of the score (piling on with additional insights that don’t necessarily make the case on their own, but certainly make the case much more entertaining).

After discovering the Wikipedia edit placing Gary Weiss within the Fort Knox-like DTCC (see this for the explanation, if you didn’t already follow the link above), I sent DTCC spokesman Stuart Z. Goldstein the following email:

From: Judd Bagley
To:
Stuart Goldstein
Sent:
Wed, 31 Jan 2007 10:24 PM
Subject:
media inquiry
Mr. Goldstein,
Yesterday I received some information suggesting Gary Weiss either is or has been hired or retained by the DTCC (or DTC or NSCC). Can you confirm the existence of a professional relationship between Gary Weiss and your organization?

More than two days passed with no response. Finally, I received the following:

From: Stuart Goldstein
To: Judd Bagley
Date: Fri, Feb 2, 2007 at 12:00 PM
Subject: your inquiry

*** Body Not Included ***

That’s right…the body of the email read only “*** Body Not Included ***”

With that, I responded:

From: Judd Bagley
To: Stuart Goldstein
Date: Fri, Feb 2, 2007 at 1:20 PM
Subject: Re: your inquiry

Mr. Goldstein,
Thanks for your reply, though the body appears to be missing…may I trouble
you to re-send your reply?

Goldstein’s record-breaking response (especially considering his earlier reply took two days to arrive) hit my inbox three minutes later:

From: Stuart Goldstein
To: Judd Bagley
Date: Fri, Feb 2, 2007 at 1:23 PM
Subject: Re: your inquiry

My response to your question is no.

On the surface, this would seem to be Goldstein denying a relationship between DTCC and Weiss. The problem is, I didn’t ask a yes or no question. I asked him to confirm something specific, to which he responded “no.” The answer didn’t fit.

I twice asked Goldstein to clarify his response, and was twice ignored.

That’s when I realized I’d been played.

Goldstein’s quick reply of “My response to your question is no” was probably calculated beforehand as his response to my inevitable request that he re-send the reply which read only “*** Body Not Included ***”.

He got me.

Here’s how this applies to Weiss.

Weiss’s most recently-banned Wikipedia sockpuppet, known as JohnnyB256, generally began to arouse suspicion in September, following a series of extremely slanted edits to the Wikipedia article on DTCC. At that time, multiple Wikipedia editors asked JohnnyB256 if he had a relationship with Gary Weiss. JohnnyB256 avoided answering the question (other than to dismiss it as “unmitigated gall”) until a senior Wikipedia administrator known as Lar inserted himself into the conversation to say he felt it was a “reasonable question.”

JohnnyB256 then responded, in a way that was unambiguously directed to Lar alone, saying, “The answer to your question is ‘no’.”

Only problem is, Lar was the one person who never asked him the question. Unfortunately, nobody picked up on this serpentine strategy at the time, allowing JohnnyB256 to claim he’d already answered the question of  a link to Weiss when it came up from time to time.

Anybody else suspect Weiss and the DTCC are using the same playbook?

Posted in AntiSocialMedia with Judd Bagley, Featured Stories, The Deep Capture Campaign, The Hijacking of Social MediaComments (64)

Dendreon’s Cancer Researchers vs. Hedge Funds & The Bootlick Journalists (or, What’s 18 Million Fails Among Friends?)

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Dendreon’s Cancer Researchers vs. Hedge Funds & The Bootlick Journalists (or, What’s 18 Million Fails Among Friends?)


One of the arguments made with metronomic regularity by those defending stock manipulation, and unthinkingly regurgitated by their lapdog financial reporters, is this: Demonstrate the harm caused by naked short selling (the fact of its illegality being too conceptually difficult for them to grok). Well, here is a good example.

Dendreon (DNDN) is “a biotechnology company, engages in the discovery, development, and commercialization of therapeutics to enhance cancer treatment options for patients. The company’s product portfolio includes active cellular immunotherapy, monoclonal antibody, and small molecule product candidates to treat various cancers.” For the last few years its operations have burned through $66 million to $80 million per year (a not-unusual pattern for pharmaceutical firms researching and developing cures for diseases like cancer).  As it stands, its balance sheet looks like it could support perhaps one more such year without additional capital raising. However, given the $5 share price at which Dendreon has been hovering, such additional capital raising would dilute the owners about 20%, assuming that it is possible in the current environment.

It turns out that the collapse of DNDN from over $20 to that $5 price was accompanied by massive levels of naked shorting. At one point, 18 million shares were unsettled (about 20% of the ownership of the company). It cannot be repeated too often: That is just the data coming from one crack in the system, the CNS bucket at the DTCC, and does not include any fails accumulating at the brokerages, or diverted by pre-netting, or masked by the Stock Borrow Program, or swept into the ex-clearing system, or stemming from offshore failures. So it is the tip of the iceberg (and perhaps, the tip of the tip of the iceberg).

As is so often the case, manipulations in Dendreon stock coincided with all that we have come to expect: surprise rejection of its drug Provenge by the FDA, endless bashing from the likes of the Media Mob and Jim Cramer the Self-Confessed Crook, and other strange incidents soon to be explored by my Deep Capture colleague, journalist Mark Mitchell.

Dendreon Fails
Click image to enlarge

Of late, this story has taken a happy turn. On April 14 Dendreon released prelimary results of their prostate cancer vaccine trials (details of which will be disclosed at this coming week’s American Urological Association’s (AUA) Annual Meeting in Chicago) showing that Provenge works. It prolongs the lives of men with advanced stage prostate cancer.  Its stock promptly quadrupled, which will make getting financing easy (Investors Business Daily, “Prostate Cancer Drugs Get Street’s Attention“).

I will assume that most readers agree that it is a good thing that Dendreon managed to survive long enough to see this day, and that it would have been a bad thing if illegal stock manipulation had suppressed Dendreon’s stock until they ran out of cash and could raise no more (as they say in intro logic classes: “If not, work the proof out on your own”). Which makes this serve, of course, as answer to the challenge that opened this essay.

Given that, one may then ask of those journalists who defend the right of hedge funds to destroy firms they wish to destroy, that is to say, of DowJones’ Carol Remond and Karen Richardson, of Fortune Magazine’s Roddy Boyd and Bethany McLean (now at Vanity Fair), of New York Times’ Floyd Norris and Joe Nocera, of Herb Greenberg hiding behind vapid emails and Dave Kansas hiding under his desk, of NY Post/Portfolio Magazine’s Dan “Crusher” Colarusso and CNBC’s Jim Cramer the Crook: Do you get it now? Do you understand why illegal stock manipulation is wrong, and can impose costs on society it was your duty as journalists to explore? You purveyors of reportorial Velveeta, you lazy and captured, half-educated and dim-witted, snarky, insufferable, conformist and indolent pseudo-intellectual lickspittles, do you get it now? You are sell-out journalists who grovelled to your sources, missed the story of your careers, and in the eyes of an increasing fraction of the public, rank just below pedophile priests.

If this essay concerns you, and you wish to help, then:

1) email it to a dozen friends;

2) email The Story of Deep Capture to a dozen friends;

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

Posted in Deep Capture the Data, Featured StoriesComments (82)

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