March 15, 2020 (FinancialWire) (By Bud Burrell) -- Editor’s Note: Years before SEC chairman Christopher Cox invoked a one-month ban in July of 2008 against naked short selling in 19 battered financial stocks, including Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Citigroup (NYSE: C), Lehman Brothers (OTC: LEHMQ.PK), Credit Suisse (NYSE: CS), Merrill Lynch (DOA, as in dead on arrival), Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Fannie Mae (NYSE: FNM), and Freddie Mac (NYSE: FRE), an eclectic “small group of thoughtful people” sounded the alarm about a financial system gone horribly wrong. Activist Dave Patch started InvestigatetheSEC.com in late 2003, and in early 2004 Mark Faulk began reporting on financial fraud on his website, The Faulking Truth.
At around the same time, the late Gayle Essary began writing for FinancialWire(tm) to bring greater exposure and an air of credibility to the cause. Others, including Bud Burrell, Bob O’Brien, Rod Young, DeWayne Reeves, Darren Saunders, Mary Helburn, Mark Faulk, as well as economists Suzanne Trimbath and Robert Shapiro, worked tirelessly to warn the country about the potential train wreck years before it happened.
Efforts to reform our financial markets were further galvanized when Overstock (NASDAQ: OSTK) CEO Patrick Byrne, along with fellow crusaders Judd Bagley, Brent Baker, and Mark Mitchell, joined the rapidly escalating war. Forbes writer Elizabeth Moyer and Euromoney magazine’s Helen Avery covered the scandal for the financial media, but the Wall Street controlled corporate media for the most part either ignored the issue or attempted to discredit those who exposed the corruption.
It is now 2010, and the ripple effect continues, as seen in the following commentary from Bud Burrell:
With the release of the CNBC CYA piece Friday on Anthony Elgindy, the convicted felon, the exodus of his journalist supporters and apologists stage left has not only continued, but expanded. For over 10 years, this coterie of killer clowns has relentlessly attacked victims of illegal short selling manipulation with every slander imaginable. Then, in a single one hour piece, their world came crashing down, along with their co-conspirators at the regulatory agencies who made hay by attacking criminals and the defenseless in the name of hanging the easiest low hanging scalps from their belt.
The CNBC segment of the “American Greed” series, titled “Mad Max on Wall Street” was laughable in its defense of many of Elgindy’s supporters. While it attacked Elgindy personally, it left out little bites like his prior conviction for felony insurance fraud in Dallas before he appeared in San Diego.
Elgindy was a former pump and dump broker for the notorious Blinder, Robinson (known in the trade by the not so affectionate name “Blind ‘em and Rob ‘em”) in Denver, before he moved on to another bucket shop where the commissions were greater in Dallas. When he saw both these firms go under to regulatory and criminal findings, he astutely morphed himself into a short seller, one who postured himself as being only concerned with outing criminal pump and dump stocks like he had previously lived off of.
He opened a site called Anthony@investigations, on the Silicon Investor Board, which he morphed into Anthony@Pacific as he gained more traction and subscribers to his shorting service. He and his cohort would hit some 4000 companies, pretty much without discrimination, wrecking more than 2200. Many deserved such attention, but as many more did not. When Elgindy put his pack of wild dogs on a small company, they would be unable to find the resouces to defend themselves.
Milberg, Weiss would sue for the companies’ D&O Insurance policies if they had any, the SEC would be “tipped” about the fraud at the company (whether it existed or not), paid bashers would bury message boards with slanders of everything about the companies, legitimate business opportunities of the target companies would be eviscerated by wholesale attacks on the potential business partners, the SEC would open investigations on the company, its management, its financiers, and so on and so on, ad infinitum. By involving an FBI agent and his friends, Elgindy would gain access to insider information that could be used in an adversarial way against the companies. This last decision had more to do with the 11 year sentence to prison he received than anything else he did.
This was a bad week for bad people. Preceding the National Inflation Association’s blast that tax revenues equal to 100% of all income could no longer pay for our Federal Government on a coverage basis, the bankruptcy examiner revealed that Lehman was bankrupt for months before it actually filed, hiding its conditions with accounting technicalities, while Dick Fuld and his CFO gave Sarbanes-Oxley certifications to their financials they knew were false and misleading. Some might forget that one major media “Guru” touted the purchase of Lehman for three consecutive days prior to their bankruptcy filing, vastly benefitting his short seller friends who were raiding Lehman, while he described the Lehman stock as “the stock buying opportunity of a lifetime”.
This “Guru” described above had said for years that illegal short sellers provided a necessary function to the markets, forcing it to be more efficient, while at the same time increasing overall market liquidity. He advocated the validity of the argument for “Strategic” failures-to-deliver as being legitimate. So where is he now on these subjects? He has completely reversed field, now opposing (along with many other of his previous journalistic supporters who mouthed similar opinions) naked short selling. He peers used an interesting tactic throughout the last 10 years, repeatedly trying to confuse investors by mixing descriptions of the legal short selling of the previous 70 years with the new naked shorting ploy, in which no stock was ever borrowed.
The SEC produced shamelessly fraudulent and misleading articles supporting its positions that short sellers acted as a kind of unregulated policeman for smaller stocks. They produced highly prejudiced, pre-determined outcome economic studies on the impact of short selling to support their actions. It took the raids on Bear Stearns, Lehman, Merrill and Citigroup to take the wind out of their sails a bit, along with the disclosure the Bernie Madoff’s “pocket” broker-dealer was 5 to 10% of total market sales. Even then, they systematically refused to admit their errors and disgracefully conflicted positions on short selling.
I would estimate that about half of all journalists who denied naked short selling’s very existence for years are now saying that it is bad for markets, and for US markets in particular. They attempt now to “Revise” history, so that their previous positions supporting illegal short sellers’ very methods, motives and means would be lost in the maw of coverage, and the defective short term memory of American investors and markets. I think that this will not happen quite as easily as they would wish it. I saw this same kind of revisionist history created on the “First Progressive”, President Woodrow Wilson, with regard to his support of Fabian Socialism, Eugenics, opposition to the vote for Women, and the support of the catastrophic Treaty of Versailles, which became the foundation for the Second World War.
Their attacks on and slanders of people ranging from Patrick Byrne, to Overstock, to Fairfax Financial, to Eagletech Communications, Viragen, Sedona Corp, Nanopierce, and more, much more, including me, won’t just evaporate. Our Courts and Judges have determined to repeatedly shield the SEC from its own venality, incompetence and arrogance, the most disgraceful being the behavior of the 2nd Circuit Courts. The SEC’s own whitewash of its malfeasance in protecting Bernie Madoff was an appalling disgrace. Its protection of the manipulators of Bear and Lehman placed the priority on shielding the manipulators, rather than facing and fixing our markets so that such manipulation could never again damage individual investors.
Many people throughout our private and public sectors are responsible for the destruction of hundreds of billions of dollars in value, and the decimation of our markets on a level unprecedented since the 1929 Raid, and, most probably, the way of life we have known for most of our history. They must pay, and I mean with everything they have including their freedom. It stops here, or the Devil will take the hindmost.
Source: Investrend Weblogs (http://www.investrendweblogs.net/bburrell/2010/03/14/pro-naked-short-selling-journalists-begin-to-jump-ship/)
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