Jun 14, 2004 7:54:00 AM
Jun 14, 2004 (financialwire.net via COMTEX) --
(FinancialWire) FinancialWire learned several months ago that "Dateline," the investigatory TV program aired by General Electric's (NYSE: GE) NBC unit, has been preparing a blockbuster expose of "Stockgate," the term coined by FinancialWire to encompass the massive naked shorting scandal, that could cause the entire financial community to implode, but FinancialWire had honored requests from participants to keep the plans for the program confidential.
That has changed now following a story by The Faulking Truth website. "It's been called the biggest financial scandal in the history of the world, with incurred losses estimated by some experts at well over $1 trillion dollars. It's a scandal that involves over 1,200 offshore hedge funds, over 150 US brokers, [including Charles Schwab (NYSE: SCH), A.G. Edwards, Inc. (NYSE: AGE), and ETrade Group, Inc. (NYSE: ET)], and has already bankrupted over 7,000 US companies in the past six years," said Mark Faulk in an article at http://www.faulkingtruth.com/article/?Investing101&1005 , entitled "Is Dateline Losing Credibility Over StockGate Story Delays?"
"According to many of the lawsuits filed to date, the crooks include terrorist groups and organized crime syndicates. Sources say that this scandal, which involves an intricate system of selling electronic counterfeit shares of stock in an effort to destroy the market value of small publically traded companies by utilizing a method known as 'naked short selling', will eventually implicate almost every major broker in America, all of the governing bodies that oversee trading, and will extend into Canada and Europe," stated the article.
"Amazingly, the SEC has admitted it had been 'observing' naked short selling for six years, but up to now has done absolutely nothing to put a halt to it.
[This message has been edited by darrenbaker (edited June 18, 2004).]
quote:
Upside, do you see a possible "crash" type response to this bombshell?
I don't know what to expect if this story comes out in the national media in an unedited form. It really does have the potential to change the whole face of the stock market, the SEC, and market making as we know it. If that happens, believe me, it wont be a good thing, at least in the short term. You're looking at many major firms going bankrupt. Shareholders who are affected by a scandal of this size will be brushed aside. That's why I don't think it will ever air in its entirety. We'll see a toned down, edited version of it that might force some minor changes but nothing that will affect us all that much.
quote:
just think the MM's should have to pay for bringing our stocks down when great news comes out. check TSBB look at 10Q and tell me how they are still sub penny.
And you're right if this stock has a normal short volume. In most cases it's never a problem for the short sellers to cover when forced to. It's when it gets carried away to an extreme level as the article alludes to, Then there could be major problems. Imagine these guys geting caught short with absolutely no way to cover. Who's going to suffer? You and me. I don't believe it's ever going to happen but the possibility is there.
You know, when everyone started cheering for CMKX to slay the evil MMs via the "greatest short squeeze in history", I started to get a bit uneasy about getting stuck with counterfeit shares. MMs can go bankrupt, and so can their insurance companies, right?
Very troubling quote from the article:
"There are numerous cases of a single share being lent ten or many more times," giving rise to the complaint that the DTCC has been electronically counterfeiting just as was done via printed certificates before the Crash.
End quote.
Under normal circumstances, I could see the SEC fixing the problem gradually, so as to avoid a major catastrophe, but if "funding terrorism" is involved, I believe the government would (and should) hit hard and fast.
If "StockGate" turns out to become a historical stock market trauma, we need to be the ones who come out of it as winners (if that's possible) If there is a crash coming, the clock is ticking. This thread, in my opinion, is now the most important thread we have here. Keep the DD coming.
Thanks for starting it, bingo.
A few quotes from their site:
Why Was SIPC Created?
SIPC is an important part of the overall system of investor protection in the United States. While a number of federal, self-regulatory and state securities agencies deal with cases of investment fraud, SIPC's focus is both different and narrow: Restoring funds to investors with assets in the hands of bankrupt and otherwise financially troubled brokerage firms. The Securities Investor Protection Corporation was not chartered by Congress to combat fraud.
Why We Are NOT the FDIC
"Insurance" for investment fraud does not exist in the U.S. The Federal Trade Commission, Federal Bureau of Investigation, state securities regulators and other experts have estimated that investment fraud in the U.S. ranges from $10-$40 billion a year. In the case of microcap stock fraud, the toll on investors has been estimated as $1-3 billion annually.
With a reserve of slightly more than $1 billion, SIPC could not keep its doors open for long if its purpose was to compensate all victims in the event of loss due to investment fraud.
It is important to understand that SIPC is not the securities world equivalent of FDIC–the Federal Deposit Insurance Corporation. Congress specifically considered creating a Federal Broker-Dealer Insurance Corporation, but lawmakers wisely concluded that such a designation would be both misleading and out of step in the risk-based investment marketplace that is so different from the world of banking.
[This message has been edited by WinsumLosesum (edited June 19, 2004).]
[This message has been edited by richnessforeveryone (edited June 19, 2004).]
quote:
Originally posted by MOSES2:
short people shouldn't be allowed to be naked- this should be stopped. It oughta be a crime.
HAHAHHAHAHHAHAHAHAHHAHAHHAHAHAHHAHAH
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78.23% of all statistics are made up on the spot...The other 35% are made up later on.
SIPC has received your recent email concerning naked short sales of securities. This is not a new phenomena, I would refer you to "Naked Came the Short Sellers," Forbes Magazine, February 8, 1988, at p. 57.
In one instance within the last decade SIPC liquidated a brokerage firm which was involved in substantial uncovered short sales. There are some different variants of what could happen that it is difficult to say what would happen to the underlying value of the securities. I can only tell you that in the one case within SIPC's experience, any individuals who were long the securities did in fact receive them, and short sellers with accounts at the defunct firm had their accounts debited to cover the short sales.