October 17, 2011
Mr Khuzami,
I filed a Whistleblower claim in April 2011 claiming Knight Capital Group (KCG), its management,auditor, and customers are guilty of massive manipulation and fraud. My complaint was acknowledged by Mr Roy Sheetz and a Mr Lucas in the whistleblower office. I have cc'd Mrs Schapiros office on all of my e mails and recently began cc ing the SEC OIG as I believe the SEC is seriously negligent in not pursuing this claim or worse yet conflicted and compromised. I fear the latter as I read the presenters for your Micro Cap Fraud Working Group. And there is KCG Counsel Mr Merritt. Please ask Mr Merrit a few questions for me:1) Why did Mr Amorusso so adamantly oppose the elimination of the Grandfather provision in Reg SHO? 2) Why won't CEO Joyce disclose to the investing public the nearly 2 Billion Sec Sold not yet purchased liability is where he moves aged fails and thus, it is a structural liability and does not in fact "fluctuate with volumes" as he has said in several public filings? In fact, as share volumes have declined significantly, this liability has only gone up. 3) Why has working capital gone from 800 mil plus to just 105 million at June 30 2011 while this liability has grown over 1 billion over the same period? 4) why does KCG generate 70-80% of their share volumes from trading .0001 stocks? Commissions? Spreads? NOPE. the answer is in the fails. 5) Fails were a whopping 246.7 million in 1Q2011.Alone a clear violation of securities law. 6) there is an undeniable correlation between fails and trading profits.
7) why are there such stark discrepencies in the share volumes KCG reports to Autex, Otcbb.com, their website, investor presentations? 8) Is it because KCG does not report these fails in share volumes? If they did, share volumes would be UP significantly instead of in the freefall being reported.9) KCG doesn't report the fails because if there were a threshold list generated, it would require close out with securities of like kind and quantity. 10) KCG can not comply with this close out requirement because in many cases the stocks don't trade anymore. No threshold list, no close out requirement. What happens to a naked short in a stock that doesn't trade anymore? KCG writes the position down to zero and puts it in their sec sold not yet purchased liability. 11) Is KCG booking trading profits as commissions to conceal what they are doing? Mr Khuzami, according to the SEC website, "abusive short selling is manipulation". All of the information in this post has been sent to the SEC and then some. I have also e mailed Sen Grassley and Sen Shelby on this very serious matter.It's about time the SEC began protecting the investing public as it is mandated to do.