Subject: File No. S7-08-08
From: David Hughes

July 17, 2008

Dear Sirs:

It is my general opinion that since anti-fraud rules already exist, their strict enforcement across all sectors of the equities markets would be effective in significantly diminishing the naked short selling that has become ubiquitous in some sectors (precious metals in particular).

This illegal and fraudlent practice is being performed as part of standard operating procedure by at least one hedge fund manager who was brazen enough to admit to it. I heard the interview, which was an un-aired part of a larger TV interview, where Jim Cramer was interviewed by a Mr. Trask and admited to commiting a number of felonies related to naked short selling. His reasons for these crimes were: 1) When the end of the month rolls around, and your customers expect you to show a profit for them, you do what you have to do. So, with a few million dollars, you can manipulate an equity to your advantage. 2) The SEC either doesn't care, or cannot police this matter.

Well sirs, I find it hard to imagine that the SEC does not care or that you are incapable of enforcing your rules and the laws of this country. It seems that the two Bear Stearns hedge fund managers were snapped up quite quickly, once all of the horses had run out of the barn. Surely the SEC was aware of all the goings on before before they were made public knowledge! There is an old English limerick pertaining to this ancient practice..."He who sells what isn't his'on; must buy it back or go to prison." So, congratulations to those of you who enforced the laws already in place to insure robbers and briggands will not infest our markets. But, there are robbers and briggands infesting our markets who have no moral/ethical conscience, and who will illegally and fraudulenly unlevel the playing field to their own advantage any time it suits them.

One of the ways they unlevel the playing field is by the practice of naked short selling. Short-pool operations are used to hammer the price of an equity down so that normal investors are discouraged. Selling for the best price is not at all the goal here, otherwise a very low sell price in very large volume would not be offered. This is unnatural selling. This is selling of shares that the sellers did not own. This has happened to many companies. In particular, Royal Gold (RGLD) suffered this a couple years ago when, for no fundamental reason at all, its shares dropped 17% in a couple of days. I think this must have caused severe pain to undeserving people.

Another way the playing field is made unlevel by illegal naked short selling is by taking a stock that is listed on more than one exchange and doing a sort of hand-off. The stocks are passed to conspirators who sell it on each of their exchanges, making it look as if there is two to three times the amount of selling going on. The Toronto exchange is famous for a certain buyer called "Anonymous". If the SEC would ever pursue these by law, surely in discovery all of this would be revealed, and there would be more than just hedge fund managers who face jail.

These ways and others to illegally depress the price of targeted equities were admitted in the above-referenced interview. You can listen to it yourself if you will go to and then click on It will take a bit of time (about 30 minutes), but it will be worth your time. This particular interveiw is used as an illustration inside a larger interview with Jim Puplava and Eric King.

Finally, I am for the enforcement of all rules already established for the purpose of keeping the playing field level for all participants, no matter how big and strong or small and weak they might be. Secondly I applaud you for your efforts to come down on fraudulent and felonious activity in the markets. I only wish that you would apply an even hand in this effort. Justice is truly blind, and the taking of bribes will corrupt not only an individual, but a whole financial system if left unchecked. Please do not let this continue.


David Hughes