January 28, 2007
The Honorable Christopher Cox Chairman
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
I hereby submit the following works that I find relevant to the matter at hand.
What if the US market system was so badly broken, so wildly compromised, that the very basic premise of an auction system was shown to be a hollow farce, an artifice designed to lure investors into a system wherein wholesale larceny, counterfeiting, fraud, collusion, corruption at a scale so pervasive that it jeopardizes the entire premise of the markets, was the reality and the norm, not some delusional construct of a cerebrum badly compromised by paranoia?
What if the worst case scenario, wherein the participants in their ex-clearing system created unknown levels of counterfeit shares which traded in the system and were treated as genuine, was not only reality, but was in fact the norm?
What if the participants had decided that instead of buying shares in the market to settle trades, they would just represent to buyers on their statements that they had gotten their shares, without ever bothering with the costly hassle of actually buying the shares? Doesn't that sound like a neat way to generate untold billions without any cost of goods sold, without any product cost at all?
What if, when caught doing it, they simply pointed at the other broker and said "it's his fault for not delivering", instead of buying in the failed trade, as mandated by the rules?
And what if the vast majority, possibly 100% of some of the trading in Reg SHO stocks, was nothing more than these bogus trades being conducted in order to damage the companies and the shareholders?
And what if, on the rare occasion that someone with enough clout to conduct a conclusive test did so, these "what if's" were demonstrated as unassailable fact? That trades didn't even settle electronically until the brokerage system was GD good and ready, and had made millions by not performing its most essential and basic function, and had allowed these "cyber-counterfeits" to depress the value of the underlying stock to the point where the shares could be bought for $10 less than the buyer paid for them? And what if the only reason that they had even done that, and bothered with settling the trades at all, was because the buyers were the owners of a billion dollar market cap company who were visibly involved in questioning the system's capability of performing at a basic level?
And what if the entire scheme was nothing more than an elaborate ponzi scheme wherein ever more fake shares have to be sold in order to buy shares to deliver at ever more depressed prices? Sound fanciful? Crazy? Impossible in today's modern world of Six Sigma nanosecond trading capability?
Wrong. It is apparently the accurate description of the norm.
Folks, I'll make this very simple. The reason that stocks like OSTK and NFI and many of the rest of the Reg SHO list stocks are selling for fractions of what they should be is because a literally unlimited number of bogus shares are being created and sold, with undiminished levels of aggression, by predators who financially benefit from the stocks going down.
And the entire market system, from the clearing system that keeps all information secret from the public, to the regulators who fail the most basic test of their congressional mandate in 17A (SETTLE THE TRADES PROMPTLY) and are uninterested in meeting this simple requirement for a fair market, to the brokers who financially benefit by treating failed trades as genuine transactions, to the hedge funds that use this capability to sell unlimited numbers of shares and manipulate stocks accordingly, all actively participate in what can only be described as a fraud against investors of such mammoth proportions that it defies credible description.
And that is now the tame version.
The test of any theory is how well it predicts future events. If the Fail To Deliver (FTD) problem was just a matter of a few rogue hedge funds gaming a loophole in the system, and of a regulator who was simply too overloaded to clamp down on what was a minor problem, then it would predict that when tested, there might be a small glitch in a few deliveries, but that within a reasonable time frame the system would function as expected and the trades would settle.
If the FTD problem was a widespread systemic problem where few if any shares of Reg SHO list stocks trading in the system are genuine, and where the system understood that, and perpetrated a massive fraud requiring secrecy, opacity of actual deliveries, and active collusion by its participants, one could predict that when tested, even by someone known to be testing it, it would be forced to defraud the buyer in plain view - blatantly, without remorse nor excuse, and with impunity - the latter is a prediction from the piece of the theory that says that the regulators are either compromised and thus in on it, or so fearful of destroying the financial system that they are rendered toothless (no other explanation satisfies the "with impunity" prediction).
That is what happened with Dr. Byrne and his father, who purchased roughly a quarter million shares of OSTK in the market two months ago in a series of extremely visible transactions, and were unable to even get the electronic shares delivered for two months.
During which time the stock price was run down by almost $10, presumably by the same selling pressure generated by the sale of the same "non-shares" as were sold to the Byrnes.
Day after day after day of non-shares being sold, with limitless availability, a steady stream of counterfeit transactions treated by the system as genuine sales for the purposes of generating commissions, and for affecting the price on the auction market.
And none of the buying brokers doing their fiduciary and legal duty of protecting their customers by buying in the FTDs - rather, simply perpetrating the fraud for profit, secure in the knowledge that most investors will never check to verify delivery, nor have the means to test the delivery claims of the brokers when presented as genuine and believable.
Oh, and did I mention that Dr. Byrne finally got his 25K shares, but that his father STILL hasn't gotten his 200K delivered? Today, as we speak, over 60 days later, no shares, and no forced buy in. So what did John Byrne pay for when the money was debited out of his account? Why did the sale go through, and yet no shares get delivered to this very day, on a billion dollar market cap company? And what kind of treatment do you think small individual shareholders receive if billionaire insiders are sold non-shares and then told to pound sand on the legally mandated delivery thereof? I'll tell you what kind of treatment: they get defrauded as a standard daily business practice by an industry out of control.
Think this is the wild, crazy version of the theory? So did I, for many months. But as I researched my book, Symphony of Greed, about the markets and the current state of the union, I noticed something odd. Every time I tested the tame version and used it as an explanation for past events, and to predict future events, it failed, or at best was incomplete. Every time I used the wild version, it accurately predicted what would happen, and completely explained past events.
Now, I'm not saying that there aren't innocent explanations for most conspiracy-driven controversies, but I will say that there doesn't appear to be any for this particular controversy.
Again, we have a total failure by the participants to perform their most basic part of the transaction, we have a company whose value has been materially harmed by that knowing and willful failure (the buying broker could have just bought in the selling broker's position at any point, as mandated by Reg SHO and by Congress in 17A - in fact, the treatment of the two month failure to deliver as some act of nature wherein the buyer's broker is powerless to do anything but hope for delivery, or berate the selling broker, is hogwash - the buyer's broker could have and should have bought the seller in after T+3 days, and chose not to, for unknown reasons), we have proof positive of a major NASDAQ company receiving the same treatment as a penny stock whose shares have zero liquidity, and we have a complete failure by any regulator to take action, define the size of the problem, and put a stop to the abuse.
The truly astounding part about all of this is that in the penny stock world and OTCBB world the failure to deliver shares for months is not unheard of, but the conceit was that it couldn't or didn't happen in the "real", legitimate, big cap market.
Tell John Byrne that as he waits for his shares that he paid $10 more for than they are worth today, and the sale of which presumably was a sham, as are all of the shares being sold to drive the price down . Why not? Who's going to do anything about it? Who is going to stop it? Does anyone think this is atypical? It isn't. It is simply confimation of our most dark and ugly suspicions.
I couldn't make this up. We will likely see no coverage of it in the media. Regulators will likely ignore it or explain it away. Senate banking committees, chartered with overseeing the system, will pretend that this doesn't represent a crisis that impacts the credibility of the entire US market system.
The question is will we stand for that anymore, given this definitive proof?
And if this isn't enough hard evidence of a major systemic problem, what precisely would qualify?
I would propose that you do the following things: Send a copy of this article to Richard Lambiaste in Connecticut, who is heading up the state task force exploring this issue. Send a copy to the Senate banking committee, to both Bennett, and to Shelby, who has shelved any examination of this settlement problem. And send a copy to every financial reporter you can think of. And send a copy to the SEC, just for giggles - not because they will do anything about it.
If the CEO of a major company can't get his electronic shares delivered (NOT the paper certificates, just the electronic ticks that can be exchanged in nanoseconds - a feature of the improvement known as de-materialization, wherein paper certificates are eliminated and we are all supposed to trust the system to verify that we are receiving genuine shares) for two months, how can anyone buy any stock on any exchange with any confidence that they aren't simply being swindled?
The answer is you can't. And that makes for a genuine, systemic crisis in confidence in the US market system - a justified crisis given the failure at every level of the system to do its basic job, of exchanging money for genuine shares in a timely manner.
And it further raises the very real questions, "how do I know that any of the shares I am buying aren't frauds? How do I know my broker isn't lying to me when he represents my account as possessing shares? How do I know that the entire trading and valuation in the market of the company I own a piece of isn't a fiction determined by manipulators who can peg the price to whatever they feel like on any given day, and thus what is the point of investing in the markets at all? If large NYSE and NASDAQ companies can be counterfeited to the point where none of the shares bought on a given day are genuine nor delivered in anything approaching a binding reasonable non-fraudulent contract, how can I invest in the market? And how have the regulators chartered with protecting me let it get this bad, and why aren't they doing anything about it?"
So regulators, what now? What is the next move? Do you continue to allow NFI, and OSTK, and all the rest of the Reg SHO list stocks to be driven down by 30, 40, 50+% using non-shares? Do you continue to ignore what can only be described as massive stock manipulation? Do you continue to pretend that overt fraud isn't exactly what it appears to be?
Read this with alarm, and concern, and great care, and consider the implications. This is not a minor event. This is the smoking gun everyone has claimed doesn't exist, when they make the statement that "no company is really harmed by naked shorting if it is viable and legitimate".
Wrong. The value of OSTK has been eviscerated by the practice, as has NFI and a host of others, and we have proof of massive failures on the very first test of the system. And the participants are in on it. And no amount of hand waving and facile tonics will alter that conclusion.
So now the question is, "what are you going to do about it?"
Here is the exchange from the Motley Fool board, from Dr. Patrick Byrne:
"Here is something odd for those following this story: Back on August 8th I bought some 25,000 shares (I think the filing ended up showing 50,000 shares because I bought the rest that day or the day before). Oddly, I could not get delivery of them for weeks and weeks. I am not talking about, "paper certificates". I am talking about simply seeing the trade clear. All along, my broker was saying that Morgan Stanley could not deliver on their side of the transaction. I will now relay an email between myself and my Broker Dealer (whom I will call, "BD") that occurred when it finally cleared, after weeks of unhappy phone calls.
=============================================================== September 29 9:11 AM
Good Morning Patrick: The 25,000 shares of OSTK originally transacted for on August 8th, came in during the night and we have initiated the process of converting to paper. Settlement is taking place today. Please call with any questions or concerns, and have a wonderful day XXXXXX
Dear XXXXX, I would like to hear from you or someone on your trading desk what exactly is the meaning of, "The 25,000 shares of OSTK originally transacted for on August 8th, came in during the night". What does "come in" mean (since they clearly are not mailed pieces of paper)? How did they manage to keep from "coming in" for 50 days? From whom did they come in? Respectfully, Patrick
Patrick: To the best of my knowledge it means that the incoming shares appear in the electronic system (SEI) which displays the stock trade transactions via PC, and this evidently takes place , like bank processing, as an overnight transaction. The August 8th date is the date I have recorded in my notes as the date of your second purchase of shares of OSTK, the date ZZZZZZZ entered into the transaction with Morgan Stanley to purchase the 25,000 shares. I am going to ask some of our professionals from the trade area to respond, and hopefully give you a better explanation of how the shares move to BD from another brokerage house. As to the 50 days the shares did not come in, the only answer we have obtained from the Morgan Stanley people when we repeatedly pressured them is this: "you have to understand that this is an extremely hot stock". Obviously not an answer that makes any sense; but an answer that was repeated time and time again as we made calls to the management at Morgan Stanley. I will forward additional information to you as soon as I am able to obtain it from the BDBDBD group. Thank you
================================================================== Now Fools, I don't know about you, but I find this pretty weird. Let them post more photos of me with UFO's flying out of my head, but something seems messed up in a system that allows this. (By the way, Morgan Stanley lawyers, when you read this you are going to get ticked off and want to fire off a letter threatening to sue me. Better check with your stock loan desk first to see if you want discovery. Go ahead: make my day.)
Here is the punch line: my Pop bought 200,000 shares right at the end of August. He still has not gotten delivery. Again, I am not speaking of certs. I speak simply of the settlement of the trade. His broker is saying that the other brokerage house is unable to settle the transaction. Any guesses as to who that brokerage house is? I'll give you three guesses. It is one of the big ones.
Does this strike anyone else here as odd? I mean, I can understand the fellow Tiddman who was writing, more or less, "Byrne, just focus on the business." Ironically, I am entirely from the value school and agree that in almost any circumstance one should just focus on the business. But given that simple stock purchases seem to be cracking the system, and given that I believe we have somewhere between 5 and 20 million electronically counterfeited shares in the market, and given that I suspect there is some relation between these two facts, and given that I think this situation may well be endemic in the market, I think at some point I am supposed to do something about it. Well, someone is, anyway.
I could be wrong, though: when it takes 50 days to get 25,000 shares of stock to clear, Lord knows I'm not in Kansas anymore.
Wednesday, November 02, 2005
We Definitely Aren't in Kansas Anymore - Fraud Wall Street Style
Folks, it couldn't get any weirder.
I was talking with our friend Dr. Byrne, and he told me a story that defies imagination. I honestly thought he was pulling my leg - had one of those double take moments, where you have to shake your head to confirm you're awake. Before I tell you the gist of this, let me send out a little tidbit to any regulators reading this - I urge you to contact Dr. Byrne for corroboration. I couldn't make this up if I tried - nobody would believe it.
First, there is the matter of Jack Byrne's 200K share purchase of OSTK, which is now closing in on 90 days since the order was executed.
Jack got 130K "registered in his name" with his broker (who knows what that means - I mean, who really knows what any of the arcane terminology really signifies at day's end?) recently, but he hasn't received the other 70K shares, and his broker is telling him they've been unsuccessful in getting the shares from JP Morgan (the seller's broker - and arguably the most venerated name on Wall Street), and that there is no ETA for their delivery.
That is seventy THOUSAND shares bought and paid for almost a quarter year ago, undelivered. And Byrne's broker hasn't bought in the offending seller. Just hasn't.
Before we continue, stop and reflect upon this set of circumstances - the Chairman of the Board of the company can't get $2.5 million worth of stock that he bought and paid for - and yet there is relentless selling pressure day after day. For months the stock price has been pummeled, and yet for months the buyer's broker can't get the product that was sold.
To add insult to injury, apparently Dr. Byrne's brother bought 50K shares almost a month ago, and he hasn't gotten his shares delivered either. So it isn't just dad. The performance of the system has been tested multiple times, and nobody can get any shares delivered to make good on the buys - but that hasn't stopped the brokers from relentlessly continuing to sell that which doesn't exist.
Aren't there laws against that? 17A? SHO? 10(b)5 - participating in a stock price manipulation scheme (by selling bogus shares to depress the price)?
You bet there are. It's just that so much money is being made by all the bad guys and their brokers, that nobody cares what the law says.
So much for Reg SHO.
So much for fair markets.
So much for the SEC.
So much for clamping down on criminal stock manipulation.
But as if that wasn't sufficiently outrageous so as to cause every major financial publication in the country to run full page, indignant articles on the collapse of the market system, here's where it goes off the reservation and into the twilight zone.
Jack Byrne apparently has inquired about buying another large slug of OSTK stock, as he presumably feels it is incredibly undervalued, and he wants to own more of it.
And he is the new Chairman of the Board. They tend to do that, those wealthy, successful COB's - buy stock in the companies they are stewarding (lest anyone think this is inside info, he hasn't to my knowledge placed any orders, nor filed any forms - but if Dr. Byrne is to be believed, his dad has made inquiries which his broker knows are as serious as a heart attack).
His broker informed him that he could buy the "shares", but only if he didn't request delivery. The broker - one of the largest in the nation - told him that "the order would not likely be filled if he insisted on delivery, BECAUSE NO BROKER WOULD SELL THEM ON THAT BASIS"
I am not making this up. Those were the words - you are reading this correctly. The brokers will only sell the COB of the company stock if they don't have to deliver what they took his money for - what they sold - presumably because they understand that every share being traded is bogus, and undeliverable, and nobody wants to feel Jack Byrne's heat.
If you are a retail buyer, they will be happy to lie to you and cheat you, but nobody wants to tackle heavyweight informed buyers with cash - because they know that every sale is a sham sale, and won't be delivered.
They know it.
They understand it.
They are clear on it. They are booking transactions designed to methodically reduce the price of the company's stock, accepting cash in return for the transactions, but have no ability nor interest in delivering the product being paid for.
It's called fraud, Wall Street style.
Sheer unbridled stock manipulation and fraud, overt, with no attempt at concealment.
(NOTE: We are not even talking about getting paper certificates here, just confirmation of delivery of the goods that were paid for, which is the most basic part of the brokerage contract and the contract between buyer and seller - and which contract, by the system's efficiently breaching thereof, renders the entire market system a sham - unreliable, larcenous, operated for the enrichment of the participants and their hedge fund customers at the expense of the companies and shareholders via obvious and wholesale fraud - in full view of lawmakers, regulators, elected officials, prosecutors, class action attorneys, and the international investing community - in other words as bad or worse as the environment that led up to the 1929 Crash and the subsequent creation of the SEC.)
So what else needs to be said? The broker in question knows that he is participating in a massive scam to run down the share price of the company (known to you and me as stock manipulation) - everyone in the industry apparently knows, and nobody wants any part of being made the test case by a guy with juice. Because they know there is no defense for their actions. And it isn't worth it.
Unless you are Joe investor, in which case you can be screwed at will, with nobody to stop the participants from doing so.
Does anyone have any questions? Nobody will accept a legitimate buy order from someone with big money and a desire to actually get what they paid for, on a large, NASDAQ traded stock, which is on the Reg SHO Threshold list of securities that MUST get shares delivered within a few trading days. Except nobody wants to accept an order for weight, because it is common knowledge that there aren't any shares. And nobody is doing anything about it, nobody is enforcing any regulations, and the brokers keep cranking out the IOUs on behalf of their hedge fund customers - only now only to people unable to call in the IOU, and force the brokers to make good on them.
Every day hundreds of thousands of "shares" are sold, surpassing demand and depressing the price. But only to rubes that don't know any better, or who don't have the juice to enforce delivery.
What can be said at this point? Exactly how bad and how blatant does this have to get before Congress calls hearings and appoints a special prosecutor? Or is it simply now the prevailing business wisdom in Washington and Wall Street that overt market manipulation and fraud are what you get if you are stupid enough to put a dime in the market?
How blatant does it have to be, when the COB can't get anyone to sell him shares unless he promises to accept bogus chits instead of shares, even as the price of the stock declines?
Are we seeing any articles in the Wall Street Journal on this?
Is Bethany writing about this? Seth? Floyd? Even Herb?
How about Alpert? Is Barron's deaf and dumb when it comes to provable fraud and collusion on a massive scale?
Where is Forbes? Where is the New York Times? The Washington Post?
The GD Chairman can't get delivery on almost half the shares he bought almost a quarter year ago, and now nobody wants to accept a buy order if they have to deliver anything.
Because who wants to actually have to deliver what clearly can't be delivered? THERE AREN'T ANY REAL SHARES TRADING. And the system knows it.
This sickens me. It really does. I can't conceive of words ugly and base enough to describe how low and foul this is - folks are losing their retirements, and the industry knows they are defrauding the investing public, and nobody wants to say a word, or do their frigging jobs and put a stop to it.
So how bad does it have to get?
How much worse can it get? At what point should we discard the conceit that we are living in a nation of laws, where the rule of law protects the individual, when Wall Street can break into your house, steal your wallet, and laugh at you when you call the cops?
I'd say we are at that point now. The law is not being enforced, the system is disintegrating on its first very public test by those with the resources to demand that it perform, and there is not a single regulator, agency, elected official, or lawmaker willing to stop the fraud.
This is a farce.
And I hang my head in shame that I was ever stupid enough to put one dime, much less one million, into the market. It is institutionalized fraud and theft, nothing more, and is as mean, base and crooked as anything I've ever witnessed in the most corrupt backwater banana republic.
And nobody is willing to do a thing about it.
What is left to say?
posted by bob obrien at 2:48 PM
Lying, Cheating and Stealing Redux - More Fraud, Wall Street Style...
A while ago I wrote, "We definitely aren't in Kansas anymore - can this get any weirder?"
It just did.
In quantum physics, there is an expression used when an experiment is successfully concluded, and all possible outcomes are eliminated, leaving only the 100% manifest event: "The waveform has collapsed."
The universe of possible outcomes is reduced to one, Heisenberg uncertainty is removed, and what you have, is "it". Sherlock Holmes used a similar logical line of reasoning - eliminate all the incorrect explanations, and what remains is, no matter how difficult to believe, the explanation.
What follows is the text of an email exchange between Dr. Patrick Byrne, President of OSTK, and his broker, whose identity Dr. Byrne has asked me to keep anonymous. Suffice it to say it is a big firm, that everyone takes very seriously. Dr. Byrne has also requested that I keep the names of the individuals out of it, as well as the offending selling broker. The actual firm names are meaningless - it is the content and the situation being described that is the shocker here.
Pay very close attention to the exchange. It is blood chilling, in that it spells out in no uncertain terms - actually in very mundane, ho hum, routine terms - that virtually all the "shares" trading in OSTK are frauds - there are no genuine shares being sold. The brokers admit as much, and yet every day hundreds of thousands of "shares" are sold - all presumably bogus.
Note that Byrne's broker is likely guilty and admitting to violations of 15(c)3, wherein they lied and told him initially that the trades had settled, when in fact no such thing had occurred. Also note that for all their pleasantries, they are reluctant to buy in the fraudulently traded shares, essentially shrugging their shoulders and saying that if they went out and tried to buy the offending selling broker in they would just get more fakes, as NO REAL SHARES ARE TRADING, thus they shouldn't even bother.
The truth is that they would have to keep buying shares until they didn't get fakes, which would drive the price up to where real holders of real shares want to sell, and there aren't any at this price. That is why they don't want to buy anyone in - they don't want to start a short squeeze, as it would decimate their hedge fund clients if the price went up $50 overnight - to a level where some folks might be interested in selling their real shares. Maybe. Or maybe not.
So it is better to violate Reg SHO and 15(c)3 and basically tell the President that hey, sorry we lied and told you the trades settled, they really didn't (in nicer language, of course, and it did shut him up for a while), and they won't settle anytime soon, as the only transactions that are being recorded are frauds issued by those that are trying to keep your price undervalued by whatever orders of magnitude they require to turn a profit.
So suck it up, rubes. If you aren't happy buying frauds, sorry, but that's all there is for sale.
Read it yourself. The only thing that has been changed are the names XXXX'd out, and the names of the individuals have been changed to Bob and Ted and such.
This is every bit as bad as I've been saying it is for the last year. Every bit. And left unchecked it will destroy the financial system - just a matter of when, and frankly it could be too late, if all the frauds in all the companies had to be covered - hence the grandfathering clause in Reg SHO.
Now read the email exchange. And be horrified.
Today I have been informed by Bob at XXXX, that the 50,000 shares of Ostk originally confirmed to have settled on Dec 5th and in the process of being converted from DTC shares to paper, have in actuality not settled and no shares have been received (emphasis added) by XXXX from SSSS (SSSS is selling broker, XXXX is buying broker). The $1.8mm for the purchase of the shares has been debited from your XXXX account, but XXXX has not distributed any money to SSSS and the funds are being held in a XXXX holding account. I am in contact with Bob on a daily basis and we will continue to push SSSS to deliver the shares.
Please let me know if you have any questions.
Subject: RE: Ostk purchase
Ted or Samson,
Can you confirm for me:
SSSS was the counterparty to this trade?
When the trade is done, what is the process by which the trade is "confirmed to have settled"?
Please describe this process normally works. No more than 50 words. For example:
The trade: "Ted talks to a broker on the SSSS side and agree on the deal, they each write a ticket with a trade number on it." Or... "Ted does the deal through a computer screen, which tells him that the counterparty was SSSS, and give him a trade number."
The confirmation: "Three days later the DTCC sends an electronic confirmation that 50,000 shares have been debited from SSSS's DTCC account and credited to XXXX'."
Or whatever the truth is. I just made those up, but it is what I imagine. Can you just write for me the correct sentences so i understand?
In answer to your questions below;
Yes we purchased the shares through SSSS.
I will try to explain the process as best I know and keep it short. I enter the trade when it comes in. My back office brokers pick up the trade and then call the "reps"/brokers that move the stock. In this instance they contacted SSSS. The SSSS broker then goes and tries to fill the order by breaking it down and going to the street. His back office accumulates the shares and then lets him know that the trade is now good. He then calls my back office broker to let them know the trade is good. Usually this would be an electronic confirmation. The selling broker then has three days to collect those shares from where ever he got them and deliver them to XXXX. So on the day of the trade or by the next morning we have a confirmation and a detailed report that the shares are good. That report is the same I provided to Sam (Your rep). When the stocks arrive at XXXX the money is then credited to the SSSS account and the transaction is complete.
I hope this helps or is the information that you need.
I have been thinking.
Doesn't this mean that SSSS sold these without having them?
If they sold it, then have to go out and "accumulate the shares"? That is, it was a short sale?
Was it identified as a short sale during the trade?
Can you buy them in?
It would seem that SSSS did not have the shares when they sold them to us. They are a market mover for overstock.com and so are both placing sells and buys throughout the day. There is no way for us to tell how short they were at what time, I don't think the broker at SSSS even knows the total position of shares when they complete the trade. It never is disclosed as a short sale, all we see is a confirmation that they accepted the trade which means that typically they will deliver the shares in three days. My understanding is that traders and brokerage houses will often on securities borrow the shares if they come up short at the end of the day. Since Overstock is a "hot" stock they are finding it just about impossible to find shares to borrow or buy (emphasis added).
As far as your question about buying them in, yes we could buy them in in this situation. However, if we try I don't know that we will be successful. Talking with my traders they feel that we will run into the same problem, no one seems to have enough of the shares to deliver (emphasis added).
I have talked with SSSS again today and they are at the same position right now.
I assume you mean "market maker" and not "market mover"? (Freudian slip?)
Can you do me a favor and ask SSSS: "Whom did SSSS buy the short sold stock from?"
I talked with SSSS and they said that as far as where they get the shares they execute the buy for us knowing that typically for stocks they can get the shares with in the three days. With Overstock shares they were not able.
They have, as of the 13th, issued buy ins on all shares owed them and are pursuing those shares to complete our purchase.
Folks, a few things are glaringly obvious here.
The first is that the short sales aren't being differentiated as such, or the broker is lying about it. Second is that Reg SHO is being violated freely, and all the brokers are just shrugging their shoulders. Third is that while the buying broker is now saying that buy-ins are commencing as of the 13th, that is the same broker who also erroneously represented that the trade had settled - raising the question as to why the confirmed liar is to be believed now when he tells Patrick something else, possibly to placate him. Friday was the 16th. Were the trades settled?
(NOTE: Byrne has asked me to withhold both the buying and selling brokers' names, simply because he has done business with them and always found the individuals at the firms to be decent and honorable, and thinks they are perhaps trapped in a debacle that they don't fully understand. We have a disagreement on this point - I've told him he is nuts not to be going after both of them with all guns blazing - multi-billion dollar suits for violation of 15(c)3, causing massive devaluation of asset value for shareholders due to the sale of unregistered securities, you name it. He is more of a gentleman than I am, I suppose - and taller, too.)
Also note that this is all apparently happening ex-clearing, in a direct transaction with another big Wall Street house, completely bypassing the DTCC - thus confirming that many of the fails never even show up as FTDs in the system - they are just niggling little annoyances between brokers, you know, delivering the actual shares for which everyone has been paid commissions, and which had downward effect on the share price. Oh, that. Also note that none of the direct questions Patrick asked were answered - the responses were, to put it mildly, lacking in information, and many times answered questions that weren't asked in place of the questions that were.
This is the President of OSTK who can't get his trades settled. Imagine what that means for every person buying shares over the last 6 months. There is no evidence that any of the shares being sold at this point exist. They are just transactions in the system, for which there are no shares - that admission alone is priceless.
Note that the excuses are along the lines of OSTK is a "hot" stock, thus no real shares are available. This is the second or third time that this type of exchange has happened over the last 4 months - on every one of Dr. Byrne's purchases, as well as his dad's. This is not isolated - it is the norm, and is being flagged by Dr. Byrne because he knows the questions to ask, and his broker knows that he knows what is really happening.
Wanna bet that you don't see anything in any financial publication about this exchange? There are no genuine share being traded, so solly, so we can't deliver yours, well, for the foreseeable future, at this point. But another half million fakes will be sold on Monday, and on Tuesday, and on Wednesday. Gotta "make a market", and heaven forbid if the price went up to reflect exactly ZERO AVAILABLE LEGITIMATE SHARES
Patrick warned everyone about this a few months ago. He was roundly mocked. "No genuine shares? That's ludicrous - look at the volume" And here we have one of the largest brokers in the country stating point-blank that is the case.
But that doesn't stop the processing of fake transactions every day, driving the price down, now does it? And nobody is doing anything about it. Not the SEC, with full access to this definitive admission of wrongdoing. Not Senator Shelby, not the Senate Banking Committee, not any of our public protectors. Nope, the hedge funds rule the roost, and Wall Street keeps on selling, even though there well may be 30-40 million fake and shorted shares now outstanding on a stock with a few million share float. They clearly believe that nobody is ever going to force them to deliver the shares - that is the only explanation for this behavior. They have now made the problem so big that they are "too big to fail." And they continue to violate the public trust, destroying shareholder value as a business plan, while those chartered with protecting investors smile and roll their eyes.