Oct. 03, 2018
Grossly corrupt scumbags at the SEC et al https://www.sec.gov/spotlight/equity-market-structure-roundtables SEC.gov | Equity Market Structure Roundtables Rule 15c2-11. Exchange Act Rule 15c2-11 requires a broker-dealer, among other things, to review certain issuer information and have a reasonable basis for believing such information is accurate in all material respects and from a reliable source, before the broker-dealer initiates quotations for an OTC security. www.sec.gov This morning I submitted comments on the SEC September 2018 "Equity Market Structure Roundtable After seven + years of dealing with the grossly corrupt scumbags at the SEC I thought I couldn't possibly be shocked by the brazen corruption at the SEC. I was wrong. Jay, shortly after becoming Chair you made the observation that there was "widespread fraud in the ICO and microcap space" What has changed in September 2018 that you and your colleagues at the SEC could sit and tell Main Street investors that "all is clear" "come on in, the water is fine"? Yes Jay, there are many similarities between the ICO and microcap markets. Larry Fink called Bitcoin "an index for money laundering". The SEC response: punt on regulating Bitcoin as a security when in fact, the SEC had settled precedent (SEC v SG Ltd) where Howey was successfully applied. The SEC decision opened wide the door to continued fraud and money laundering. Now, we have the latest example of SEC facilitated criminal activity: my claims. The SEC has repeatedly bailed out the criminal enterprise Knight/KCG/VIRT over the last seven years specifically so that this criminal activity can continue. Knight was insolvent in August 2012. I told them so. Knight/KCG was insolvent in July 2017 when the grossly corrupt SEC approved the VIRT/NITE merger. NITE/VIRT is insolvent in October 2018. How can this be? The grossly corrupt SEC has done absolutely nothing to stop the criminal activity. In fact, the grossly corrupt SEC facilitates the illegal activity. A few examples: The SEC authorized the DTC to create the non guaranteed , shadow clearing mechanism Obligation Warehouse (OW). The SEC knows exactly the fails date in the OW. They don't disclose them. Blatantly misleading "Main Street investors that there is no naked shorting. The SEC outsourced the entire OTC equity/shell market to the BD SRO FINRA. Including issuer corporate actions like reverse splits. The SEC allowed VIRT/NITE/Cifu/Coleman to not "publish" KCG 2Q 2017 financials on the eve of the NITE/VIRT merger closing. In doing so, the SEC facilitated NITE/VIRT/Cifu/Coleman moving $4 billion+ in fails off the KCG balance sheet. Material to Main Strret investors? But, let's consider the September Roundtable specifically. Two comment letters specifically OTC Equity/Shell CEO Cromwell Coulson https://www.sec.gov/comments/265-31/26531-4427219-175689.pdf And NITE/VIRT CEO Cifu aka Mr Transparency https://www.sec.gov/comments/265-31/26531-3488782-162247.pdf The Honorable Jay Clayton Chairman Securities and Exchange ... Illiquidity in thinly-traded securities is not rooted in perceived market structure defects such as fragmentation. Market structure changes will not alter the desirability of www.sec.gov Both echoing the baseless claims that there is a lack of liquidity in the OTC equity shell (microcap) space. On their 2Q 2018 (that's right 2018) NITE/VIRT CEO Cifu disclosed in an SEC reviewed investor presentation (slide 12 specifically) disclose that in 2017 NITE/VIRT traded more than 11 billion shares+ of OTC equity shells/ day. There were 251 trading days in 2017. NITE/VIRT traded more than 2.7 TRILLION shares of OTC equity shells in 2017. These share volumes represented more than 90% of NITE/KCG total equity market making share volumes in 2017. On the 2Q 2018 earnings cc, the Goldman Sachs analyst Alex Blostein discovered the NITE/VIRT business model leverage to these share volumes. NITE/VIRT is the #1 OTC equity shell trader. CDEL is a close #2 and traded a similar amount of OTC equity shells in 2017. Combined, these 2 mm's represent more than 50% of total OTC equity shell volumes. Where is the lack of liquidity? Specific to NITE/VIRT: In July 2018 their top 25 traded OTC equity shells COMBINED price was .21075 One of the NITE/VIRT top 25 traded OTC shells did a SEC/FINRA 1:1000 reverse split in July 2018 and traded at .19. NITE/VIRT traded billions of shares of these 25 shells and is representative of ALL of NITE/VIRT traded OTC shells. Mr's Coulson and Cifu are advocating for weaker Reg Sho (rule 204 specifically) rules as a solution to non existent liquidity issues. Question Mr Coulson/Cifu: HOW exactly do OTC shells trade to trip zeroes on billions of shares in volume: More buyers than sellers?????? NITE/VIRT is not sitting on the bid as a vital source of liquidity. Their trading profits refute the assertion of Bona Fide market making. AND the need for weaker Reg Sho (Rule 204) rules The SEC is actively facilitating the abusive naked shorting (manipulation) being perpetrated on Main Street investors by NITE/VIRT, CDEL and others in the OTC shell space. In June 2017 just weeks before the SEC approved the NITE/VIRT merger, FINRA (not the SEC) brought a "complaint" against VIRT where they "mis marked" more than 1.6 million short sales as long. By definition each example a Reg Sho violation. No locates. No Borrows. No mention of Reg Sho in the complaint. The "deterrent": pennies per violation. The SEC has repeatedly bailed out the criminal enterprise Knight/KCG/VIRT so that allof this illegal activity can continue. The SEC is grossly negligent in executing its mandate to protect the investing public. NITE/VIRT,CDEL, the OTC equity shell market exist for 1 purpose: Abusive naked shorting publicly traded shells to facilitate money laundering. The AML red flags associated with the NITE/VIRT top traded shells are too numerous to count. I can say with confidence that NITE/VIRT, CDEL et al do NOT file any SAR's related to trading these shells. When would they file SAR's: BEFORE or AFTER trading billions of shares? They never pull markets because they have open naked short fail positions. The SEC is allowing BD's acting in capacity of MM to outsource their compliance functions to 3rd parties. Clearly contrary to Securities laws. As I have repeatedly told the SEC: NONE of this activity takes place without a willing executing BD converting certs to cash. WHY? because abusive naked shorting is a riskless and very profitable trading strategy. Which is why Coulson and Cifu advocate for weaker Reg Sho rules. So Jay, you and your colleagues can sit in these Investor Roundtables and lie through your teeth that "all is well" in the OTC equity shell space. Knowing full well the extent of the criminal activity taking place. In fact your colleague at Sull Crom Jared Fishman is up to his eyeballs in the criminal entity known as Knight/KCG/VIRT. As are other corrupt SEC "regulators". The fraud I have detailed in extensive TCR's details capital destruction on a massive scale perpetrated on the investing public. The definition of a "failed trade": a trade that has not settled. The SEC/FINRA/DTC are actively facilitating fraud on a massive scale. When the SEC/FINRA approve a reverse split a new CUSIP is issued. So, the SEC/FINRA/DTC issue new securities WHEN trades in the old securities have not settled AND where the new securities are not authorized by the issuer. The SEC can and has evoked emergency halts where there is clear investor harm. NITE/VIRT is a clear risk and must be halted immediately. Cheers! Christopher Diiorio [phone number redacted]