Date: 06/21/2000 7:02 AM Subject: naked shorting of ADGI WHEN WE YOU STOP NAKED SHORTING IN OTCBB, LOOK AT WHAT THEY ARE DOING TO ADGI !!! IS THIS A FAIR MARKET TO YOU? Market Maker Comments, But Investor Says It Doesn't Add Up By Jack Burney Published by OTCNN.com 06/21/2000 09:11 AM CST (This is part of a series of articles about secret market maker manipulation (MMM) of OTCBB stock prices, and the need for a rule to require full disclosure of short positions in OTCBB stocks. To read the other articles, use MMM as a key word with the Word Search on the right margin of the Site. If you know of such instances of MM manipulation of stocks, please tell us the story at jburney@otcnn.com.) A major Market Maker claims it is selling short to save the public, but an articulate investor argues that it doesn't add up, that it is just more MMM, in a pertinent trading of viewpoints found among comments the Securities and Exchange Commission has received regarding proposed changes in the rules that govern shorting. The MM in question admits to "identifying over-valued stocks," and claims that short selling is critical OTCBB stocks is critical to its operations. But the investor says the public doesn't need such help from the MMs. Here's the exchange. Market Maker's Pitch Jersey City MM Hill, Thompson, Magid & Co., Inc. "believes that expanding the framework for regulating short sales to the SmallCap or the OTCBB markets is unnecessary. The same market factors that have lead the Commission to consider abolishing or significantly decreasing the application of the short sale rules for exchange listed and Nasdaq National Market securities equally apply to the SmallCap and OTCBB markets. "Because Section 10(a) of the Securities Exchange Act of 1934 does not provide the Commission with specific authority to regulate this market sector, any such regulation would have to be based on other statutory authority. Hill Thompson believes that the framers of the Exchange Act deliberately limited the Commission's authority to regulate this market," according to Hill Thompson CEO Anthony Broy, Jr. "Short selling is a legitimate market maker function. Hill Thompson maintains that short sellers provide valuable liquidity to the markets, both in their selling activities and in subsequent covering purchases. "Short sellers," Hill Thompson claims, "temper the price volatility of securities and preserve market integrity by identifying over-valued companies, whereas a short sale rule leads to pricing inefficiencies in the market. Since short selling abuses can be controlled with the anti-manipulation regulations already in place, Hill Thompson believes that additional short sale regulation is unnecessary. "The practice of short selling is critical to SmallCap and OTCBB market making because it facilitates transactions by permitting market makers to assume larger positions than would otherwise be possible. Hill Thompson routinely fills orders that are significantly above the minimum allowable tier size in these markets. This allows for enhanced liquidity, which is a benefit to individual investors, throughout the SmallCap and OTCBB markets. But It Doesn't Add Up "Jenny," an investor takes exception to Hill Thompson's claims. "You will notice that this MM tries to portray that he saved the public money. But really, what he is trying to do is rip the public. Investors know the risks in investing. There are many companies that have gone bankrupt and came out of it and did well. "Investors take risks. They don't need the MM to 'regulate' the price to their advantage. Most of the OTCBB stock continues to be bought more by investors than sold, yet the price continues to drop," Jenny said. "If this MM's claims are true, then why are prices not going up for shares, like ADGI, KAHI, VALH, etc., which have sold more to the public than MM have bought back? Something just doesn't add up. MMs like to play god and we are at their mercy," Jenny said. "Take ADGI for example. (See today's Investor Forum.) Bashers have increased 10-fold," Jenny claims, "because the 2nd quarter results will be out in 3 weeks and with their contracts to sell 60 million minutes of phone calls to Mexico, their sales could reach $3-4 million." "More contracts are being put together, but the prices continues to drop as the MMs try hard to create the impression that the stock is (expletive), especially by (using) bashers who claim they have no position but spend day and night for the good of investors by telling lies and using old information to twist the truth." "MMs know that when the news come out, the price will move up, so why not drop it down now to buy as much as they can before the buying pressure comes in? That was what happened when they announced the contract with Mexico for 60 million minutes a month and 100 million minutes in the second phase. The price went from 20 cents to 36 cents, and within an hour or two, it was back to 26-27 cents." Writer's Comment: This exchange clearly demonstrates the wide differences of opinion that exist on this important topic. While we at OTCNN are quoting from comments directed to the Securities and Exchange Commission, we would like to remind our readers that there are other possible explanations for the situation under discussion. (Tomorrow: More investors voice eloquent, reasoned complaint about MMM.) Private Placements About Us Letter To The Editor Contact Us Advertise SEC Filings Search by: company ticker symbol PLEASE CONTACT ME AT 561-747-5265 JAMES RUSSELL