By Lucy Komisar | May 20, 2021
My interview on the Superstonk youtube channel tells through three dramatic stories how corrupt brokers, hedge funds and their accomplices in government and the media steal from stock market investors. Superstonk is the investor site started by retail buyers of GameStop whose buys pushed up the stock price and cost hedge fund short sellers billions.
The key is naked short selling, when traders sell stocks they do not own, claiming they have borrowed or located where they can borrow them, and then never deliver the shares to buyers. More shares in the market drives their price down. Short sellers plan to then buy the shares at a cheaper price and deliver them. Or often they don't deliver them at all. They "fail."
The stories involve Sedona, victim of a death spiral financing scheme enabled by New York Stock Exchange member Ladenburg Thalmann, then owned by billionaire Carl Icahn and his partner, Bennett LeBow.Here are key elements
Anthony Elgindi, an Egyptian fraudster who ran a message board through which hedge fund operators collaborated on short sale attacks to bring down companies. One of the members was Dan Loeb, who founded and heads Third Point, one of the world’s largest hedge funds.
Overstock, how its lawsuit against the eleven major prime dealers got internal emails that proved Goldman Sachs was working with clients to create counterfeit shares to cover naked shorts. And how Eric Holder gave it a pass when Justice Department investigators were about to charge it with corruption.
The Sedona case
Sedona was a software firm based in King of Prussia, Pennsylvania, that about 20 years ago wanted to expand.
Michael Vosinkevich an investment banker at Ladenburg Thalmann, promised he could help finance their growth. Ladenburg Thalmann was owned by corporate raiders Carl Icahn and Bennett LeBow. Vasinkevich got Sedona into a $2.5 million deal in which he would locate investors and sell shares to them. The lenders would be paid back when the loans were converted to shares. The amount of shares depended on the stock price at the time of conversion. It would come to be called death spiral financing.
Sedona trusted Ladenburg. It was a prominent New York investment firm, member of the New York Stock Exchange since 1879.
And that's where offshore and naked short selling came in. Thomas Badian and his brother Andreas, from Vienna, and their Rhino Advisors would be the intermediaries, working with an offshore fund, Amro International registered in Panama and based in Zurich, both tax havens.
Ladenburg's investors included the Batliner Group. Herbert Batliner, according to a 1999 German intelligence document, was in the business of laundering illicit funds. U.S. prosecutors told a Colorado federal court that Batliner had handled money for a prominent Latin America drug dealer, Jorge Hugo Reyes Torres.
The contract with Amro, the fund, said "no shorting." Short selling would push down the share price, and the less the stock was worth when it came time to convert the loan to shares, the more of the stock Amro's "investors" would get.
But the Badians went to work. When Sedona signed the deal with Ladenburg Thalmann February, 2000 the stock was trading at $6 a share. Every time the company put out good news in the summer and fall of 2000, such as a relationship with IBM that should have made stock triple in price, as soon as it started to move up, there was heavy, heavy selling through these electronic communications networks that allow the seller to hide. It would stifle the stock.
A month before the conversion took effect, Andreas Badian directed Amro's brokers at the infamously corrupt (and now defunct) New York brokerage Refco to start selling Sedona stock short from an account at an offshore Refco affiliate. Refco had over $4 billion in some 200,000 customer accounts and was the largest broker on the Chicago Mercantile Exchange. In a month, they pushed down Sedona's stock price to $1.01.Badian told the brokers at Westminster, in New York, according to tapes, to "keep selling" and to use "unbridled levels of aggression," because "every dollar of that you sell is a dollar in my pocket." Price fell to 75 cents, then 20 cents. The Badians shares represented 40% of the trades in one month.. The conversions left Sedona still owing $1.9 million and they would have to issue more shares that would end up letting the Badians control the company.
In February of 2000, Sedona was a company of 77 employees that had obtained 65 bank customers and an IBM contract, along with $17 million in financing. When stock tanked, Sedona lost business at a dozen companies: companies don't want to buy software if you wont be around to service it. Impossible for Sedona to get other financing except limited from own shareholders. It had to fire employees in sales and marketing.
Sedona went to the SEC and Justice Department. The Justice Department charged Andreas Badian in a criminal case, but he jumped bail and is a fugitive in Vienna, Austria.
Thomas Badian and Rhino settled with the SEC for a $1-million fine without admitting or denying guilt. But the SEC did not sue Ladenburg or Batliner or Westminister or their clearing firms.
More in the video
The Elgindi case: About the collusion of media, some crooked people in the FBI & SEC, and selective prosecution.
Anthony Elgindi was an Egyptian who pretended to be Italian. He lived in San Diego and ran a subscription stock message board on the internet. He had a few hundred hedge fund members, paying him $300 to $600 a month for the privilege of being on the website talking about "who are we going to hit next week?"
Thomas Badian and Rhino settled with the SEC for a $1-million fine without admitting or denying guilt. But the SEC did not sue Ladenburg or Batliner or Westminister or their clearing firms.
More in the video
The Elgindi case: About the collusion of media, some crooked people in the FBI & SEC, and selective prosecution.
Anthony Elgindi was an Egyptian who pretended to be Italian. He lived in San Diego and ran a subscription stock message board on the internet. He had a few hundred hedge fund members, paying him $300 to $600 a month for the privilege of being on the website talking about "who are we going to hit next week?"
Please go to The Komisar Scoop to read more.
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"Naked, Short and Greedy: Wall Street's Failure to Deliver" is available directly from Spiramus Press. Paperback, .pdf or autographed book (signed books for US shipping addresses only). Publisher's site also has a chapter-by-chapter summary.https://t.co/eb6Q7iqeAe
— Susanne Trimbath PhD (@SusanneTrimbath) May 22, 2021
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