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Overstock.com Lawsuit Adds Racketeering Charges Against Goldman & Merrill


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Guest ValueCarl

Who would have thunk it!  ::)

 

I hope "Deep Capture" is able to distribute their newest revelations in advance of the New Year, so that all the talking heads who have theirs crammed up the butt holes of certain "hedgies" including "investment banks," can choke together on their cocktails this season. 

 

 

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Redacted Motion:

 

http://www.overstock.com/REDACTED_motion.pdf

 

Redacted Declaration:

 

http://www.overstock.com/downloads/pdf/REDACTED_declaration.pdf

 

Read through these and you'll get the gist of what its all about.  They are adding a single claim against Goldman & Merrill under New Jersey RICO (like Fairfax) - Treble damages. Makes you wonder what all those blacked out parts are all about, huh!

 

<IV

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Hey, but naked short selling really doesn't exist, does it!  There are certain value managers, including Buffett, that I wish did renounce the behavior of naked short selling.  Instead, they just said that there are as many people guilty on the long side, which I thought was a bit of a cop-out. 

 

Wrong is wrong, and naked short-selling was just plain wrong.  We never lent out our shares of Fairfax or Overstock, even though we were contacted several times by our institutions to see if we wanted to lend the shares.  It was just unethical...regardless of the interest rate people were willing to pay.  Unfortunately in this world, if it's legal than it's ok.  I don't buy that.  If it feels wrong, then it is.  Simple!  You don't know who was borrowing those shares, and who they were re-lending to.  I didn't want to help those people in any way.  Cheers!

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Hey, but naked short selling really doesn't exist, does it!  There are certain value managers, including Buffett, that I wish did renounce the behavior of naked short selling.  Instead, they just said that there are as many people guilty on the long side, which I thought was a bit of a cop-out.  

 

Wrong is wrong, and naked short-selling was just plain wrong.  We never lent out our shares of Fairfax or Overstock, even though we were contacted several times by our institutions to see if we wanted to lend the shares.  It was just unethical...regardless of the interest rate people were willing to pay.  Unfortunately in this world, if it's legal than it's ok.  I don't buy that.  If it feels wrong, then it is.  Simple!  You don't know who was borrowing those shares, and who they were re-lending to.  I didn't want to help those people in any way.  Cheers!

 

Lending your shares is participating in the game fair and square.  I lent mine out... for a time until it was smarter to pull them back in, sell them, and buy calls.  No breach of ethics here.  From what I understand some people were motivated to go the naked shorting route in order to get around the high borrowing costs... lending them shares helps bring the rate down, thus less need to naked short.

 

One could argue that buying options on Fairfax was unethical, because it facilitated the market maker exemption game that they were running.

 

You can't take an honest business practice and say it's unethical just because somebody else (who is unethical) is going to play unethical games.

 

 

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From what I understand some people were motivated to go the naked shorting route in order to get around the high borrowing costs... lending them shares helps bring the rate down, thus less need to naked short.

 

That's like saying it's ok to do something unethical, because indirectly it brings down the cost for everyone.  Yet what is the cost?  Take a look at Fairfax...the naked shorts made it difficult for them to refinance if they needed to issue shares...same with Overstock.  Dendreon was almost completely wiped out...how would that have been fair or good for society? 

 

The question is:  Should investors participate in a rigged game, simply because it's legal?  Obviously the answer is no.  Saying yes would only compromise the integrity of the system and that hurts everyone!  Cheers!

 

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From what I understand some people were motivated to go the naked shorting route in order to get around the high borrowing costs... lending them shares helps bring the rate down, thus less need to naked short.

 

That's like saying it's ok to do something unethical, because indirectly it brings down the cost for everyone.  Yet what is the cost?  Take a look at Fairfax...the naked shorts made it difficult for them to refinance if they needed to issue shares...same with Overstock.  Dendreon was almost completely wiped out...how would that have been fair or good for society?  

 

The question is:  Should investors participate in a rigged game, simply because it's legal?  Obviously the answer is no.  Saying yes would only compromise the integrity of the system and that hurts everyone!  Cheers!

 

 

Naked shorts are by definition NOT the people borrowing my shares.  I lowered the borrowing cost for the LEGAL shorts.  That's perfectly clear and you have to admit it.

 

So why are you now calling the legal shorts unethical?

 

I don't understand the connection you are making -- I helped people short LEGALLY.  The naked shorts were not at the other end of my transaction.  The only way I facilitated them was when I bought call options -- the "options market maker exemption".  I find it confusing that you have no problem with buying the call options which actually does bear some connection to knowingly facilitating naked shorting (doing business with the market maker who you understand to be crooked in renting out his exemption)... but instead you have a problem with lending shares out to the honest shorts.  I remember you bought OSTK calls, did you not?  Why do you do business at a marketplace that you know is engaged in rotten behavior, but throw stones at people who lend shares?  Personally, I've bought calls too.  Try to see what I'm getting at here... I have no interest in saying that you are unethical, I just want you to understand that it's unfair to accuse honest share lenders of ethical breaches.  

 

Watsa, Byrne, Buffett -- those guys have no problem at all with legal shorts.  And legal shorts only get their shares from... lenders like me.

 

 

 

 

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Guest ValueCarl

For purpose of clarity, the term "Failure To Deliver(FTD)" was what the National Coalition Against Naked Short Selling(NCANS) related to which made the practice of naked short selling "ILLEGAL." This coalition comprised of a stellar group of people from all walks of life stretching from corporate chieftains, economists, lawyers and accountants including Wall Street veterans. Although Dr. Byrne's involvement began circa 2005, this outstanding group of people had been addressing the issue at least five years prior. One of those people includes someone I consider a friend, today, Mr. Bud Burrell, in addition to Dr. Susanne Trimbath, a superb Economist with a prior, leadership role at the DTCC. If one researches Dr. Trimbath, an NYU graduate of Roubini, Greenspan fame, she also worked with, Michael Milken, as a Senior Research Economist at The Milken Institute. That is not to question her outstanding character and ethics, while she worked tirelessly to expose the criminal network behind the sleight of hand which occurred, and which still occurs today because of an ineffective, complicit regulator who was always co-opted by Wall Street thugs yielding their power, influence and control via the large investment brokerages who "own" the DTC, on top of the cabal of hedge funds who Patrick Byrne has described over a period of many years now.  

 

 

http://www.sec.gov/comments/s7-12-06/mhelburn5643.pdf      

 

Let us not get into semantics here because, illegal naked short selling is and was "criminal" for it is borrowing something with the intent of never paying it back, or should I say, "locating it" in order to properly establish fair supply/demand parameters tied to any given security's "price." Go to Dr. Byrne's videos and witness how "selling phantom shares incessantly" will drive any company to zero. You needn't look further than a host of 08/09 train wrecks including former bellwethers like Wamu, Lehman, and Bear Stearns for proof!

 

By counterfeiting, and using their media control, inclusive of people like Jim Cramer's own, "sell, sell, sell" buttons, such vicious attacks on countless companies have placed the entire system at risk just like Patrick explained.

 

When you talk about them using market maker exemptions, an exemption that was established for the bookmakers in a security to create "orderly markets," it makes my blood boil.

 

Why? Because destroying companies, and jobs in order to assist "for profit" evil doers "illegally" like they were doing/did, is not their function, and is hardly an "orderly market" based upon factual supply and demand factors! They aided and abetted the destruction of companies for an "order flow" fee in exchange for their exemption!          

 

Sanjeev is right regarding the excessive finance costs which must be incurred by companies under attack like this, assuming they're able to weather the storm during some weak period of their business cycle. One that is never mentioned, but I am sure it occurred, was LVLT. They could never have gotten the price as low as they have, without this criminal, illegal method.    

 

When I asked Mr. Munger how severe "ILLEGAL naked short selling" was, because of "FTD's" which might create "systemic risk," this board will recall that he told me, "short selling is not a problem for the markets" circa early 2008. Subsequently, Patrick proved that he knew all about "illegal naked short selling," even mentioning it at an earlier Berkshire ASM. He's a very wise, smart business maven, that Mr. Munger, and he wasn't going to tell someone looking for his signature on a book what the real deal coming down pike was! I can't fault him too much for that, and can only blame myself for not placing him on the fire more when he "lawyered" me on the response!  

 

Although I have my doubts, we can still look optimistically that there's a "greater good" inclusive of "karma" which will work its way back into the marketplace. To top that off, it may even be possible that Messrs Buffett and Munger have been in stealth mode behind the scenes all along.

 

The purpose of my long rant should be clear! These people worked too damn hard on behalf of all investors to attempt calling it something different than illegal, and criminal, for that is what it is and was!  

 

                 

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Guest ValueCarl

Ben Hacker, since I agree with Eric's right to lend his legal shares as you do, are you in disagreement with NCANS, and why "illegal naked short selling" is the same as counterfeiting, while being "criminal" as a direct result of brokerages on behalf of their "fee for service" clients never intending to locate borrowed shares? You have been recommended as one of the sharper tools on this board recently, so I look forward to your response. tia 

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I think that people confuse the naked short and the covered short. Maybe a few user should look at Overstock case so they fully understand what it means. If I remember correctly, at one point Byrne was complaining that there was more shares in circulation then what they issued... how could that be and why should it exist?

 

BeerBaron

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My memory might be incorrect, but Sanjeev didn't you object to the short selling ban?  I think you reasoned that legal short selling is okay -- but my point to you is that one can't have legal short selling without a LENDER of shares.

 

You implicitly said that LENDING is okay when you said that legal short selling is okay.  

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I think that people confuse the naked short and the covered short. Maybe a few user should look at Overstock case so they fully understand what it means. If I remember correctly, at one point Byrne was complaining that there was more shares in circulation then what they issued... how could that be and why should it exist?

 

BeerBaron

 

Here you go:

 

http://antisocialmedia.net/media/reverseconverts-primer.pdf

 

 

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Carl,

 

Ben Hacker, since I agree with Eric's right to lend his legal shares as you do, are you in disagreement with NCANS, and why "illegal naked short selling" is the same as counterfeiting, while being "criminal" as a direct result of brokerages on behalf of their "fee for service" clients never intending to locate borrowed shares? You have been recommended as one of the sharper tools on this board recently, so I look forward to your response. tia 

 

Naked shorting, I believe, is illegal and wrong.  I could imagine reasons for the market maker exemption in extreme markets for one or two days (locating borrows ASAP, but not before the MM shorts)... but more than that I think is very wrong, it is counterfeiting.

 

I have no basis for how widespread it is, but even Rocker Partners in the end (when they shut down) had some who claimed Goldman was NSS in a widespread basis... so to me, it's an issue that I hope someone gets to the bottom of, maybe Prem will dig up enough dirt to get there.

 

I think legal short selling (if there were SEC disclosures similar to longs) is perfectly ok.  Without transparency it frustrates me but is still ok (like Eric is saying).  I don't understand why Sanjeev wouldn't lend his shares out (legally) of FFH, but he's entitled to his views like the rest of us. :)

 

Ben

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My memory might be incorrect, but Sanjeev didn't you object to the short selling ban?  I think you reasoned that legal short selling is okay -- but my point to you is that one can't have legal short selling without a LENDER of shares.

 

You implicitly said that LENDING is okay when you said that legal short selling is okay.

 

Eric,

 

When did I say short-selling was bad?  What I said was that you guys lending your shares, in companies that were under attack and had numerous fail to delivers, only helped those creating the naked short sales in the first place.  Your shares were lent to someone...you don't know who...and they could have simply been running reset transactions so that their fail to delivers disappeared. 

 

Take a look at the HCM/SEC case below.  It's a good example of who may have been at the other end of the shares you were lending.  Yes, there are numerous legitimate transactions, but I'm talking about the lending of shares of companies that were specifically targeted and heavily shorted, with numerous fail to delivers before Reg SHO was strictly enforced.  Cheers!

 

http://www.sec.gov/litigation/admin/2009/34-60441.pdf

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Eric,

 

When did I say short-selling was bad?

 

I reverse engineered your support of legal short selling.  It's like saying air travel is okay, but selling jet fuel is unethical because some bad people use jet fuel for nefarious reasons.  We could picket against the production of jet fuel, or we could go after the terrorists instead.

 

Byrne has stated that he doesn't mind people legally shorting OSTK.  He can't have people legally shorting it without people lending the shares out in the first place.  

 

Yet your argument is that nobody should be lending OSTK shares because somebody might do something illegal with them.  So you go farther than Byrne -- he implicitly supports lending of OSTK (how else can we have legal shorting?).

 

 

 

 

 

 

 

 

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Guest ValueCarl

Whoa, Ericopoly! You are all over our board host like white on rice tied to this issue! You're as perfect to correct in your reasoning too!

 

Byrne's as well as those who helped lead him to the illegal naked short selling methods, reside in the "lack of proper accounting" for managing "short shares." That responsibility lies with the BD's who have shunned their responsibility in favor of destroying markets and businesses during the process! It didn't prevent them from profiting exorbitantly, however. Damned be capitalism in the "public markets!"

 

Many here know that I am very fond of our board host, even though he "censors" me from time to time!

 

That will never change the respect I have for him, at the same time.

 

In his favor, I think what he has been saying all along, and I'm sure he will correct me if I am wrong, is that, "investors" of a company, those who have the mindset of being real underlying "owners," ones who might have come to an intimate understanding of the "foul play" which had existed in the corporations they maintained vested interests in, would be wise to avoid engaging the "enemies" in any way possible, including lending their shares to the "miscreants" behind the scene.

 

Long ago, however, I came to the understanding that my "shares" were truly "VAPORWARE," or "electronic tickets" no longer representative of factual ownership stakes as people like Mr. Buffett and others relied upon in the past! The only way for passive stakeholders to get to meaningful ownership "positions," would come about through "control stakes," something that casual investors or the sheep of the marketplace-the majority of investors-will never attain due to limited cash and resources.  :'(

     

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