Taking off the Glasses of Media Spin: Can You See the Crminial Fraud in Front of You?

12 Oct

The Economist brings us their version of this intriguing story. This little tidbit will give you all the language you need to see how it is being spun.

It is interesting to read this piece just to see how the evidence being presented is, rather than being considered at face value, presented within a framework of ‘opinions’ or ‘arguments’ of Merrill and Goldman supporters, and apparently, non-supporters of Overstock, or at least its boss.

Of course everyone is being very careful not to say anything that might be considered slander we suppose – but unbiased reporting does not look like this, we think.

It is not just a problem of language or of ‘presentation’ for a firm of any kind to ‘short’ more stocks than actually EXIST.

But instead, “Some question the link between failed trades and naked shorting”.  Really? Some of the supporters of Goldman and Merrill? Or just “some”… Not exactly clear.

These two paragraphs AFTER the email excerpts in the piece seem to call into question what the emails themselves convey. Read the emails excerpts and it is pretty clear what you are reading. Read this ‘summary’ and you are back in a fog of confusion.


Goldman and Merrill have denied throughout that they participated in any sort of naked-shorting conspiracy. Their supporters argue that the legal action brought by Overstock is a crude tactic by Patrick Byrne, the retailer’s mercurial boss, to divert attention away from its long history of underperformance. (The firm continues to struggle, despite no longer being plagued by settlement failures.) Some question the link between failed trades and naked shorting, arguing that fails are generally the result of operational problems and other factors rather than naked nefariousness.

Nevertheless, the release of the e-mail excerpts will have done the brokers no favours. They suggest that trades were being intentionally failed; that some of those involved were aware regulators would not look kindly upon some of the activity; that some of the firms’ internal policemen were unhappy with the explanations they received for the proliferation of fails; and that at least one senior executive appeared to have an unusual attitude towards compliance.

Now, let’s see if we can unravel the spin.

Overstock’s boss is Mercurial, while the senior executive at Goldman has an ‘unusual attitude’ toward compliance…

The emails in question, which are quoted in the article above these two paragraphs clearly demonstrate that members of the firms were in communication about how to deal with the inability to deliver on trades (called FAILS – the failure to deliver).

How could they be in this position?

How is it possible to be in the position where you cannot deliver on a trade; unless of course the trade was a naked short and there was nothing to back it up? What sort of operational problems or ‘other factors’ account for these fails?

We’d like some examples.  Perhaps the Jaimie Dimon model of raiding customers accounts of a client firm for cash? Just what operational problems and what factors?

The other firm implicated in all of this, (SBA and in particular the man  Scott Arenstein) taking the heat (sanction order)  is identified in the emails between Merrill and Goldman counterparts as  “our boy” and yet the story goes on to continue to point out that the firms deny collusion and conspiracy?  Well, that was fine in the opening paragraph, but after the content of the emails is laid out – and only in part, mind you, it seems rather pointless.

And of what relevance is it that ‘Overstock continues to do poorly’, other than as a way to insinuate that the Goldman/Merrill supporters who deny the conspiracy to commit naked shorting are perhaps correct that Overstock’s boss only made these allegations as a way to deflect attention from his own ‘poor performance’ rather than as a result of experiencing the consequences of such naked shorting against his firm?

Which, after the disclosure of these emails seems at best, highly unlikely.

The ‘unusual attitude of the President of the Merrill’s stock clearing businesses as expressed in the email quoted in the article?

He responds to internal concerns about the intentional failing of short sales thus: “Fuck the compliance area—procedures, schmecedures.”

Now go over to The Economist and read the entire article here. You’re beginning to see more clearly, perhaps?

Short-selling litigation An enlightening mistake



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