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OT: HOW HEDGE FUNDS TIED TO EMBATTLED BROKER REFCO USED "NAKED SHORT SELLING" TO PLUNDER SMALL COMPANIES
By DANIEL KADLEC
Can you feel the heat yet?
N T P.
http://www.time.com/time/insidebiz/article/0,9171,1126706-1,00.html
Sunday, Nov. 06, 2005
Watch Out, They Bite!
HOW HEDGE FUNDS TIED TO EMBATTLED BROKER REFCO USED "NAKED SHORT SELLING" TO PLUNDER SMALL COMPANIES
By DANIEL KADLEC
Thomas Badian was expecting a package, just not this one. Standing in his doorway, smiling, he opened the envelope a courier handed to him. Then he froze, and the color drained from his face. It was over: after two years overseas, the former New York City hedge-fund operator had been located. Badian slammed the door of his posh Vienna, Austria, apartment in the heart of the city's embassy quarter--but not before being officially served with a civil lawsuit linking him to the beleaguered U.S. commodities firm Refco and tying him and Refco to a type of fraud that some argue has destroyed thousands of companies and bilked investors out of billions of dollars.
The boyish-looking Badian, 36, of East European descent, seems an unlikely key figure in a high-stakes Wall Street intrigue. Yet long-standing criminal and civil charges place Badian at the center of a scheme to lend Arizona software developer Sedona much needed operating capital, then trigger the collapse of its stock and profit from the company's demise. This pattern is also alleged in the civil suit handed to Badian on Aug. 8 in his apartment in Austria--only this time the mark was pet-supplies company Pet Quarters, based in Lonoke, Ark.
Three years ago, Badian paid a $1 million fine to settle a Securities and Exchange Commission (SEC) charge that he had manipulated Sedona's shares. Related criminal charges were filed a few months later, but by then Badian had fled. His whereabouts were recently given to U.S. Attorney Michael Garcia in New York City, whose office is handling the criminal case. Garcia's office said only that the case remains open.
Yet the Badian episode might have been forgotten if not for its ties to Refco, which last month admitted to reporting false results after hiding $430 million of uncollectible debt. Refco CEO Phillip Bennett was charged with fraud, and his company sank into bankruptcy protection within days. It turns out, plaintiff lawyers say, that Badian had been making some of his Sedona trades through Refco, which has acknowledged an SEC investigation.
Looking the other way while clients manipulated the shares of small companies through what's known as naked short selling appears to have been yet another questionable way of doing business at Refco. Short selling is legal: you borrow stock, then sell it and hope to buy it back at a lower price, profiting from the difference. But naked short selling is illegal, barring certain exceptions for brokers trying to maintain an orderly market. In naked short selling, you execute the sale without borrowing the stock. The SEC noted in a report last year the "pervasiveness" of the practice. When not caught, this kind of selling has no limits and allows a seller to drive down a stock.
Brokers are required to ask a client the nature of a stock sale. If it's a short sale, the broker must ascertain if the client has been able to borrow the stock. "I have seen evidence that links Badian and/or Refco to more than 50 stocks that were driven into the ground," says Wes Christian, part of a legal team headed by billionaire Texas tobacco litigator John O'Quinn, who is amassing a case against Badian, other hedge funds and now possibly Refco. Refco declined to comment. Badian didn't come to the door when a TIME reporter rang his bell. His lawyer in the civil cases, Perrie Weiner, says that the suits against Badian have "not a shred of merit" and that courts have consistently dismissed such cases.
After high-profile alleged frauds like Refco's and another this summer at hedge fund Bayou Management, where managers shut down the firm without notice, the call for strict oversight is growing. Largely unregulated investment pools for institutions and the wealthy, hedge funds make big bets--up or down--on stocks, bonds, commodities and currencies. Officials are investigating trading records at 35 institutions as part of their probe into naked short selling. And starting in February, hedge-fund advisers must register with the SEC.
Usually the victims of hedge-fund excesses are their rich customers, who lose when the hedge fund makes a bad bet. But through naked short selling, hedge funds can stir up trouble for any publicly traded firm. In the case of Pet Quarters, the suit alleges that Badian's hedge fund lent the firm sorely needed operating capital on terms that allowed the hedge fund to convert the debt to shares at any time. Through naked short selling, Badian then pushed Pet Quarters stock from $4 to just pennies. Badian balanced his massive short selling with cheap shares obtained after he converted the loan to stock.
Meanwhile, with its stock sinking, Pet Quarters couldn't raise the funds it needed to keep operating, and shut down. CEO Steve Dempsey and an executive who had invested with him wound up filing for personal bankruptcy. "There was nothing wrong with our business," says Dempsey. "We fell prey to the perfect crime." Weiner counters that "most of these companies" that blame short sellers when their stock falls are financially "barely skating by."
SEC data show that such relatively big firms as Overstock.com and Martha Stewart Living Omnimedia have been targets too. Overstock CEO Patrick Byrne has launched a crusade against naked short selling, charging that an unnamed criminal "mastermind" is conspiring against his company. Byrne says the attacks have "put limits on the amount of capital we can raise, how fast we can grow and how many people we can employ." His company's stock, at $76 in January, has tumbled into the low $30s. Byrne filed an unfair-practices suit in August against Rocker Partners, which specializes in short selling. Rocker says the suit is "frivolous" and blames Overstock's disappointing results for the stock slide.
But small companies are especially vulnerable because even modest trading can move the stock. Naked short selling "has got to push the price down," says James Angel, associate professor of finance at Georgetown University. He says the rate of short selling has nearly doubled in the past five years, to 36% of all trades. In the same period, assets held in hedge funds, which are active short sellers, more than doubled, to more than $1 trillion.
Illegal naked short selling, according to Robert Shapiro, a former Under Secretary of Commerce, has cost investors $100 billion and driven 1,000 companies into the ground. Shapiro is on O'Quinn's legal team, which has brought 16 cases against hedge funds and other traders. For their part, the hedge funds say that they have done nothing illegal, that the stocks they sell short ultimately drop because the companies are not doing well.
Papers filed in the Sedona case offer a rare glimpse into the cut-throat nature of naked short selling. Federal prosecutors, in a case that remains open against Thomas Badian but has been dropped against his brother Andreas, charge in the complaint that Andreas ordered brokers to sell Sedona shares short with "unbridled levels of aggression." After the stock had "collapsed," according to the complaint, he congratulated the brokers on a "good job" and instructed them to be "merciless" in selling the stock a day later.
Around that time, Thomas Badian was living the high life. Registered in his name was a two-seat 1998 Aston Martin. "He told me he liked to put the top down and take a long drive," recalls Pet Quarters' Dempsey. "I asked him if he'd like to drive out to Humboldt [Pa.] to take a look at our distribution center. For a guy who had just loaned us money, he seemed strangely detached. He never did make the drive." He had other plans for Pet Quarters. Just not the ones Dempsey had imagined.
Copyright © 2005 Time Inc. All rights reserved.
Reproduction in whole or in part without permission is prohibited. Privacy Policy
According to the CMKX board alot of people have ordered them which is great. eom
http://cmkxdiamond.proboards66.com/index.cgi?board=general1&action=display&thread=1131291965
Distribution/Dividend of Entourage Common Stock and all other assets of CMKM. CMKM's board of directors, through the distribution Task Force described below, has resolved to distribute the 50,000,000 shares of Entourage common stock to all CMKM bona fide stockholders. In order to be considered a bona fide stockholder of CMKM, a physical stock certificate issued in his/her/its name will need to be presented to the distribution Task Force for confirmation on or before Dec. 31, 2005, or as extended at the sole discretion of the Task Force.
So I guess everyone is in accord the CMKX was good for all. Mr Maheu will help us all imo.
I agree, I hope everyone pulls their certs quickly!
Posted by: Jim Bishop
In reply to: nascar_trading_pit who wrote msg# 192104 Date:11/6/2005 12:25:03 PM
Post #of 192108
LOL I'll never cover, don't need to.
--------------
thats why your are a BOBO lol and the LOBO is coming!
Monday So many more CERT holders will tune to get their CMKX Certs, and take them out of Street name, an EXCELLENT Move on the companys behalf, now that we are private.
The more bashers the more people WILL PULL THEIR CERTS LOL
Sorry never owned that stock.
He had his chance- and greed made him break the law so now he will pay through his nose lol
But still going to get my CMXK CERTS- put those bad boys next to my 250,000 shares or Sirius I picked up @ .50 lol
Silly me, your right Shorty can never COVER LMAO!
CMKM Diamonds Provides Corporate Update
Nov 4, 2005 2:50:00 PM
Copyright Business Wire 2005
LAS VEGAS--(BUSINESS WIRE)--Nov. 4, 2005--
CMKM Diamonds Inc. today announced a corporate update to its stockholders by disclosing the following information:
Status of Entourage Agreements. On Oct. 28, 2005, Entourage Mining Ltd. completed a private placement of $1,050,000, which effectively removed all contingencies from the agreements disclosed in the Oct. 21, 2005, CMKM Form 8-K. CMKM is awaiting final receipt of the 50,000,000 shares of Entourage Mining common stock. Upon receipt of the 50,000,000 share certificate, the certificate will be held in trust by Stoecklein Law Group in the firm's bank deposit box pending distribution.
Revocation of 34 Act Reporting. On or about Oct. 28, 2005, the Securities and Exchange Commission, in response to CMKM's withdrawal of its appeal, declared Administrative Law Judge Brenda Murray's initial decision final. This effectively revoked CMKM's reporting status under the Securities Exchange Act of 1934, as amended. As such, it is currently unlawful for any broker dealer to effectuate a trade in CMKM's common stock.
Distribution/Dividend of Entourage Common Stock and all other assets of CMKM. CMKM's board of directors, through the distribution Task Force described below, has resolved to distribute the 50,000,000 shares of Entourage common stock to all CMKM bona fide stockholders. In order to be considered a bona fide stockholder of CMKM, a physical stock certificate issued in his/her/its name will need to be presented to the distribution Task Force for confirmation on or before Dec. 31, 2005, or as extended at the sole discretion of the Task Force.
Electronic and/or other forms of ownership (i.e. -- brokerage statements) will not be accepted by the Task Force as evidence of ownership. Therefore, CMKM stockholders who hold their shares in "street name" will need to demand physical certificates from their broker in order to be considered a bona fide CMKM stockholder and be entitled to their proportionate share of the Entourage common stock and any other assets of CMKM to be distributed to its bona fide stockholders.
At the time of CMKM's revocation, CMKM had 703,518,875,000 shares of common stock validly issued and outstanding.
Urban Casavant, CMKM's sole officer and director, has informed the distribution Task Force that neither he nor his immediate family members will receive any of the Entourage shares in the distribution.
Distribution Task Force. As previously released, CMKM has established a distribution Task Force consisting of Robert A. Maheu, Bill Frizell and Donald J. Stoecklein. The distribution Task Force will be entrusted to ensure the shares of Entourage common stock, and any other assets of CMKM, are distributed to only CMKM bona fide stockholders. The Task Force has been given full and complete authority to use all means necessary, including bringing federal or state court legal action, to make certain all bona fide CMKM stockholders receive their proportionate allocation of the Entourage common stock and any other assets of CMKM available for distribution.
Maheu, former CMKM co-chairman and the designated trustee of the Task Force, stated, "I am fully committed to protecting the interests of bona fide CMKM stockholders, including if necessary, bringing appropriate federal or state court actions to ensure the appropriate distribution of the Entourage shares is made. When I initially took on the assignment of assisting CMKM with its compliance needs, of primary concern was doing the right thing for the stockholders. We faced a tremendous number of hurdles, including the trading halt, administrative hearing and let down of numerous professionals. However, with the continued commitment of Urban Casavant and diligent professionalism of Stoecklein Law Group, we are trying to overcome the obstacles of the past and look forward into the future towards distributing value to CMKM's bona fide stockholders. I want to commend Urban and his immediate family for deciding not to share in the distribution of the Entourage shares. This goes a long way towards showing the Casavant family's continued commitment to the CMKM stockholders." Maheu further stated, "This is a time for the CMKM stockholders to look forward towards the future and forget the past. Working as a united front will allow us to extract all available sources of value for distribution."
The Task Force will be establishing a fax line where all CMKM bona fide stockholders can fax a copy of their certificates to be matched to a certified stockholder list. All CMKM bona fide stockholders will need to be identified on or before Dec. 31, 2005, or as extended at the sole discretion of the Task Force. Once CMKM's bona fide stockholders are identified, the Task Force will issue further instructions on how and when the distributions will be made.
Management. As CMKM is effectively a non-operational company holding only the Entourage shares and intangible assets, Urban Casavant will remain as the sole officer and director of CMKM until the Task Force identifies all bona fide CMKM stockholders and all of the affairs of CMKM are wound up.
Again, neither Casavant nor any of his immediate family members will receive any of the Entourage shares in the distribution.
Nevada Minerals Default. Effective Oct. 29, 2005, CMKM was unable to cure the ongoing default with Nevada Minerals under the Operation Agreement for The American Shaft in Portovelo, Ecuador. Therefore, all of CMKM's right, title and interest in The American Shaft has been relinquished to Nevada Minerals.
Future Correspondence. CMKM stockholders are being asked to please refrain from contacting Maheu and the Stoecklein Law Group. All corporate updates will be made in press releases or other forms of distribution media as they become available. The Task Force is in the process of establishing a Web site, www.cmkmtaskforce.com, for posting of all corporate updates and other relevant information as and when it becomes available.
Source: CMKM Diamonds Inc.
----------------------------------------------
CMKM Diamonds Inc.
Las Vegas
Investor Relations
702-966-6328
The bigger they are the HARDER they fall. Crown MM fell who is next? lol
Posted by: stock_hippie
In reply to: None Date:11/5/2005 11:16:49 AM
Post #of 717
http://www.cmkmtaskforce.com/
great link,.
I am getting me CERTs ASAP! I feel better with them in my possession anyway, that way the broker cant LEND THEM OUT! in street name lol
Looks like Lee Web busted an anurism here lol huh janice lol
Time to get my CERTS! this is great!
They were warned, they should have covered when they had the chance lol
I saw the Diamonds lol doesnt cost much to visit CMKX $$$
Hartley Bernstein and StockPatrol.com have been featured in The New York Times, The Wall Street Journal, Forbes, Barrons, Crain’s New York Business, Details Magazine, Chief Security Officer Magazine, and Investment Dealers Digest.
FOR BEING A WALL STREET THIEF LMAO!
HIS CLAIM TO FAME IS BEING A WALL STREET THIEF WHO STOLE 150 MILLION?
LMAO!!
the owner of stockpatrol helped rip off 150 million dollars and pleaded guilty?
thanks I will let them know what a pos he is lol
Yeah! Ill say a POS wall street thief telling people to beware LMAO!!
Stockpatrol? LMAO That guy is a crook who runs that a convicted fellon, a wall street fellon lol get real lol
you are funny though lol
http://www.careerjournal.com/columnists/movingon/20020920-movingon.html
When that news hits, maybe things maybe cleared up here?
I was hoping for a CMKX Nascar someday lol
GZFX volume moving up eom
Shattered, shattered
Love and hope and sex and dreams
Are still surviving on the street
Look at me, I’m in tatters!
I’m a shattered
Shattered
Friends are so alarming
My lover’s never charming
Life’s just a cocktail party on the street
Big apple
People dressed in plastic bags
Directing traffic
Some kind of fashion
Shattered
Laughter, joy, and loneliness and sex and sex and sex and sex
Look at me, I’m in tatters
I’m a shattered
Shattered
All this chitter-chatter, chitter-chatter, chitter-chatter ’bout
Shmatta, shmatta, shmatta -- I can’t give it away on 7th avenue
This town’s been wearing tatters (shattered, shattered)
Work and work for love and sex
Ain’t you hungry for success, success, success, success
Does it matter? (shattered) does it matter?
I’m shattered.
Shattered
Ahhh, look at me, I’m a shattered
I’m a shattered
Look at me- I’m a shattered, yeah
Pride and joy and greed and sex
That’s what makes our town the best
Pride and joy and dirty dreams and still surviving on the street
And look at me, I’m in tatters, yeah
I’ve been battered, what does it matter
Does it matter, uh-huh
Does it matter, uh-huh, I’m a shattered
Don’t you know the crime rate is going up, up, up, up, up
To live in this town you must be tough, tough, tough, tough, tough!
You got rats on the west side
Bed bugs uptown
What a mess this town’s in tatters I’ve been shattered
My brain’s been battered, splattered all over manhattan
Uh-huh, this town’s full of money grabbers
Go ahead, bite the big apple, don’t mind the maggots, huh
Shadoobie, my brain’s been battered
My friends they come around they
Flatter, flatter, flatter, flatter, flatter, flatter, flatter
Pile it up, pile it high on the platter
(they dont know whats coming these bashers lol ) nice posts!
Good volume today, this board is packed, cant read them all, but thanks for the support! eom :)
CMKX new car looks good.
the new diecast that is.
http://cmkxdiamond.proboards32.com/index.cgi?board=general&action=display&thread=1129096217
Thanks hope the news is good, I hold some CMKX and I for one hope good people are running the show.
A good CMKX link
http://www.stockhouse.com/bullboards/viewmessage.asp?no=10520033&t=0&all=0&TableID=0
Hello all, new here , hoping to hear some good news from this company hopefully.
Good luck!