CMKM Diamonds Inc (fka CMKX)

[pennypauly]

March 17, 2006 (FinancialWire) The last time the Depository Trust & Clearing Corp., which resists all suggestions that the nation’s preeminent SRO-controlled clearing operation can either control or provide transparency to the national short-selling scandal known as StockGate, began striking out in highly-spun press releases, it was just before state regulators appeared at the entity’s door with subpoenas.


The DTCC has struck again, twice in one week, giving rise to speculation that something is once again “up.” At the same time, the U.S. Securities and Exchange Commission has filed against three hedge funds and Jeffrey Thorp, for using deceptive naked short selling schemes, often implemented through Canadian brokerages and insider data, to lock in $7-million in “ill-gotten gains” in PIPEs transactions for some 23 public companies, including Generex Biotech (NASDAQ: GNBT), Avi Biopharma (NASDAQ: AVII), Healthextras (NASDAQ: HLEX) and TIVO (NASDAQ: TIVO), which was associated only with “insider trading” charges.

The complaint is at http://www.sec.gov/litigation/complaints/comp19607.pdf

Other companies the SEC says were manipulated include Britesmile (NASDAQ: BSML), Ectel (NASDAQ: ECTX), Impco Tech (NASDAQ: IMCO), Irvine Sensors (NASDAQ: IRSN), MGI Pharma (NASDAQ: MOGN), Matritech (AMEX: MZT), Photomedex (NASDAQ: PHMD), PurchasePro (OTC: PROEQ), SIGA Tech (NASDAQ: SIGA) and Viisage Tech (NASDAQ: VISG).

Meanwhile, the DTCC has issued two press releases to “correct” inaccuracies it says has reported in the media and online portals. One states that Susanne Trimbath, who testified on a panel for the North American Securities Administrators Association November 30, 2005, just before that organization’s multi-state task force descended on the DTCC, was never an “official of the DTCC” nor an “officer.” It says she was a “manager of transfer agent services, which is points out is a “corporate middle-management position below officer level,” and that she resigned in 1993 holding the same position, and never dealt directly with electronic clearance and settlement or the Stock Borrow Program.

A transcript of that event is at http://www.ncans.net/files/NASAAtrans.pdf

Why the DTCC would issue a fresh press release almost four months after the event remains a bit of a mystery, but it quickly followed with another press release disputing points that former U.S. Undersecretary of the Treasury Robert Shapiro made almost a year ago, and pointed out that he has “admitted to the DTCC he is a paid consultant for the John O'Quinn and Wes Christian legal firms, which have been suing DTCC with respect to naked short selling,” which again is an inexplicable charge since Shapiro has himself made that public disclosure in most if not all public comments, hardly qualifying it as “an admission to the DTCC.”

Further, said the DTCC, “Shapiro's report is replete with errors, baseless numbers (e.g., estimated fails), faulty analysis that we believe mischaracterizes and misinforms.”

Raising eyebrows about that allegation is the statement further into the DTCC’s press release, “DTCC's subsidiaries do not disclose confidential information to the marketplace, including data on fails, since it could potentially be used in market manipulation.

“And while we have data on the volume of fails, we have no information on the underlying causes of those fails.”

It left observers scratching their heads over the DTCC’s claim that Shapiro’s “estimate” is wrong, but that the DTCC knows what the number is but won’t tell anyone for fear of market manipulation.

One said, the DTCC’s “refusal” to transparently reveal the data “is what causes market manipulation,” but in any event, the DTCC’s “catch 22” as well as its sudden new flurry of press releases has put it back on the radar.

Overstock (NASDAQ: OSTK) CEO Patrick Byrne surfaced in the hornet’s nest this week, leveling charges at the JP Morgan Chase (NYSE: JPM) Conference that Goldman Sachs (NYSE: GS) and Citigroup (NYSE: C) are the most egregious of 15 major Wall Street brokerages holding positions far in excess of their Depository Trust and Clearing Corp. positions.

The presentation is at http://www.businessjive.com/podcast/060315-ByrneJPM-businessjive.m4a

Byrne told the brokers that Goldman Sachs, holds 1,696,513 shares in excess of its DTCC position of 1,024,234 shares, as of January 12, and Citigroup holds 942,890 shares in excess of its position of only 88,706 shares.

The chart, showing undelivered shares of 6,862,730 out of 3,673,980 at the DTCC, totaling a mathematically impossible 109,536,710 shares, is slide 24 of the presentation at http://www.shareholder.com/overstock/downloads/JPMorgan_3-14-06.pdf

Goldman Sachs is said to be the primary brokers for Rocker Partners, a huge hedge fund that Overstock has sued, claiming collusion with Gradient Analytics. The U.S. Securities and Exchange Commission has also subpoenaed records from both companies, along with several prominent “journalists,” in what is thought to be a front-running investigation.

Other large unfilled positions are held by City Securities, Morgan Stanley, Barclay, NFS LLC, Lazard Capital, Charles Schwab, Merrill Lynch, UBS Securities, Daiwa, Bear Stearns, National Investors, Ameritrade and E*Trade.

With 10 percent of all issues currently on the naked short-sales Regulation SHO list, market watchers have been trying to track the various end-arounds that market manipulators employ to circumvent their legal responsibilities in the U.S., including the secretive and nefarious Stock Borrow Program at the Depository Trust and Clearing Corp., equally secretive ex-clearing arrangements between brokerages, and deep-pocketed offshore hedge fund accounts, now Canada now admits it has not, so far, been adhering to U.S. short-selling rules.

The Ontario Securities Commission has published proposed amendments to the rules of the Canadian Depository for Securities Ltd. (CDS) concerning adherence to U.S. short-selling rules.

On January 26, CDS’ board of directors approved amendments to the CDS rules which will facilitate adherence to Regulation SHO by CDS Participants utilizing Cross-Border Services offered by CDS. Regulation SHO imposes requirements on broker-dealers engaged in trading activity on markets regulated by the U.S. Securities and Exchange Commission with respect to short sales of equity securities.

Regulation SHO requires short sellers to locate securities to borrow before selling short, and imposes additional requirements when trading in securities in which a substantial number of failures to deliver have occurred (threshold securities).

The proposed amendments include: an explicit requirement that participants utilizing Cross-Border Services comply with Regulation SHO; a provision allowing CDS to release information to any self-regulatory organization of which the participant is a member or the primary Canadian regulatory body relating to that participant's compliance with Regulation SHO; a provision authorizing CDS to restrict a participant's access to Cross-Border Services where there is non-compliance with Regulation SHO; and, a provision mandating that CDS take the necessary steps to close out a participant's fail to deliver position in a threshold security.

In addition to the proposed amendments to its rules, CDS is proposing to implement changes to procedures to facilitate adherence to Regulation SHO by its participants. CDS is proposing to generate reports identifying threshold securities and outstanding positions in relation to these threshold securities both on an aggregate basis, for all CDS participants, and by individual participant.

To comply with the proposed amendments CDS participants will be expected to adopt internal procedures or policies when utilizing Cross-Border Services to ensure compliance with Regulation SHO.

For up-to-the-minute news, features and links click on http://www.financialwire.net

FinancialWire is an independent, proprietary news service of Investrend Information, a division of Investrend Communications, Inc. It is not a press release service and receives no compensation for its news or opinions. Other divisions of Investrend, however, provide shareholder empowerment platforms such as forums, independent research and webcasting. For more information or to receive the FirstAlert daily summary of news, commentary, research reports, webcasts, events and conference calls, click on http://www.investrend.com/contact.asp

For a free annual report on a company mentioned in the news, please click on http://investrend.ar.wilink.com/?level=279

The FinancialWire NewsFeed is now available in multiple formats to your site or desktop, free. Click on: http://www.investrend.com/XmlFeeds?level=268