Thank God for my mental recall of what TC_Trader posted last Fall 2016: in that multi-chapter 5 yr ordeal of exposing KCG:Knight Capital Group in this 9 Part PENNY STOCK CHRONICLES
KEY FOREWORD: Given a terse & VERY BRIEF Les Goldman mention when I was presenting Manish Singh as a possible party trying to bury NWBO ( Manish Singh was recently seriously SEC INDICTED for other matters. He shared a lot in common with CEO Linda Powers who had never thought of it.ie venture capitalist; mgr of Cell-Gensys where LP bought it's new Memphis Cognate plant to running both IMUC and LBIO both of which Manish was deposed from.. so they pursued it! and I believe they have identified the party (ies)!):
So the following derives from a small mention by Les Goldman of the complex subject matter of NAKED SHORTS but at this phase in time with ASCO over, it is worth in SPADES A READ, EVEN A RE-READ!! to understand why CEO Linda Powers chose OTC.QB and have Cofer Black do extensive compilation and documentation of NAKED SHORTS TO PROVE ILLEGAL STOCK MANIPULATION
Here are some selected excerpts from both Part 3 Naked Shorts Don't..... Part 4 Calling The Sec:
Reverse mergers and reverse splits typically result in a change in the CUSIP, the nine-digit identification symbol assigned to a public stock. Once that CUSIP changes, the naked shorter has no apparent way to close out the naked short position. No stock under the old CUSIP number exists anymore; it all automatically converts to the new CUSIP.THIS IS WHAT CEO LINDA POWERS DID LAST DEC 2016 when delisted from NASD and WHY SHE CHOOSE TO GO TO OTC.QB!
Those trades can sit in the Obligation Warehouse forever, in theory. But the “aged fails” — essentially orphaned naked short transactions — remain on the naked shorter’s balance sheet as a liability to be paid later.
By DiIorio’s reckoning, then, the cycle of naked shorting and reverse splits would inevitably result in an ever-increasing number of aged fails. And if that was happening, and those liabilities grew bigger and bigger, then federal regulators could see the outlines of the scheme on any financial statement.
DiIorio believed Knight accounted for its aged fails in the “sold not yet purchased” liability on its balance sheet. That’s supposed to be an inventory of stocks for use in future market making, which goes up and down as orders are filled. But DiIorio says it was a hiding place for a billowing structural liability.
And consider this: According to its own financial reports, Knight’s “sold not yet purchased” liability jumped from $385 million at the beginning of 2008 to $1.9 billion by mid-2011.If DiIorio was correct, Knight was driving penny stocks down over and over again with naked shorting, then not actually closing the trades, and racking up enormous paper liabilities.
This was even more complicated than he thought. It was time to call the cops.[/color] In April 2011, DiIorio decided he had to alert the Securities and Exchange Commission. He reached out to the SEC through its Office of the Whistleblower.“The core business at Knight has always been naked shorting penny stocks,” DiIorio asserted.Other than a perfunctory acknowledgement of receipt, the SEC did not respond to the TCR. DiIorio sent personal emails to top officials at the agency. One still exists on the SEC’s website, an October 2011 letter to Robert Khuzami, then the SEC’s head of enforcement. “Why won’t [then-Knight CEO Thomas] Joyce disclose to the investing public the nearly [$2 billion] sold not yet purchased liability is where he moves aged fails,” DiIorio wrote. “It is a structural liability and does not in fact ‘fluctuate with volumes’ as [Joyce] has said in several public filings.”
In this case, aged fails are the obligation left over when the stock whose shares the seller was supposed to actually hand over no longer exists because of a merger or split.
SEC spokesperson Ryan White declined to comment on the matter. As a matter of policy, the SEC never confirms nor denies the existence of an investigation until it reaches the public record in a court action or administrative proceeding, and it usually doesn’t inform whistleblowers about the status of their cases unless it grants them an enforcement award.
But DiIorio grew frustrated with the lack of response. “I was baffled why the SEC was not acting on what appeared to be blatant securities violations,” he said.Why was UBS so involved with penny stocks, which had little upside potential for a global megabank? Why was it so intertwined with Knight? Who was it purchasing these penny stocks for?
And why didn’t the bank seem to care that its clients were being sold stock that kept going down in value?
SAY YOU’RE A Swiss bank and you want to launder some money for high-net-worth clients.
Here’s one way: Start by placing large quantities of the funds into a brokerage account at the bank under the name of a shell corporation.
Then, conduct multiple financial transactions with the funds, confusing the true source of the money. Once the transactions “wash” the money, it can be spent out of the brokerage account as simply as writing a check or using a credit card.
UBS’s clients, according to DiIorio, purchase the penny stocks because they know they will drop in price. That way, they can use capital losses to offset any capital gains in the brokerage account, “resulting in a reduction in their reported income-tax liability and the underpayment of millions in taxes,” according to DiIorio’s 2013 complaint to the SEC.
Wealthy clients will pay handsomely for this activity. Not only do they get access to funds laundered through the banking system, but by placing the money offshore in a shell corporation, they can avoid taxation in their host country. “Money laundering is tax evasion in process,” said John Cassara, a 26-year intelligence and law enforcement official and former special agent for the Treasury Department. “Shell companies make it more complicated to figure out who that money belongs to and where it’s going.”
UBS’s clients, according to DiIorio, purchase the penny stocks because they know they will drop in price.
In fact, illicit financial flows through brokerage accounts are rarely scrutinized at all. “In federal law enforcement, we have skilled people, but we have a whole lot of people in there, they don’t get the securities markets,” said Cassara, the former Treasury agent. “They don’t get trade-based money laundering. The bad guys know this so they pile on the layering.”
He cited statistics from Raymond Baker, president of the research group Global Financial Integrity, that indicate money-laundering enforcement fails 99.9 percent of the time. “I use his line, total failure is only a [decimal] point away.”
DiIorio argues that client losses from the drops in value of the penny stocks are a small price to pay for the layering activity and tax avoidance. That’s if they’re even losses at all. Because if the stock shares never really existed, maybe the payments never happened either. way, they can use capital losses to offset any capital gains in the brokerage account, “resulting in a reduction in their reported income-tax liability and the underpayment of millions in taxes,” according to DiIorio’s 2013 complaint to the SEC.
That happens at the same time that the money placed in the brokerage account is being commingled with the various trades, he argues — effectively laundering it.
The IRS rarely suspects trading in equity markets is a vehicle for money laundering or tax evasion, because it assumes stock investors are trying to make money. “It’s a lot more efficient than stuffing diamonds into toothpaste,” DiIorio says.
AI
