Goldman Sachs Group Inc (GS)

[tw0122]

How much is GS involved in Naked Shorting

Some highlights of House or Cards for full version must open the PDF:
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A House of Cards by Austin Tobitt

Parr I Summary: The DTC has been taken over by big money. They transitioned from a manual to a computerized ledger system in the 80s, and it played a significant role in the 1987 market crash. In 2003, several issuers with the DTC wanted to remove their securities from the DTC's deposit account because the DTC's participants were naked short selling their securities. Turns out, they were right. The DTC and it's participants have created a market-sized naked short selling scheme. All of this is made possible by the DTC's enrollee- Cede & Co._____________________________________________________________________________________The events we are living through RIGHT NOW are the 50-year ripple effects of stock market evolution. From the birth of the DTC to the cesspool we currently find ourselves in, this DD will illustrate just how fragile the House of Cards has become.We've been warned so many times... We've made the same mistakes so many times.And we never seem to learn from them._____________________________________________________________________________________In case you've been living under a rock for the past few months, the DTCC has been proposing a boat load of rule changes to help better-monitor their participants' exposure. If you don't already know, the DTCC stands for Depository Trust & Clearing Corporation and is broken into the following (primary) subsidiaries:1.Depository Trust Company (DTC)-centralized clearing agency that makes sure grandma gets her stonks and the broker receives grandma's tendies2.National Securities Clearing Corporation (NSCC)-provides clearing, settlement, risk management, and central counterparty (CCP) services to its members for broker-to-broker trades3.Fixed Income Clearing Corporation (FICC)-provides central counterparty (CCP) services to members that participate in the US government and mortgage-backed securities marketsBriefhistorylesson: I promise it's relevant (thislinkprovides all the info that follows).The DTC was created in 1973. It stemmed from the need for a centralized clearing company. Trading during the 60s went through the roof and resulted in many brokers having to quit before the day was finished so they could manually record their mountain of transactions. All of this was done on paper and each share certificate was physically delivered. This obviously resulted in many failures to deliver (FTD) due to the risk of human error in record keeping. In 1974, the Continuous Net Settlement system was launched to clear and settle trades using a rudimentary internet platform.In 1982, the DTC started using aBook-Entry Only(BEO) system to underwrite bonds. For the first time, there were no physical certificates that actually traded hands. Everything was now performed virtually through computers.




Section 5:Hedgies are f*cked... I’m officially +20 pages deep and there’s still so much I’d like to say. It’s best saved for another time and another post, I suppose. So I guess I’ll wrap all of this up with some of the best news I can possibly provide...It all started with a 73 page PDF that was published in 2005 by a silverback named John D. Finnerty. John was a Professor of Finance at Fordham University when he published“short selling, death spiral convertibles, and the profitability of stock manipulation”. The document is loaded with sh*t that’s incredibly relevant today, especially when it comes to naked short selling. He dives into the exact formula that short sellers use, which is far beyond what my wrinkled brain can interpret, alone...However, when firms are naked shorting a company with the goal of bankrupting them, they leave footprints which are only explained by this event. The proof is in the pudding, so to speak.Any of this sound familiar??“The manipulator can not drive the share price close to zero unless he can naked short an extraordinary number of shares...this form of manipulation would result in... unusually heavy trading volume, and unusually large and persistent fails to deliver at the NSCC”.Anyone else remember the volume in GME during the run-up in January? The total volume traded between 1/31/2021 and 2/5/2021 was 1,508,793,439 shares, or an average daily trade volume of88,752,555 shares. On 1/22/2021, the volume reached 197,157,946... that’s roughly 3x the number of shares that exist..if this doesn’t sound like unusual volume then I’m not sure what is. Furthermore, the FTD report on GameStop was through the roof during this time
Notice the statement where the manipulator will be relieved of its obligation to cover if the firms shares are cancelled in bankruptcy? Did you happen to see footnotes 65 & 66 in the first screenshot of his PDF? It references a company that he used for his analysis...Charter Communications had a whopping 241.8% short float in 2005...The ONLY way the manipulator could have escaped this was by bankrupting the company and relieving the obligation to repurchase those shares...Guess what happened to Charter? They filed forbankruptcy in 2009...same thing hedge funds are trying to do to AMC/GME.


Part III Section 4:Slimy... If you watched the AMA with Wes Christian, he talks about the number of occurrences where the actual short interest is severely understated based on the data his firm obtained for legal proceedings. According to his numbers, in most cases the short interest is 50% - 150%MOREthan what is reported by the SEC(starting at 14:30). The objective isn’t to address the issue: it’s to keep the issue hidden. Firms that underreport their short interest are gaming the system by taking advantage of how the short interest calculation is done. When the SEC relies on reports that broker-dealers provide, and FINRA takes YEARS to reveal the lies within those reports, the broker-dealer can lie without immediately facing the consequences. It allows these firms to operate in a high-risk environment without exposing just HOW big their risk-appetite is.Another example that Wes mentioned wasMerrill Lynch. Merrill was fined$415,000,000(violation 3)in 2016 for using securities held in their customer’s accounts to cover their own trades. Check out this screenshot I took from that case:Remember when we mentionedSEA 15c3-3in the case with Apex? They were asking customers to book short positions to either a cash account or a short margin account.SEA 15c3-3protects those customers from allowing brokers to lend out the securities within their cash accounts...Well Merrill Lynch knocked that one right out of the f*cking park

Merrill made it seem like the required deposit in their customer reserve account was much lower than it truly was. They wouldn’t have been able to use that cash if it reduced the amount below the minimum capital requirement, so they found a way to fudge the numbers. In doing so, they managed to prevent a CODE RED while reaping the benefits of a high-risk ‘opportunity’. Should Merrill have filed bankruptcy during that time, those customers would have been completely blindsided.In the case of short selling, thetrueexposure of short interest is unknown... and I’m not just talking about the short sale indicator. When a firm fails to deliver securities that were sold short, there’s a pretty good indication that they’ve exposed themselves to a bit of a problem.. Now imagine a case where the FTDs start piling up and they STILL continue to short sell that same security.. think I’m joking?Check out theRoyal Bank of Canada:

Again... I was pretty shocked at that one. However, nothing rang-the-bell quite like this one fromGoldman Sachs:Goldman had 68 occasions in 4 months where they didn’t close a failure-to-deliver... In 45 occasions, they CONTINUED to accept customer short sale orders in securities which it had an active failure-to-deliver...When a firm is really starting to sweat, they pull certain tricks out of their ass to quell the situation. Again, this is nothing but smoke and mirrors because that’s all they can really do. Just as Merrill Lynch artificially lowered their customer reserve deposit, other firms make it look like they cover their short positions.One of the ways they do this is by short selling a SH*T load of shares right before a buy-in... Since we’re talking about Goldman Sachs, this seems like a great time to showcase their experience with this..

I promise... It really is as dumb as it sounds...So the perception here is when Goldman’s client has a FTD and they find out a buy-in is coming, the required buy-in would obviously be too extreme for the client to handle.. So they begin to buy those shares while simultaneously shorting AT LEAST the same amount they were required to purchase...Have you ever failed to repay a loan so you went to another bank and got a loan to cover the first one? Well that’s exactly what this is... I know what you’re probably thinking... “didn’t that just kick the can down the road?”. The answer is YES: it didn’t actually solve anything.There’s still one more citation that Goldman received which truly represents the pinnacle ofno-sh\ts-given. After I cover this, I don’t know how anyone could argue the systematic risks that exist within the securities lending business.. Check it out:

For 5 years, Goldman relied on a team of 10-12 individuals to locate shares to be used by its clients for short selling. This group was known as the “demand team”. Naturally, as the number of requests coming in the door started to increase, it became difficult for the team to properly document all of them. The volume peaked at 20,000 requests PER DAY, but the number of individuals that handled this job stayed the same.Obviously, this became too much for them to handle so they opted out of the manual process and found another solution- the F3 key....Yes- the F3 key... This button activated an autofill system which completed98% of Goldman’s orders to locate shares

The problem with Goldman’s autofill system was that it used the number of shares available to borrow at the beginning of that day, which had already been accounted for. After using the auto-locate feature, the demand team didn’t even verify the accuracy of the autofill feature or document which method was used to locate the shares for each order... and this happened for 5 years..Just goes to show how dedicated firms like Goldman Sachs truly are to the smallest of details, you know? Great f*cking work, guys.By the way, I have to show one of Goldman’s short sale indicator violations... It’s too good to pass up

At some point, you just have to laugh at these ass clowns... I mean seriously... one violation for a 4 year period involving over 380,000,000 short interest positions... they have plenty of other short interest violations, I just laughed at how the magnitude of this one was summarized by FINRA with 10 lines and roughly 4 minutes... whoever wrote that one must have been late for lunch.The last thing I’d like to note here is the way in which short sellers use options to “cover” their positions. Wes gave a great overview of this in the AMA(starting at 6:25). Basically, one group will buy puts and another group buys calls. This creates a synthetic share that is only provided if the option is activated. Regardless, short sellers will use that synthetic share to cover their short position and the regulators actually accept it...However, as Wes points out, most of those options expire without being activated which means the share is never delivered. This expiration can be set months down the road and allows the short seller to keep kicking the can.I doubt I need to say this, but we all remember the wild options activity that was happening shortly after GameStop spiked in January.u/HeyItsPixelwas one of the first to point this out. While a lot of that activity was on the retail front, I suspect a lot of it was done by short sellers to cover those positions



However, unlike John’s example where naked short sellers were driving down the price without opposition, GameStop had extremely high demand from retail investors to counter this activity. As I have discussed with Dr. T and Carl Hagberg, the run-up in volume during January and February was largely conducted by naked short sellers in an attempt to suppress the share price. As I have shown in the example with Goldman Sachs, firms will short sell during a buy-in for the same exact reason.

However, unlike John’s example where naked short sellers were driving down the price without opposition, GameStop had extremely high demand from retail investors to counter this activity. As I have discussed with Dr. T and Carl Hagberg, the run-up in volume during January and February was largely conducted by naked short sellers in an attempt to suppress the share price. As I have shown in the example with Goldman Sachs, firms will short sell during a buy-in for the same exact reason. To stabilize the price, you must stabilize supply and demand....


The only conclusion I keep coming back to is that the people with money know what’s going on and are desperately trying to keep it under wraps..So.... In an effort to prove this, I looked for violations that showed their desperation to protect this f*cked up system.Buckle up.27
Part III Section 4:Slimy... If you watched theAMA with Wes Christian, he talks about the number of occurrences where the actual short interest is severely understated based on the data his firm obtained for legal proceedings. According to his numbers, in most cases the short interest is 50% - 150%MOREthan what is reported by the SEC(starting at 14:30). The objective isn’t to address the issue: it’s to keep the issue hidden. Firms that underreport their short interest are gaming the system by taking advantage of how the short interest calculation is done. When the SEC relies on reports that broker-dealers provide, and FINRA takes YEARS to reveal the lies within those reports, the broker-dealer can lie without immediately facing the consequences. It allows these firms to operate in a high-risk environment without exposing just HOW big their risk-appetite is.Another example that Wes mentioned wasMerrill Lynch. Merrill was fined$415,000,000(violation 3)in 2016 for using securities held in their customer’s accounts to cover their own trades. Check out this screenshot I took from that case:Remember when we mentionedSEA 15c3-3in the case with Apex? They were asking customers to book short positions to either a cash account or a short margin account.SEA 15c3-3protects those customers from allowing brokers to lend out the securities within their cash accounts...Well Merrill Lynch knocked that one right out of the f*cking park.28
Merrill made it seem like the required deposit in their customer reserve account was much lower than it truly was. They wouldn’t have been able to use that cash if it reduced the amount below the minimum capital requirement, so they found a way to fudge the numbers. In doing so, they managed to prevent a CODE RED while reaping the benefits of a high-risk ‘opportunity’. Should Merrill have filed bankruptcy during that time, those customers would have been completely blindsided.In the case of short selling, thetrueexposure of short interest is unknown... and I’m not just talking about the short sale indicator. When a firm fails to deliver securities that were sold short, there’s a pretty good indication that they’ve exposed themselves to a bit of a problem.. Now imagine a case where the FTDs start piling up and they STILL continue to short sell that same security.. think I’m joking?Check out theRoyal Bank of Canada:29
Again... I was pretty shocked at that one. However, nothing rang-the-bell quite like this one fromGoldman Sachs:Goldman had 68 occasions in 4 months where they didn’t close a failure-to-deliver... In 45 occasions, they CONTINUED to accept customer short sale orders in securities which it had an active failure-to-deliver...When a firm is really starting to sweat, they pull certain tricks out of their ass to quell the situation. Again, this is nothing but smoke and mirrors because that’s all they can really do. Just as Merrill Lynch artificially lowered their customer reserve deposit, other firms make it look like they cover their short positions.One of the ways they do this is by short selling a SH*T load of shares right before a buy-in... Since we’re talking about Goldman Sachs, this seems like a great time to showcase their experience with this..30
The problem with Goldman’s autofill system was that it used the number of shares available to borrow at the beginning of that day, which had already been accounted for. After using the auto-locate feature, the demand team didn’t even verify the accuracy of the autofill feature or document which method was used to locate the shares for each order... and this happened for 5 years..Just goes to show how dedicated firms like Goldman Sachs truly are to the smallest of details, you know? Great f*cking work, guys.By the way, I have to show one of Goldman’s short sale indicator violations... It’s too good to pass up.
At some point, you just have to laugh at these ass clowns... I mean seriously... one violation for a 4 year period involving over 380,000,000 short interest positions... they have plenty of other short interest violations, I just laughed at how the magnitude of this one was summarized by FINRA with 10 lines and roughly 4 minutes... whoever wrote that one must have been late for lunch.The last thing I’d like to note here is the way in which short sellers use options to “cover” their positions. Wes gave a great overview of this in the AMA(starting at 6:25). Basically, one group will buy puts and another group buys calls. This creates a synthetic share that is only provided if the option is activated. Regardless, short sellers will use that synthetic share to cover their short position and the regulators actually accept it...However, as Wes points out, most of those options expire without being activated which means the share is never delivered. This expiration can be set months down the road and allows the short seller to keep kicking the can.I doubt I need to say this, but we all remember the wild options activity that was happening shortly after GameStop spiked in January.u/HeyItsPixelwas one of the first to point this out. While a lot of that activity was on the retail front, I suspect a lot of it was done by short sellers to cover those positions.



I promise... It really is as dumb as it sounds...So the perception here is when Goldman’s client has a FTD and they find out a buy-in is coming, the required buy-in would obviously be too extreme for the client to handle.. So they begin to buy those shares while simultaneously shorting AT LEAST the same amount they were required to purchase...Have you ever failed to repay a loan so you went to another bank and got a loan to cover the first one? Well that’s exactly what this is... I know what you’re probably thinking... “didn’t that just kick the can down the road?”. The answer is YES: it didn’t actually solve anything.There’s still one more citation that Goldman received which truly represents the pinnacle ofno-sh\ts-given. After I cover this, I don’t know how anyone could argue the systematic risks that exist within the securities lending business.. Check it out:31
For 5 years, Goldman relied on a team of 10-12 individuals to locate shares to be used by its clients for short selling. This group was known as the “demand team”. Naturally, as the number of requests coming in the door started to increase, it became difficult for the team to properly document all of them. The volume peaked at 20,000 requests PER DAY, but the number of individuals that handled this job stayed the same.Obviously, this became too much for them to handle so they opted out of the manual process and found another solution- the F3 key....Yes- the F3 key... This button activated an autofill system which completed98% of Goldman’s orders to locate shares
The problem with Goldman’s autofill system was that it used the number of shares available to borrow at the beginning of that day, which had already been accounted for. After using the auto-locate feature, the demand team didn’t even verify the accuracy of the autofill feature or document which method was used to locate the shares for each order... and this happened for 5 years..Just goes to show how dedicated firms like Goldman Sachs truly are to the smallest of details, you know? Great f*cking work, guys.By the way, I have to show one of Goldman’s short sale indicator violations... It’s too good to pass up.
At some point, you just have to laugh at these ass clowns... I mean seriously... one violation for a 4 year period involving over 380,000,000 short interest positions... they have plenty of other short interest violations, I just laughed at how the magnitude of this one was summarized by FINRA with 10 lines and roughly 4 minutes... whoever wrote that one must have been late for lunch.The last thing I’d like to note here is the way in which short sellers use options to “cover” their positions. Wes gave a great overview of this in the AMA(starting at 6:25). Basically, one group will buy puts and another group buys calls. This creates a synthetic share that is only provided if the option is activated. Regardless, short sellers will use that synthetic share to cover their short position and the regulators actually accept it...However, as Wes points out, most of those options expire without being activated which means the share is never delivered. This expiration can be set months down the road and allows the short seller to keep kicking the can.I doubt I need to say this, but we all remember the wild options activity that was happening shortly after GameStop spiked in January.u/HeyItsPixelwas one of the first to point this out. While a lot of that activity was on the retail front, I suspect a lot of it was done by short sellers to cover those positions.


One year later they adoptedNYSE Rule 387which meant most securities transactions had to be completed using this new BEO computer system. Needless to say, explosive growth took place for the next 5 years. Pretty soon, other securities started utilizing the BEO system. It paved the way for growth in mutual funds and government securities, and even allowed for same-day settlement. At the time, the BEO system was a tremendous achievement. However, we were destined to hit a brick wall after that much growth in such a short time.. By October 1987, that's exactly what happened._____________________________________________________________________________________"A number of explanations have been offered as to the cause of the crash... Among these are computer trading, derivative securities, illiquidity, trade and budget deficits, and overvaluation.."If you're wondering where the birthplace of High Frequency Trading (HFT) came from, look no further. The same machines that automated the exhaustively manual reconciliation process were also to blame for amplifying the fire sale of 1987.The last sentence indicates a much more pervasive issue was at play, here. The fact that we still have trouble explaining the calculus is even more alarming. The effects were so pervasive that it was dubbed the1st global financial crisis.Here's another great summary published by theNY Times: "..to be fair to the computers.. [they were].. programmed by fallible people and trusted by people who did not understand the computer programs' limitations. As computers came in, human judgement went out."Damned if that didn't give me goosiebumps... _______________________________________________________________________________
Notice the last sentence? A major factor behind the crash was a disconnect between the price of stock and their corresponding derivatives. The value of any given stock should determine the derivative value of that stock. It shouldn't be the other way around.This is an important concept to remember as it will be referenced throughout the post.In the off chance that the market DID tank, they hoped they could contain their losses withportfolio insurance.Anotherarticle from the NY timesexplains this in better detail. __________________________________________

Here are a few in favor.All of the comments I checked were participants and classified as market makers and other major financial institutions... go fucking figure.https://www.sec.gov/rules/sro/dtc200302/srdtc200302-82.pdf 8
_____________________________________________________________________________________Twohttps://www.sec.gov/rules/sro/dtc200302/srdtc200302-81.pdf 9
_____________________________________________________________________________________Threehttps://www.sec.gov/rules/sro/dtc200302/rbcdain042303.pdf _____________________________________________________________________________________Here's thefull listif you wanna dig on your own....I realize there are advantages to "paperless" securities transfers... However... It is EXACTLY what Michael Sondow said in his comment letter above..We simply cannot trust the DTC to protect our interests when we don't have physical control of our assets.10
Several other participants, includingEdward Jones, Ameritrade, Citibank, and Prudential overwhelmingly favored this proposal. How can someone NOT acknowledge that the absence of physical shares only makes it easier for these people to manipulate the market?This rule change would allow these 'participants' to continue doing this because it's extremely profitable to sell shares that don't exist, or have not been collateralized. Furthermore, it's a win-win for them because it forces issuers to keep their deposits in the holding account of the DTC...Ever heard of thefractional reserve banking system?? Sounds A LOT like what the stock market has just become.Want proof of market manipulation? Let's fact-check the claims from the opposition letters above.I'm only reporting a few for the time period we discussed (2003ish). This is just to validate their claims that some sketchy shit is going on.1.UBS Securities(formerly UBS Warburg):A.pg 559; SHORT SALE VIOLATION; 3/30/1999B.pg 535; OVER REPORTING OF SHORT INTEREST POSITIONS; 5/1/1999 - 12/31/1999C.PG 533; FAILURE TO REPORT SHORT SALE INDICATORS;INCORRECTLY REPORTING LONG SALE TRANSACTIONS AS SHORT SALES; 7/2/20022.Merrill Lynch(Professional Clearing Corp.):A.pg 158; VIOLATION OF SHORT INTEREST REPORTING; 12/17/20013.RBC(Royal Bank of Canada):A.pg 550; FAILURE TO REPORT SHORT SALE TRANSACTIONS WITH INDICATOR; 9/28/1999B.pg 507; SHORT SALE VIOLATION; 11/21/1999C.pg 426; FAILURE TO REPORT SHORT SALE MODIFIER; 1/21/2003Ironically, I picked these 3 because they were the first going down the line. I'm not sure how to be any more objective about this. Their entire FINRA report is littered with short sale violations. Before anyone asks "how do you know they aren't ALL like that?" The answer is - I checked. If you get caught for a short sale violation, chances are you will ALWAYS get caught for short sale violations. Why? Because it's more profitable to do it and get caught, than it is to fix the problem.Wanna know the 2nd worst part?Several comment letters asked the DTC to investigate the claims of naked shortingBEFOREcoming to a decision on the proposal.. I never saw a document where they followed up on those requests....

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