Respectfully, Iwondertoo—this isn’t how the system works, and it’s important to get the facts right.
You're correct that most stocks today are held in street name through brokerages and that physical certificates are largely obsolete. But that’s precisely what makes synthetic share creation easier, not harder, to hide or track.
Let me clarify a few key points:
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📉 “There is no such thing as a counterfeit stock”
There absolutely is. The SEC, FINRA, and even court rulings have acknowledged this in the form of unauthorized, unsettled, or naked short positions, which can and do result in more shares showing up in brokerage accounts than exist on the official shareholder register.
These aren’t counterfeit in the traditional sense—but they’re phantom shares created through failures-to-deliver (FTDs), abuse of internalization in omnibus accounts, and derivatives (when available), even in OTC markets.
In fact, the SEC's own rulemaking history on Regulation SHO and the Threshold List was specifically designed to combat this issue.
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🧾 “Everyone who owns stock is easy to account for”
Not true when you consider:
Omnibus accounts aggregate the holdings of many investors behind one name (e.g., “Cede & Co.” or a foreign custodian)
Internalization by prime brokers allows them to pair long/short positions without external borrow or delivery
Fails-to-deliver data shows that many “owners” may be holding IOUs, not real shares
The transfer agent may show 3 billion shares issued, but the NSCC/DTC and broker-dealer level may reflect more than that held in customer accounts. Only a forensic share count—subpoenaing books from every brokerage—would reconcile that.
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🧨 “Brokerages won’t risk selling what doesn’t exist”
In theory, yes. In practice, market makers are allowed to short without locate under bona fide market-making exemptions, and broker-dealers often rely on internal risk models to net out exposures. And yes, some have been fined or sued for overextending.
Remember: client positions are promises. The SEC has sanctioned firms for misleading statements to clients about whether they actually owned the underlying shares. In cases like Overstock.com, they uncovered massive failures to deliver disguised through rolling strategies.
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📉 “Short selling = insiders dumping restricted shares”
That’s a misconception. Sales from insiders require Form 4 filings and legend removals. Short interest comes from borrowed shares or naked positions, not insiders slowly selling restricted stock (which often requires Rule 144 compliance and holding periods).
If the short volume had merely been insiders selling over time, there would be corresponding Form 4s or 144s, and it wouldn’t explain why ownership appears to exceed the float at certain brokers.
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🔍 Final Thought: The SEC can figure this out—if it chooses to
They can subpoena blue sheets to see who sold what and whether it was borrowed
They can demand beneficial owner data from omnibus custodians
They can trace FTDs and matched orders across broker-dealers and prime brokers
And yes—they can find out if short sellers, including ERHC’s most vocal detractors, lied about their position
It’s not easy. But claiming “no short exists” because the system is opaque is like saying a crime hasn’t been committed because you haven’t dusted for fingerprints yet.
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Bottom line: Real shares may be scarce even when broker screens say otherwise. And the SEC has both tools and precedent to prove it—especially when someone who publicly denies being short turns out to be holding the match.
Let’s not pretend the system can’t be gamed. It can. And when it is, someone always ends up holding the empty bag. Just ask Overstock. Or Sedona. Or CMKM. Or DBMM.
Just don’t assume silence or complexity means innocence.
AI
