A Small Voice In Cyberspace

[Georgia Bard]

Financial Fraud & Money Laundering on Wall Street

The inside story on the
Depository Trust Company
a/k/a CEDE & Co.

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This is the third part of our ongoing investigative reports into the Depository Trust Company (DTC) (Part I) and CEDE & Co (Part II).

A simple scenario takes place each week within the upper echelon of the financial powers that control America - and the world - a/k/a International Organized Crime. In any other form of commercial interaction or business, the sale of non-existant stocks is considered absolute fraud. But, when you have the power to control paper or electronic accounting ledgers, you also have the power to create facsimile assets from nothing but thin air and journal entries. This is where the Depository Trust Company (DTC) and CEDE & Co., the DTC's "street name" or "nominee name", come into play. By holding their stock in the particular name of CEDE & Co., all "DTC Participants" have the means of making fast and immediate illegal profits. Of course, none of this could happen without the full consent of the DTC, et al.

For background reference, the Depository Trust Company (DTC) filed their original Organization Certificate with the New York Superintendent of Banks on March 20, 1973. In July 1999, The Depository Trust & Clearing Corporation (DTCC) became the name of the new holding company created by the merger of the DTC and the National Securities Clearing Corporation (NSCC). For a list of the DTC Participants and links to their public pages, go to DTC Participants.

Counterfeit Public Stocks

In the past year, we have been shown more than twenty ways to make illegal profits from fraudulent stock shares using the DTC "shield" - CEDE & Co. - to hide the fact that those particular shares are never actually issued by a public company. In simpler terms, these are counterfeit shares of public stock. A couple of "whistle blower" Wall Street brokers, along with a former employee of a major market operator, have shown us how this scam operates. We'll try our best to explain it to you in the simplest terms possible.

DTC Participants are exclusively able to issue and sell non-existent stock to the public. It's that simple. However, the process as to how this actually takes place is usually not quite so simple. This financial scam may seem like a shock to the average American, but it's time for a reality check. We've warned you since 1995 to insist on physically holding your stock certificates in your own name, and now we have more facts to support what Parts I & II of this investigative series were revealing.

When price is restrained below the balance of supply and demand, public buyers predominate and money pours in while more and more bogus receipts flood the market. Eventually, those corporations must be bankrupted as the market operator and his criminal co-conspirators will never buy back their counterfeit receipts. This has been the modus operandi of international organized crime throughout history and should be of no surprise to any of us. We should all read Isaiah, Chapter 10, verses 13-14 over and over until it sinks in that we're the victims of professional financial thieves.

According to the DTC, there are currently 11,000 brokerage firms, dealers, custodian banks, institutional investors, transfer agents, paying agents, and exchange and redemption agents for securities issuers considered as "DTC Participants". There is the possibility that any or all of these DTC Participants could issue counterfeit stocks at any given time. Being extremely conservative, let's imagine if this was done on a weekly basis by only 5% of the DTC Participants. In such a scenario, there would be 550 worthless offerings of counterfeit stock issued each week. If each offering is for 100,000 shares at a buy price of $7 ($700,000 each offering), the total profit to the DTC Participants each week would be $385 Million dollars from nothing more than ledger entries and thin air. That's an annual "profit" of $200,585,000,000 or more than $200 BILLION.

The sale of counterfeit shares of a public corporation is illegal, unlawful, and immoral, yet the purported agencies and departments (i.e. the SEC, FBI, etc.) that are supposed to "police" such illegal organized crime activities do nothing. As the market operators control prices, eventually those corporations will be bankrupted. This is because the market operators are not about to buy back their bogus receipts at higher prices. The entire Wall Street scam operation functions in this manner. Once the market operator sells bogus shares to control and manipulate prices, he puts himself, as well as his co-conspirators profiting from secret omnibus accounts, in a very profitable position.

If anyone believes that the Executive Branch, the Congress, the Justice Department, the FBI, the SEC, et al, are protecting your interests, you had better wake up. For example, why is the U.S. Treasury "borrowing" paper fiat money from the private Federal Reserve Corporation? The fake debt, based on "borrowed" counterfeit paper money, created by accounting notations, and printed by the U.S. Treasury when paper receipts are needed, would not exist if government were not protecting the thieves. Having to pay the private Federal Reserve Bank Corporation a billion dollars a day for bogus interest - the result of mere accounting notations - is blatant thievery from the U.S. Treasury and all Americans.

For more details, see Corruption in Government, Scam #1.

Derivatives & Depositary Receipts

We believe that the controlled media dis-information as to what a financial 'Derivative' actually is has been the greatest factor into the fraud now overpowering our nation's economy. Forget about the drug dealers and their alleged money laundering schemes. This is much larger in terms of monetary value.... and it's highly illegal and far from being lawful or moral.

The DTC allows their Participants (banks and brokerage firms) to issue Derivatives or Derivative Instruments. A derivative is basically defined as something that can be made or derived from another; a spin-off based on an original. As used in the current financial world, a Derivative is a Depositary Receipt (DR). There are two basic forms of Depositary Receipts: an American Depositary Receipt (ADR) and a Global Depositary Receipt (GDR).

In essence, DTC Participants issue derivative stocks - Depositary Receipts (DR's) - based upon previously issued shares of public stock held in the name of CEDE & Co. on behalf of the beneficial owners, the actual purchasers. The DTC Participants don't own the legitimately issued stocks they issue their DR's against. Those stocks are held in trust for the public, the purchasers of the stock, in the name of CEDE & Co.

First, let's assume that a DTC Participant decides to sell one million shares of non-existent stock, or unsecured DR's, in each of the next 100 Over-the-Counter Bulletin Board (OTCBB) companies at an average price of $3 per share [$300 million]. Given the fact that an average 98% of these OTCBB companies fail, they would earn $294 million in sales, plus interest, by selling stock shares that don't exist. This is not gambling. This is a sure bet knowing that the "DTC house rules" are guaranteeing them a fixed return. But.... the game isn't over yet! This still leaves them with 2 OTCBB companies that haven't failed and they can parlay that into even greater profits.

Secondly, let's also assume that the two left-over solvent OTCBB companies have a $10 per share price. Instead of "covering" - guaranteeing - the two successful OTCBB companies and taking a $16 million loss (2% of the original $300 million investment), the DTC Participant does an "Offshore Private Placement Regulation S" underwriting for these two companies. The standard brokerage discount on a Regulation S offering is 60%. This means they will pay the company issuing the stock $8 million. If they simply deduct their $3 million gains from the sale of these stocks several years earlier, the DTC Participant loses $2 million on the books but, in reality, grosses $292 million in profits, plus interest.

For more details, see Wall Street Thievery, Scam #2.

DTC Participant Tax Havens

Why doesn't the DTC Participant show this gain on their books? The DTC Participant creates their own tax haven client that technically sells the non-existent stock, or DR's, and this "tax-free client" makes the profit. Since the profit isn't legally taxable due to their tax haven status, nobody (particularry the IRS) cares who makes the money. However, neither the bank shareholders, nor the brokerage firm shareholders, share in this profit. This is a real fraud scam in the real world.

Now, let us explain how this works using a real scenario. Examine the recent Bear Stearns - a DTC Participant - SEC 10-Q Filing at the end of 1999 [the Securities and Exchange Commission Form 10-Q is a report filed quarterly by reporting companies which includes unaudited financial statements and is supposed to provide a view of the company's financial position during the year]. Their 10-Q report showed that Bear Stearns had about $819 million in assets with roughly a $34 Billion (that's BILLION) "short position". [A short position is a situation whereby an investor borrows stock certificates for delivery at the time of the short sale. Should the seller be able to sell the stock at a price lower than the borrowed cost, a profit is made]. So then, where does the profit from the short sales go since it doesn't seem to go to the brokerage firm or Bear Stearns' stockholders? It goes to their created "tax haven client".

The brightest red light concerning this is that these short positions are rarely "covered" nor guaranteed by any real assets. Everything is on paper and nothing of any substance value is backing it up. This is due to the fact that the public company eventually fails as a result of its share price collapse from the nonexistent stock. In layman's terms, this means that the profit from the short sale is NOT subject to taxes because the contract is never completed.

Banks and Organized Crime Syndicates

As previously discussed above, banks and stock brokerage firms use the actual public stock being held by the DTC - in their street name CEDE & Co. - to issue bank Depository Receipts (DR's). The bank does NOT physically, nor electronically, hold the stock for the Depository Receipt, nor do they actually own it. Rather, the bank or brokerage merely issues DR's and the public buys them as if they were actual and legitimate stock certificates. If any questions concerning the actual possession by the bank or brokerage of the stock certificates are asked by an investor-purchaser, they reply that the stock is being held by the DTC. It's very odd that the average investor never asks the bank or their broker to prove this. In essence, the banks and brokerages issue 100% non-secured and worthless paper. The DR's are worthless because they are not secured. The banks, along with the brokerage firms, make 100% PLUS on every sale of these counterfeit stocks. They get the full value for the DR's plus their commission on the sale. This is the scam of all scams.

At any time, anyone can issue an accepted financial instrument giving them the means to launder "money". For example, look at the recent money laundering by Russian organized crime syndicates where the international banks sold DR's representing stocks on the mob's behalf . The banks issued the DR's and the buyers accepted the DR's as equivalent to the stock. The bottom line is that the seller of the stock was the Russian mobs. However, the banks shared the profits with the mob to gain access to the mob's money. The newspapers centered their headlines on the mob's laundering without explaining that this could have never taken place without the involvement of the banks and the DTC. This is the risk behind "Derivatives". You never know if the people holding the stocks used as the basis for the DR's are legitimate.

Let's not forget that we live in an instant society. If the average world citizen can't make money right now, in an instant, few will play the "money game". Money, or rather its ledger created facsimile, has become the god of this world. The stark reality behind the existence of the DTC is that it's nothing less than a protective shield for DTC Participants to create instant paper profits. Otherwise, the DTC and CEDE & Co. would have no practical reason to exist.

Who pays if Derivatives collapse the Markets?

The banks are covered by FDIC insurance. This simply means that the U.S. taxpayer will pay for any losses. Consider the S&L Crisis during the1980's, especially in Texas and California when banks were collapsing left and right. It cost least one Trillion dollars to FDIC insurance, a.k.a. the American taxpayer, to "bail out" the banks. Stock and mutual fund brokers are covered by private SPIC insurance. SPIC isn't taxpayer backed, so a meltdown would mean the bankruptcy of the brokerage industry. Client accounts would be forfeited and there would be no taxpayers to pick up the tab. The alternative would be to have the derivatives covered by FDIC insurance as well. If there's risk in issuing these derivatives - and we know these risks are big - and the same derivative risks are to be covered by both the FDIC & SPIC, what would happen if these derivative scams are exposed to the public and investors opt for a cash market by demanding their physical stock certificates?

The doomsday "Stock Market Program" was put into effect after the October 1987 stock market exchange "correction". This was brought about by the DTC (See Part I). Directly attributable to this is the fact that the privately owned Federal Reserve System now has the "legal" right to buy "blue chip" Dow Jones Industrial Average (DJIA) stocks in a declining market. So far, the public has made money by having the FED support the stock market. The problem with this is that the full faith of the U.S. "dollar" now supports the stock market and that support is the investment made by the average working American. Binding the U.S. Federal Reserve Notes (FRN's), which are not "lawful dollars", to stocks increases the probability that FRN's must fail sooner or later. With each passing day, "sooner" becomes a timely reality.

How to legally launder money...
just like banks and brokerage firms do
As a result of our research, and thanks to a few "insiders" who helped us put this all together over the past year, we have come up with 21 Ways to Legally Launder Money which mirror the actual goings-on in the financial world today.

If you think the movie Wall Street was a shocker, wait to you read this script....

Traditional Short Sale- Borrow the stock against a fifty percent margin. This is the only type of short sale that can be "squeezed" when the share price goes up. That's because the short seller must add money to their margin account. This is the most "legal" way to "legitimately" launder money, but also it's the riskiest for the launderer.

Market-maker Short Sale- U. S. Market-makers are not required to take physical delivery of stock certificates when they sell them. They are assumed to be a repository of the company's shares.

Brokerage House Short Sale- This is a decision by the broker not to execute a "buy order" from a client. The broker merely shows the stock as "owned" by the client on their monthly brokerage firm account statement - a paper transaction without reality - securities fraud. [If you don't think this really happens, they also have some swamp land in Florida for sale to add to your monthly brokerage statement]. This is the first reason to insist on holding your own stock certificates in your own hands and in your own name. Never trust a broker, the DTC, or anyone else to "hold" your certificates. You become the "beneficial owner" when they placed your certificates in the "nominee name" of CEDE & Co.

Clearing House Short Sale- The Clearing House doesn't execute the buy order. Instead, they credit it to the brokerage firm client's account.

Naked Short Sale- This is where two brokerage firms agree to trade stock in a company with neither brokerage firm requesting physical delivery of the share certificates.

Insider Short Sale- This is when insiders, with restricted stocks, use their restricted shares to sell their company "short". It's supposed to be illegal according to the SEC. It was a common practice when the Regulation S Hold Period was 40 days, but a rarer occurance lately.

Dodge Viper Short Sale- This is where a bloc of stock is purchased, then, the same stock is converted to derivatives (DR's) thus multiplying the original stock 100% or more. The short sale doesn't occur in the stock market, but the derivative or Depositary Receit owners are holding a short position. We were told this is the most widely used method.

DTC Short Sale- This is when DTC sells short using the stocks they hold in their "street name", CEDE & Co.

International Short Sale- a/k/a stocks created offshore. The company is listed to trade outside the United States (usually in Canada). However, the company is trading in the United States and the shares are sold within the U.S. The short sale is moved into the primary country where the local brokers can ensure that the short position will be covered by the listed company if there is ever a successful short squeeze.

Judicial Short Sale- a/k/a LTV. Scattered Securities is an example of this short play. The Court in the LTV reorganization determined the exchange rate for new shares for old shares at three cents. The controlled financial media made sure that the Market didn't know about the Court decision. The old shares traded far higher than the Court Ordered exchange rate. The short sale was done by selling old shares and buying new shares before the Court mandated exchange of the share certificates.

Agent 007 Short Sale- Sellers who are insiders, or who allege themselves to be insiders, sell completely counterfeit stock to buyers outside regular or known market channels.

Desert Short Sale- Brokers sell stock at prices well above the actual trading price of the stock. This has been popular with German OTC stocks sold into the Middle East. The gap between the sale price and the trading price is an effective short sale.

DR Short Sale- Using counterfeit stock, the seller deposits it into an overseas bank. They then sell Depositary Receipts against the counterfeit shares held by the bank. This is done alot in Asia.

Rockford Short Sale- An investment firm buys shares and takes physical delivery of the stock certificates. They replace the actual share certificates with counterfeit share certificates. Next, they sell the real shares back into the market and repeat the process. This practice does wonders for their balance sheet! This tactic was popularized by an episode of the Rockford TV Series. It's done a lot in the Asian markets (especially Hong Kong) with NYSE shares.

Tax Haven Bank Short Sale- Small banks, especially Caribbean banks, act as agents for their clients unwilling or unable to reveal their real identity. However, the bank client wants to buy some legitimate stock. The bank never buys the stock on behalf of the client. Instead, they simply show the sale within the bank's accounting system. This practice extends to gold and other precious metals and is the biggest scam used against U.S. investors in offshore banks. Take note that a majority of the Caribbean banks are backed - and owned - by various organized crime syndicates throughout the "new" Europe, especially former Soviet Union provinces that are now independent countries and recognized by the United Nations and EU.

Lost in the Mail Short Sale- The client-purchaser demands their stock or share certificate. The broker sends it via certified or registered mail to the wrong address - deliberately. The actual certificate is eventually returned to the broker. Using the signed return receipt, the broker claims the client has the share certificate. For the investor, perhaps a year or more is spent in proving it never arrived. Meanwhile, the broker has the stock certificate and can use it to cover other short sales. This happens frequently.

Margin Short Sale- The purchaser buys stock on margin. They can't take physical delivery of their share certificates, so the broker sells the margined account a/k/a non-existent stock.

Public Media Takeover Short Sale- Brokers add non-existent stock into a highly publicized company takeover with a legitimate stock transaction. The buyer of the other company pays for the non-existent shares. The short seller gets cash or stock in the buyer's company.

AWOL Short Sale- For many OTC stocks, about 3% of the "beneficial owners" cannot be accounted for each year. Usually, they die or forget they have the stock. Brokers can safely sell short 3% of the "float" each year relying on the fact that these beneficial owners will most likely never claim their stock. Some brokerage firms, relying on retirement age portfolios, sell short 5-10% hoping that the younger relatives never find out. Considering the numerous stock splits over the years, 10 shares in 1965 may well be 1,000 shares in 2000. This gives the broker "safe" odds even if the original certificate shows up and is cashed in at a future date, provided the broker doesn't get too greedy.

Counterfeit Stocks- Professionals regularly send counterfeit share certificates to stock Transfer Agents. Believe it or not, a surprising percentage are accepted as real share certificates. The result is that the professional thief has effectively sold short the shares involved in the certificate.

DR Float- The issuance of Depositary Receipts without ever holding the stock certificates. This goes along with selling the Depositary Receipts at a profit even though they have no "cover" in real assets.

International common Law Copyright 2000
by The Christian Law Institute & Fellowship Assembly

http://web.archive.org/web/20010223224210/64.225.47.117/nbn/weekly10.html

:=) Gary Swancey