CMKM Diamonds Inc. (fka CMKX)

[Ignutz]

How is it possible for a stock price to remain unchanged under ceaseless buying and selling?

STOCKGATE - Timeline to Financial Terrorism –
August 18, 2004
Compiled by Dave Patch

The financial terrorism of this issue is not only caustic to the small issuer and retail investor but has been well documented as a process to finance criminal elements. The paper trail of Regulatory delays in correcting this problem over the years is irrefutable. Worse still is the SEC’s arrogance and incompetence in fighting for the rights of the investor. In 1996 the SEC accused the NASD of making enforcement and regulatory decisions based on the pressures of the member firms. They claimed that the NASD would never emerge as an effective agency until they could divorce themselves from this conflict of interest. Ironically it would appear, based on this timeline that it is not the NASD that has succumb to member pressures recently but the SEC itself. The political pressures of maintaining the financial revenues of the Industry have been placed above the financial security of the investors of this nation as the SEC wavered.

This is financial terrorism and the terrorist are our own Government Agency. The Securities and Exchange Commission has failed to identify exactly why the trades cannot settle in compliance to the Securities Act of 1934 but instead make excuses and claim that it is complicated. Certainly the NASD, which regulates the most abused micro-cap stocks, did not think it was so complicated when they submitted their reform package to the SEC in March of 2004. The NASD could not understand what rationalization was needed to have trades fail settlement beyond a allowable 2 week failure period. The SEC apparently has their own reasons but think it unnecessary to inform anybody in regulation of those fighting for protection.

For the sake of the Future of our Markets, the SEC needs to be held accountable for the financial terrorism they impose on our nation.

Issue starts:

1985 – Securities investigators were tracking the “Mob on Wall Street” placing their sites on Alphonse Malangone and Vincent Romano. The Investigators focused on Broker-Dealer Hanover Sterling controlled by Malangone through Alan Longo.

1995 – Hanover Sterling shut down and Clearing Firm Adler Coleman went insolvent due to their insufficient capital to cover unsettled trades associated with illegal shorting.

1996 – SEC conducts study of NASD and fines the NASD for conflicts between member pressures and the enforcement of fraud to protect investors. SEC claims that NASD must change their conflicted practices if they choose to be an effective regulatory agency. http://www.sec.gov/litigation/investreport/nd21a-report.txt

1996 – 2000 SEC and FBI Investigate Organized crime infiltration into US markets through Canadian brokerage firm Pacific International. Claims criminal elements laundering money and stock manipulation through naked shorting is exposed. http://www.rgm.com/articles/cornucopiaofcrooks.html

1999 – SEC has an open comment period on Short Selling and receives more than 2000 comment letters addressing the abuses of Naked Shorting. No actions or reforms came from those comment letters. http://www.sec.gov/rules/concept/s72499summary.htm

September 2000 – SEC speaks in front of Congress to discuss Organized Crime infiltration into Securities Markets. They speak heavily about the Micro-Caps as the easiest to infiltrate. (http://www.sec.gov/news/testimony/ts142000.htm)

September 2000 – National Association of Securities Dealers (NASD) meets with Congress to discuss Organized Crime in the Markets and also discusses the Micro-Caps as the easiest to infiltrate. The NASD being an SRO consisting of the member bodies of Wall Street. (http://www.nasdr.com/1420/goldsmith_04.asp)

Dec 2000 – NASD files Enforcement action against Broker-Dealer Fiero Brothers for their participation in “Bear Raids” and illegal shorting of small cap securities. The Fiero Brothers worked directly with Hanover Sterling and was a major contributor to the demise of Hanover Sterling and Adler Colemen. This is the first enforcement action associated with stock manipulation via shorting practices and linked Organized Crime to the practice.

January 2001 NASD bars Fiero Brothers from Industry and fines them $1 Million for Stock Manipulation, Illegal Shorting, and Extortion. No reforms came from this action. (http://www.nasdr.com/news/pr2001/ne_section01_003.html)

2001- Allegations of illegal short selling abuses in small companies begins to grow in the markets.

October 2001 – NASDAQ Company Sedona Corporation files complaint with SEC regarding short selling abuses by Rhino Advisors. SEC agrees to investigate matter.

October 2001 NASD submits a reform bill to SEC for approval to “Close a Loophole” in offshore shorting practices. Request changes to Affirmative Determination requirements to address non-member shorting abuses (Offshore shorting). http://www.nasdr.com/pdf-text/rf01_85.pdf

2002 – Naked shorting campaign heats up with more than 100 publicly traded companies going public with their problems. Many try to take action by moving to “Certificate Only” trading and to exit the Electronic Settlement System of the Depository Trust (DTC).

June 2002 – Genemax (OTCBB:GMXX) is the first of 6 Companies that had successfully exited the DTC Trade settlement system for “Certificate Only” Trading. Shareholder failures in receiving Certificates were evidence of counterfeit shares manipulating the Markets. SEC and NASD failed to take any actions for correction.

August 2002 – Operation Bermuda Short – Joint FBI Royal Canadian Mounted Police (RCMP) sting operation concludes with nearly 60 arrests of offshore bankers and brokers associated with stock manipulation. Sting Operation took 3 years to complete. The manipulation of our Markets continued while this sting was in play. (http://www.globeandmail.com/servlet/ArticleNews/business/RTGAM/20020818/818bcbc/Business/businessBN/... )
(http://www.globeandmail.com/servlet/ArticleNews/business/RTGAM/20020816/wxmain/Business/businessBN/b... )

October 2002 – NASD speaks to Congress about Anti-Money Laundering initiatives. Throughout this time, the NASD was fully aware of the trade settlement failures and the public outcry from Companies violated by the “Naked Short” abuses. http://www.nasdr.com/1420/walter_01.asp

December 2002 – Paul Lemmon pleads guilty in Operation Bermuda Shorts. Given light sentence for disclosing mechanisms to fraud and names. No net actions to date have been taken by the FBI or our Securities regulators based on the evidence provided by Mr. Lemmon (http://www.rgm.com/articles/tk2.html )

January 2003 – DTC seeks support of SEC to stop all Companies from exiting the electronic trading system for “Certificate Only” trading practices. Evidence to date by those that did exit was a disclosure of the settlement failures within the DTC settlement process. It became better to cover up the problem than expose it at the present time. In June the SEC supported the DTC’s request to stop future exiting from the system. Cite “potential” of Counterfeit paper and lost paper as a rationale while accepting the electronic counterfeit shares to remain in place. (http://www.dtcc.com/PressRoom/2003/nakedshorts.html)
(http://www.sec.gov/rules/sro/34-47978.htm)

February 2003 – SEC fines Rhino Advisors $1 Million for stock manipulation and short selling abuses to Sedona Corp. Stock. What will later be learned is that the SEC had evidence in hand regarding the bribery of US and offshore brokers to manipulate this security. No actions against a broker have ever taken place. No attempts at restitution to shareholders taken and no demand for unsettled trades to be settled by brokerage firms. Sedona’s stock remains oversold/manipulated to this day. (http://www.sec.gov/news/press/2003-26.htm )

June 2003 – SEC initiates first action in Genesisintermedia case. MJK Clearing house becomes victim to stock loaning scandal and is placed into bankruptcy protection and receivership. The receiver's suit alleges a wide-ranging and sophisticated securities loan and market manipulation schemes financed by the Toronto branch of Deutsche Bank. http://www.rgm.com/articles/sec.html

October 2003 – SEC proposed regulation SHO to address shorting issues including “Naked Shorting”. SEC admits in background to proposal that “naked shorting” and settlement failures exceed the entire float of a company. (http://www.sec.gov/rules/proposed/34-48709.htm ). Comments to this reform include a letter from the North American Securities Administrators Association (NASAA) identifying that small companies and investors have been victimized by the short selling abuses. (http://www.nasaa.org/nasaa/Files/File_Uploads/Short%20Sales%20Comment.37990-38287.pdf)

October 2003 – Forbes article identifies “naked shorting” as “Wall Street’s Next Nightmare”. Coverage of issue remains sparse. (http://www.forbes.com/forbes/2003/1013/066.html)

November 2003 – SEC approves 2001 request by NASD to close offshore short selling loophole. Seeks accelerated approval of reforms. Accelerate request for approval in contradiction to 2 year hiatus on approval. http://www.sec.gov/news/digest/dig112003.txt

December 2003 – Department of Justice (DOJ) arrest Andreas Badian (Rhino Advisors) under criminal indictment for Stock manipulation. Thomas Badian fled country just prior to arrest. DOJ provided audio tapes by SEC with Badian bribing US Brokers to “Collapse” stock. Like the SEC (Feb. 2003) the DOJ leaves the Brokers untouched in the criminal actions.

January 2004 – NASAA provides public comment to SEC on Regulation SHO and addresses industry abuses and “Bear raids” taking place in the markets. Claims investors are being victimized and that the DTCC stock borrow program has issues. Requests that the SEC seriously consider actions to stop the abusive behavior and claims that SHO does not go far enough. (http://www.sec.gov/rules/proposed/s72303/nasaa010504.htm)

January 2004 – Senate Banking Committee council member identifies that a joint SEC/NASD task force is looking into the “Naked Shorting” abuses including the investigation into specific companies. The Senate Banking Committee was never to be heard from again on this matter as they folded on the issue in this highly political election year.

January 2004 – NASD notifies members of the new rule change that was approved in November of 2003. Rule change to plug ‘loophole” used to manipulate our stock markets. Time table for incorporation is slated for February 20, 2004. Nearly 2.5 years from the original proposal to close loophole. (http://www.nasdr.com/pdf-text/0403ntm.txt)

February 18, 2004 – NASD pushed out proposed rule change to April 1, 2004. Members request extension to closing “loophole” because February date was too inconvenient for them. 2000 (http://www.nasdr.com/filings/rf04_31.asp)

March 2004 – NASD submits proposed short selling settlement package to SEC for release to public comment. NASD proposal addresses once and for all the abusive nature of settlement failures and forces an industry correction. SEC’s Regulation SHO still in writing at this time.

March 2004 – Universal Express sues the SEC for harassment regarding the SEC’s continued unwillingness to address the naked shorting issues on their stock. Universal express claims that instead of assisting in the resolution to the abusive trading that the SEC became vindictive and came after the company to shut them up.

March 2004 – Berlin Stock Exchange begins listing of nearly 800 US Publicly traded companies. Companies are unaware of this listing but many notice a downward spike in their stock prices that coincide with the listings. The belief is that the industry is using naked shorting to an arbitrage in Germany will be used to circumvent the new NASD 3370 Rule effective April 1. Berlin Stockgate begins.

May 2004 – SEC Division of Market Regulation admits that the SEC is working with the Federal Government tracking the illegal shorting and manipulation to terrorism. This same Division of the SEC claims that the SEC cannot force the industry to settle all the unsettled positions because “There are more unsettled shares than shares to settle with”. The SEC is calculating mitigation of losses and is willing to throw aside the Congressional mandates of investor protection if necessary. It is the Industry responsible for the buy-in to settle these trades and the industry has failed to set aside enough capital to cover a forced buy-in (RE: 1995 Adler Coleman and 2002 MJK Clearing Bankruptcies).

May 2004 – Nanopierce Technologies files first lawsuit against the DTCC/NSCC for stock manipulation. Nanopierce claims that the stock borrow program orchestrated a culture of abusive trading and the creation of counterfeit shares to manipulate the stock.
June 2004 – SEC and NASD travel to Berlin to discuss exchange trading regulations. Hundreds of Companies have complained with only partial success in acquiring de-listing. No word on the result of this meeting. The broker responsible for the listings of US companies claims the SEC and NASD left satisfied.

June 2004 – SEC suspends registration of 26 Shell Companies for failing to file reports with the SEC. Trading suspension, without forcing equilibrium of trade settlements allows the Industry to eliminate the liability of settlement failures on these shell companies. many believe these companies are part of the 4% abused that the SEC identified in Regulation SHO and that by suspending these registrations, now after years of failed filings, is an attempt to mitigate member liabilities.

June 2004 – SEC proposes rule change to restrict small issuers from self-help protection to illegal shorting practices. SEC claims yet to be released Regulation SHO will be cure-all to naked shorting and that small issuers must be restricted from placing their shares in “Custody Only” status. (http://www.sec.gov/rules/proposed/34-49804.htm)

June 2004 – Charles Schwab Executive VP Michael Alexander, in a public comment to the SEC regarding concept release on reducing trade settlements to T+1 or T+0, identified that the Industry has a “Behavioral Issue” with stock settlements. Mr. Alexander identifies that changes will not work until this Industry Behavioral problem is addressed. Naked shorting manipulation feeds off this same behavioral issue as the industry ignores their responsibility to locate and deliver shares for settlement. (http://www.sec.gov/rules/concept/s71304/charlesschwab061604.pdf)

June 2004 – SEC releases watered down Regulation SHO creating thresholds of acceptable abuse. SEC release fails to enforce mandatory buy-ins on extended failures and fails to address the settlement problems in the industry today. (http://www.sec.gov/rules/final/34-50103.htm)

June 2004 – House Financial Services staffer made statements that the recently released Regulation SHO did not address all of the issues regarding naked shorting and stock settlements. “I indicated to your colleague that I was not denying that there were some serious problems and that the SEC had not yet addressed them.”

July 2004 – NASD expels Ryan and Co. for failure to present documentation as requested regarding short sale transactions for hedge funds. Offshore Hedge Funds being primary targets for the naked shorting manipulation of stocks and present settlement failures the SEC claims are excessive on the books today.

July 2004 – NASD sends notice to members on the allowances for arbitrage exemptions in trade settlement. Notice comes in direct response to Berlin Stockgate issue. NASD re-acclimates members with specific guidelines should they decide to use arbitrage exemptions on trades.

August 2004 – Allegations of SEC asking NASD to rescind their March 2004 proposal for short sale settlements are confirmed. SEC has identified that all Markets must be in compliance with their Regulation SHO, problems and all, and that the harsher restrictions requested by the NASD would not be in compliance with their recent package. The SEC has succumbed to Member pressure to allow settlement failures to be a normal part of the markets.

August 2004 – SEC again suspends registrations on additional 14 companies for failing to file with the SEC. The SEC again failed to force the industry to set the stock back to equilibrium – no settlement failures – prior to taking action allowing the industry to mitigate liability.

[ To be continued - August 18, 2004 ]