The Authoritative NSS Page

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In summary:

1. optionsXpress was intimately aware and involved in helping customers with this strategy
2. the traders and the company knew they were doing something that was manipulative.
3. when the new regs came down in 2008, they got very nervous (who wasn't!), and started seeking a better procedure to keep allowing their customers to implement riskless buy-writes
4. they had trouble getting anybody to bless the trades (a red flag).
5. they continued to allow the trading while knowing it was presenting risk to all parties involved.
6. the SEC stopped commenting on the trading, and went into fact gathering mode for enforcement action

And it all came down just today, from 2009. Took three years.

I think this is the first action taken on synthetic short buy-write arrangements. There may be others! The SEC and FINRA warned about this during the financial crisis that they were going to go after the "synthetic short" strategy.

And they did.