When broken down into its simplest form, the clearing, settlement, and delivery system at the DTCC allows fraudsters to target a company (say BVIG), sell nonexistent shares in unlimited numbers (see, e.g., KAT Gold), thereby creating a giant pile of money in their margin or proprietary accounts. These naked short positions at the DTCC must be collateralized at 130% but the collateral necessary is MARKED TO MARKET on a daily basis. This explains in part why you will see 100 or 200 share prints at the bid on thinly traded OTC:BB and Pink Sheets securities, especially where there are wide spreads between the bid and offer. These are referred to as "NEBBs" or non-economic bid-bangings. They are a form of market manipulation that try to paint the picture of a stock constantly being sold by shareholders but sold into bids that are extremely small i.e. there are no buyers around that want to invest in this scam. They represent a good screening tool to estimate the level of manipulation of a victim company. All one has to do is to chart the percentage of trades of an issuer that are NEBBs. The 2002 NEBB champion is well on its way to defending its crown in 2003. It is a small company called NP Energy (NPER) that trades on one of these smaller trading venues. . As the share price tumbles from the massive artificially manufactured dilution that ensues from these sales, the amount of collateral needed drops precipitously and is returned to those perpetrating the fraud. Thus the naked short sellers NEVER NEED TO COVER THESE NAKED SHORT POSITIONS in order to receive the proceeds from the sale of nonexistent stock. They just need to keep the share price pinned down to artificially low levels, which is extremely easy to do because the market makers really do "almost" assume the role of a bona fide MM when the stock previously trading at $5 now trades at a dime. At the 10-cent level there really is a long line up of opportunistic investors and nobody willing to sell "real" shares. NASD Rule 3370 encourages MMs to naked short sell into these imbalances. Thus the further along the "bear raid" matures the more "bona fide" the MM activity becomes. As the PPS continues to drop, the proceeds of the sales of nonexistent shares at the $4 and $5 level is sitting in the pockets of the fraudsters EVEN THOUGH THEY HAVE NEVER COVERED THE NAKED SHORT POSITION. This is a closed system and a "zero sum game", the money in their pockets is, of course, the money paid by the investors that thought they were buying real "shares".
AI
