II. VIOLATIVE SHORT SELLING IN THE SECURITIES OF ISSUER 1 41. In June 2018, Defendants engaged in a scheme to circumvent Regulation SHO requirements in connection with the short sales of millions of shares of the common stock of Issuer 1. As more fully described below, Defendants’ scheme including short selling without having locates in place and naked short selling in which they not only failed to have locates but also failed to timely deliver the securities being sold. Defendants’ goals were two-fold. First, Defendants knowingly or recklessly used their violative short selling to push down artificially the price of Issuer 1’s stock so that Defendants could lower the price at which Defendants were able to exercise their Issuer 1 convertible securities, thus obtaining more stock upon conversion. 42. Second, regardless of whether Defendants succeeded in driving down Issuer 1’s stock price by their improper short selling, Defendants knew or were reckless in not knowing they could profit additionally from selling Issuer 1’s stock in violation of Regulation SHO’s locate requirements. As set forth more fully below, their fraudulent trading scheme worked as follows: first, they entered into a securities purchase agreement with Issuer 1 on behalf of the Warrant Fund that, for a brief period, effectively allowed Defendants to exercise convertible preferred securities in exchange for Issuer 1’s stock at an approximately 20% discount to the market price. Then, prior to exercising the convertible securities, they entered short sales orders without first obtaining a locate, circumventing Regulation SHO. Almost immediately after those short sales, they executed their conversion rights to acquire Issuer 1 stock and attempted, albeit unsuccessfully, to use those shares to cover their short sales. In this manner, Defendants locked in an approximate 20% spread. In other words, by short selling without first obtaining a locate, they effectively were able to sell at market price and then acquire the shares at a 20% discount to market price, earning substantial illicit proceeds. Defendants would not have been able to do this Case 2:23-cv-03201 Document 1 Filed 06/12/23 Page 12 of 36 PageID: 12 13 if they had followed the rules that required locates for their short sales because they would not have been able to obtain locates in sufficient quantity, if at all.
Do you think you don't look stupid after all those wrong/false predictions about DBMM? You were wrong 10 times, and you're still bashing like you have any credibility left. Lmaoo
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