Vindman found that the penny stock world abounds with unsavory characters, including promoters and chief executive officers (CEOs) seeking a quick profit rather than building a company.
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Some say that short sellers drive small companies out of business, on the theory that the short sellers intend to drive the price of the stock to zero so they can cover at no cost. Tr. 44. Thel opined that these allegations are usually made by companies that go broke on their own. Tr. 44.
Vindman believed that the stock price of Marx was kept unnaturally low by the activities of "naked" short sellers hoping to ruin the company.15 Tr. 241-42, 475-77, 526. He testified that some short sellers even posted messages on message boards stating they would stop shorting the stock if they were given three million shares, a practice known as "short and extort." Tr. 476-77. Vindman did not complain to the Commission, the NASD, or any law enforcement authority. Tr. 615-17. He did not have confidence that the Commission would take action against the "short and extort" people. Tr. 615-17. Instead, Vindman engaged in what he described as "fighting the shorts." Tr. 242, 619; Div. Exs. 401A, 401B at 6, 9; 402A, 402B at 1, 3. Vindman believed that unless the shorts were stopped, Marx would be unable to get financing to develop and market IM Buddies so that it could succeed on fundamentals. Tr. 619-22. He believed that the shorts would be forced to cover at forty cents. Tr. 240-41. Vindman denies that "fighting the shorts" meant fraudulent price manipulation, but never explained what he did do except in terms of vague generalizations.16
The evidence shows that Vindman's "fighting the shorts" consisted of his coordinating trading in Marx for the purpose of exerting upward pressure on its price. The trading he coordinated was his own and that of Massaro, Nader, Brantley, and Bevins. Additionally, at Wise's insistence, Vindman sought the assistance of Stetson and Ingrassia, who were to buy and solicit their customers to buy Marx in order to exert upward pressure on its price.
[omissis]
Vindman denies directing Massaro's, Nader's, or Brantley's trading and even speaking with Bevins. Tr. 536-40, 635-36. He conceded he might "recommend" trades. Tr. 538. Understandably, Massaro, Nader, Brantley, and Bevins denied to FBI Agent Dengler that Vindman had any connection to their trading patterns. Resp. Exs. W, Y, Z, BB. The weight of the evidence shows otherwise.
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