Truemors
I know you weren't invited to the party but stick around. We are all going to pay to clean up their mess. To bring you up to snuff on this story, Overstock CEO Patrick Byrne was the first public figure to sound the battle cry and go toe to toe with the naked short sellers. In exasperation, he filed a lawsuit against them, which should have been heard in August, but delay, delay, delay, it is now scheduled for April. By then, many of those he is suing, like Lehman Brothers, may already have gone bankrupt, due to their corrupt naked trades which they cannot ever deliver on.
One of the groups alledgedly at the forefront of Naked Shorting Overstock.com stock, is Rocker Partners, who changed their name to Copper River shortly after they were served with a lawsuit, at which time one of two the Big Kahuana's (David Rocker, Marc Cohodes) retired (if one considers it work to sit around at your computer all day selling naked shares of Overstock etc). Now the stench of fetid fish is seeping up from the river. Are they getting ready to bar their doors too?
Gradient/Rocker Partners Lawsuit Overstock filed a lawsuit against Rocker Partners, a hedge fund, and Gradient Analytics, an independent research firm, in August 2005. We are suing the defendants for libel, unfair business practices and tortuous interference. This lawsuit claims that Rocker Partners, a hedge fund managed by David Rocker, paid Gradient Analytics, an independent research company, for a series of false and disparaging reports about Overstock, and that Gradient allowed Rocker to review and edit the so-called "independent" reports before they released them. It also claims that Gradient timed the release of the reports so that Rocker could profit on trades, as could Gradient through hedge funds it secretly controlled. The Establishment press has tried to spin this case as being about free speech, but this argument has already been rejected by a California state trial judge (on all counts, 8-0), by a friend-of-the-court brief from the California attorney general, and, in a blistering decision, by the California Court of Appeals (3-0). Read FAQ | View Media | Legal/Court Documents | Company Documents Prime Broker Lawsuit This suit alleges that the defendants, most of Wall Street's major brokerage houses, participated in a massive, illegal stock market manipulation scheme of selling short the company's stock with no intention of covering such orders with borrowed stock, as they are required to do, causing what are referred to as "fails to deliver" (in effect, the creation of fake stock in the marketplace). The suit asserts that a persistent large number of failures to deliver have been generated and may, at times, have come to exceed Overstock's entire supply of outstanding shares.
Why is it that Naked Shorting is still rarely written about by the mainstream press?
Roddy Boyd, formerly of the New York Post, now with Fortune magazine sticks his counterfeit 2 cents in again.
http://money.cnn.com/2008/10/10/news/economy/river_boyd.fortune/index.htm
and Patrick Byrne responds.
Roddy Boyd Works It Like He’s Paying the Rent October 11th, 2008 by Patrick ByrneIn the adult novelty & video arcade shop that is our New York financial establishment, one of the mop-and-bucket spooge-boys is Roddy Boyd, formerly of the New York Post (for folks who move their lips when they read Entertainment Weekly), and currently, of Fortune Magazine (also known as “People Magazine for Capitalists”). I have met Roddy on occasion, and a more seedy and furtive character would be difficult to name. I once knew a one-eyed Chinese guy named “Chaney” who ran a Bangkok pawn shop/mail-drop who turned out to be working for Taiwanese, Chinese, and Soviet intelligence, simultaneously, but by appearances anyway, Chaney was a model of probity and fair-dealing when compared to Mr. Boyd.
Admittance into Roddy’s New York financial journalism spooge-bucket-brigade is conditional upon acceptance of The Fundamental Principle and First Corollary of that august fraternity:
The Fundamental Principle - Hedge funds can do no wrong, particularly if they belong to a small constellation whose brightest lights are Stevie Cohen, Dan Loeb, David Einhorn, Jim Chanos, David Rocker & Marc Cohodes.
The First Corollary - If any corporation or individual appears to have been wronged by activities of any of these hedge funds, using methods up to and including stock counterfeiting and manipulation, blackmail, harassment, and intimidation, use of private eyes and internal moles, inciting endless and expensive investigations that go nowhere, and so on and so forth, it must only be because they deserved it (for proof, see The Fundamental Principle).
Today Fortune Magazine’s Roddy Boyd gives fine illustration of these rules in an article on Copper River Partners (née Rocker Partners). This is the same Copper River/Rocker Partners whose exploits are chronicled throughout DeepCapture, and who have been frequent beneficiaries of reportorial lotion-jobs from Roddy, Karen Richardson (WSJ), Herb Greenberg (CBSMarketWatch), Joe Nocera (New York Times), and Jim Cramer (CNBC & TheStreet.com), and have been long-time recipients of Bethany McLean’s highly-regarded regulars-only service. (Full disclosure: Copper River is also on the business end of a Marin County lawsuit filed by Overstock.com, in which I played modest role.)
In today’s think-piece, Roddy treats us to such insights as:
- “But for noted short-sellers Copper River Management, a $1 billion hedge fund based in Larkspur, Cal., the month turned into a perfect storm. A devastating combination of counter-party failure, sudden regulatory edicts and margin calls conspired to turn the fund’s performance on its ear, leading to a 55% loss in just two weeks.” Translation: In the last two weeks Copper River lost over half of its billion dollars, not through any decisions made there: instead, counter-party failure, regulators, and those pesky margin calls “conspired” to create “a perfect storm” that lost the half-billion dollars.
- In case the point was lost that none of this had to do with the quality of Copper River’s investments, Roddy Boyd writes it out. He really does, in those words: “What’s worse for Copper River is that the battering had nothing to do with the quality of its investments.”
- We are treated to a bit of financial arcana: “On top of that, as Lehman unwound its own internal hedges to the Copper River trades, its trading desks bought shares of these companies, driving up their prices and leading to losses for Copper River.” Translation: Lehman sold Copper River puts that Lehman then hedged by shorting stock (most likely in more abuse of the option market-maker exception), and when Lehman covered its shorts it hurt Copper River, whose investment strategy assumes an environment where shorts don’t need to cover (and understandably so). As far as Roddy Boyd is concerned, the possibility that a short might “cover” (that is, “at some point come into the possession of and deliver things they are selling”) and thereby cause loss to a favored hedge fund has “nothing to do with the quality of its investments.”
- As though that litany of impositions were not harrowing enough, Roddy chronicles the further injustices suffered by Copper River: “That was bad enough, but on September 19, the bottom fell out for the fund. That was when the Securities and Exchange Commission ordered unprecedented restrictions in short sales” (as our nation’s financial system was imploding). And further, “As prices in those stocks shot upwards, Copper River was forced to cover - or buy back - some of its positions at steep losses. “ Clearly this further injustice is intolerable: how could a hedge fund such as Copper River ever be expected to make money if it has to deliver on things it has sold? And lastly, this chestnut: “The rising stock prices also led to a series of margin calls (demands for additional cash collateral to be deposited in a margin account) from Goldman Sachs, Copper River’s prime broker.” I’m with Roddy on this one: it’s just damn inconsiderate of Goldman Sachs to insist that Copper River have funds to back its play.
Perhaps I am too hard on Roddy. “Out of the crooked timber of humanity no straight thing will ever be made”, and all that. A gal moves to the big city, gets behind, does things of which she is not proud. Molded are we all of imperfect clay.
But normally, she doesn’t write home about it.
It’s just Roddy’s ill fortune to have to perform these acts in national print.
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