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Microcap & Penny Stocks : Naked Shorting-Hedge Fund & Market Maker manipulation? -- Ignore unavailable to you. Want to Upgrade?

To: rrufff who wrote (1881)	10/5/2006 9:19:57 AM
From: rrufff	Respond to of 5034

The SEC’s PIPE Crackdown Continues Posted by Peter Lattman For the past half-decade or so, PIPEs — which stands for Private Investments in Public Equity — have become popular menu items for hedge fund managers and other institutional investors looking to beef up their returns. Here’s how they work. A publicly traded company, often one unable to raise money through a traditional public stock offering, privately approaches investors to buy a PIPE. Because you can’t sell them right away – the PIPE shares are usually locked up for two to four months before they’re registered and free to trade — the deals are typically priced at a discount to the company’s stock price. So if you’re a hedge fund offered PIPE shares by a company, why not short the publicly-traded stock (i.e., bet on its decline) and then use the discounted PIPE stock you receive when the deal is complete to cover your short position? Because it’s a violation of the securities laws and, what’s more, the PIPE investors sign statements promising the company not to trade in the company’s stock while in possession of material nonpublic information. But that, the SEC alleges, is precisely what was done by hedge fund Deephaven Capital Management and one of its former portfolio managers, Bruce Lieberman. Yesterday the SEC filed a civil action against Minnesota-based Deephaven and Lieberman, charging them with insider trading on information that 19 PIPEs were about to be publicly announced. When Lieberman learned the news, he allegedly shorted the company’s stock. In each case, the company’s shares fell on the announcement of its PIPE offering. Without admitting or denying guilt, Deephaven — a $3 billion fund owned by Knight Capital Group — has agreed to pay roughly $5.7 million in a combination of civil penalties, disgorgement of profits, and interest. Lieberman agreed to pay a $110,000 civil penalty and be barred from being associated with any investment adviser for at least three years. Here’s the SEC complaint and litigation release. Knight had discussed the SEC case and the proposed settlement in a February SEC filing. In March the Law Blog posted on a similar SEC case brought against funds controlled by New York hedge fund manager Jeffrey Thorp. Read more: Global Permalink \| Trackback URL: blogs.wsj.com

To: rrufff who wrote (1881)	10/5/2006 9:24:22 AM
From: rrufff	Respond to of 5034

Patchie again refuting with facts one of our SI hedge fund defending hypocrites (my scam is ok, yours is not) To: Jeffrey S. Mitchell who wrote (95786) 10/5/2006 8:48:00 AM From: Patchie of 95787 Actually they are very related. Abusive PIPE's, in which shorts take place where a fail is guaranteed due to the use of unregistered shares as the "locate", can only be stopped if the process of settlement failures is tightened and enforced. The settlement failure was the vehicle to the illegal trade. Without an industry acceptance of the fail there never would have been an illegal trade. Now the PIPE investor is not the only short selling investor who has figured this out. The same Hedge Funds that enter into PIPE's also enter into natural short sales where they are afforded the opportunity to sell into a settlement failure. Negative news comes out, every short seller wants to jump on the same bandwagon, and soon there is massive fails in the system. To the industry the fail is "accepted" because they have become a natural and normal part of the market. When REFCO collapsed the fails jumped from <10,000 to well over a million in 3 trade days. This on a collapsing stock where no market maker could use the bona-fide exemption. So who was allowed to fail and who profited from it? Illegal sellers of shares they could not deliver. was it a PIPE? No but it might just as well of been a toxic PIPE as the illegal sales put sell side panic into the market and collapsed the stock 90% in 3 days. This isn't theory here it is law. A loophole has been identified that is being exploited in many ways. Trade settlement is an integral part of Wall Street and the settlement loophole needs to be firmed up - plain and simple. The investors deserve that protection.