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AMC to the MOON!


keylime
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Taking down Citadel might be like taking Maliki down? Sometimes, getting too big and too bad scares off the smaller fish and insulates you from the law and spineless politicians. I reckon once we are done with the smaller nets, the harpoons have to be sharpened.

Hedge Funds Ensnared in Expansive DOJ Probe Into Short Selling

By 
December 10, 2021, 9:00 AM CST
  •  
    Funds and researchers are scrutinized by Justice Department
  •  
    Inquiry seeks information on trading in several dozen stocks

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The U.S. Justice Department has launched an expansive criminal investigation into short selling by hedge funds and research firms, scrutinizing their symbiotic relationships and hunting for signs that they improperly coordinated trades or broke other laws to profit, according to people familiar with the matter.

The probe, run by the department’s fraud section with federal prosecutors in Los Angeles, is digging into how hedge funds tap into research and set up their bets, especially in the run-up to publication of reports that move stocks.

Authorities are prying into financial relationships between hedge funds and researchers, and hunting for signs that money managers sought to engineer startling stock drops or engaged in other abuses, such as insider trading, said two of the people, asking not to be named because the inquiries are confidential.

Underscoring the inquiry’s sweep, federal investigators are examining trading in at least several dozen stocks, including well-known short targets such as Luckin Coffee Inc., Banc of California Inc., Mallinckrodt Plc and GSX Techedu Inc. And they’re scrutinizing the involvement of about a dozen or more firms -- though it’s not clear which ones, if any, may emerge as targets of the probe. Toronto-based Anson Funds and anonymous researcher Marcus Aurelius Value are among firms involved in the inquiry, the people said. Other prominent firms that circulated research on stocks under scrutiny include Carson Block’s Muddy Waters Capital and Andrew Left’s Citron Research.

The U.S. probe opens yet another front in an already treacherous era for those who try to profit on stock drops. Some bearish funds threw in the towel as government stimulus buoyed prices during the pandemic. That pressure intensified as retail investors organized counterattacks on popular short targets, bidding up shares to inflict losses on hedge funds this year. By late January, Citron vowed to give up short-selling research and focus on long bets.

Read more: Wall Street’s bounty hunter abandons short selling research

Meanwhile, companies criticized by short sellers have become increasingly bold in firing back, sometimes launching legal battles even as they face government probes that ultimately support short sellers’ theses. A number of corporate executives have been hoping U.S. authorities might help to further shift the focus to investors’ tactics.

Still, successfully bringing charges against short sellers could be challenging, given that betting against companies and publishing research believed to be accurate is lawful and even beneficial for markets. So far, nobody has been accused of wrongdoing, and authorities may ultimately decide not to pursue charges.

Government attorneys are trying to determine whether short sellers engaged in some form of deception -- say, by misleading the public about their financing of what appears to be independent research, violating confidentiality agreements with authors, or orchestrating stock plunges to panic shareholders and exacerbate selling.

Spokespeople for the Justice Department and Muddy Waters declined to comment, and there was no response to messages sent to Anson Funds and Aurelius. 

An attorney for Citron said he’s aware of an industry probe but that it’s routine for U.S. investigators to open and close cases. He expressed doubt that their theories would be borne out.

Citron Capital and Mr. Left are successful because they do quality research and keep their reports secret from other short sellers until publication,” said the lawyer, James Spertus. “There is simply no truth behind any theory that short sellers coordinate amongst themselves before publishing reports, at least in regard to publications by Citron Capital and Andrew Left. I am hopeful that anyone investigating the issue will reach that conclusion as soon as possible.”

Funding Research

Hedge funds are known to strike a wide variety of deals with researchers, sometimes paying handsome subscription fees for fresh insights into possible corporate trouble, or even becoming an author’s primary source of funding. In one example, prominent financial investigator Harry Markopolos, who normally makes money from whistle-blower awards, said he partnered with a hedge fund to share profits when he released a report on General Electric Co.

Some hedge funds have been known to suggest targets to researchers, who then deliver scathing reports.

One cautionary tale emerged in court after Dallas-based Sabrepoint Capital agreed to pay a short-selling researcher a monthly retainer of $9,500 in 2018. Sabrepoint encouraged him to dig into real estate company Farmland Partners Inc. The researcher, who also wrote publicly under a pseudonym, later published an article on Seeking Alpha, setting off a 39% drop in Farmland’s share price. The company sued and used a judge’s order to force him to reveal his identity: Quinton Mathews. 

Mathews later said in a statement that he subsequently learned his article “contained inaccuracies and false allegations” and retracted it. He and Farmland reached a settlement. Sabrepoint has said it didn’t know about the Seeking Alpha article.

Farmland also is on the list of stocks that the Justice Department is examining. Lawyers for Sabrepoint and Mathews declined to comment.

Read a Businessweek cover story: Reddit hates short sellers, but the market needs them

The Justice Department unit handling the inquiry already has a formidable reputation on Wall Street. It recently brought several cases against global banks and traders for illegal spoofing of precious metals and Treasury futures. As part of that probe, JPMorgan Chase & Co. paid more than $900 million in penalties after its traders placed and canceled orders for commodities to benefit positions held by the bank or prized hedge fund clients. Those cases were brought by analyzing trading data for suspicious patterns and then attributing it to individual traders.

While prosecutors in the short-selling investigation issued subpoenas as recently as October, the effort has been underway much longer, the people said.

https://www.bloomberg.com/news/articles/2021-12-10/hedge-funds-ensnared-in-expansive-doj-probe-into-short-selling

 

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Adam Aron (@CEOAdam) Tweeted:
We now have more than 500,000 members of AMC Investor Connect. Remember, if you are a U.S. or international AMC shareholder, and you enroll in our Investor Connect by December 31, you’ll receive for free this NFT and other benefits. It’s also free to join: https://t.co/b5l62CQlD0 https://t.co/sn8Jaxz224 https://twitter.com/CEOAdam/status/1470421908181159937?s=20

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1 hour ago, CSM (R) Thack said:

Adam Aron (@CEOAdam) Tweeted:
We now have more than 500,000 members of AMC Investor Connect. Remember, if you are a U.S. or international AMC shareholder, and you enroll in our Investor Connect by December 31, you’ll receive for free this NFT and other benefits. It’s also free to join: https://t.co/b5l62CQlD0 https://t.co/sn8Jaxz224 https://twitter.com/CEOAdam/status/1470421908181159937?s=20

Over 500,000! Hmmm ! But there are only about 540,000 legitimate shares in the float. Oh that must mean each investor only has 1 share and perhaps a few have 2. Of course not counting the few that institutions hold. 

OR...

That means there are billions of naked shares out there.

Hmmm... which one is the more mathematically plausible?

Hmmm...

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1 hour ago, keylime said:

Over 500,000! Hmmm ! But there are only about 540,000 legitimate shares in the float. Oh that must mean each investor only has 1 share and perhaps a few have 2. Of course not counting the few that institutions hold. 

OR...

That means there are billions of naked shares out there.

Hmmm... which one is the more mathematically plausible?

Hmmm...

Correct me if I’m wrong…but that’s 500,000 (thousand) have signed up!?

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17 minutes ago, CSM (R) Thack said:

Correct me if I’m wrong…but that’s 500,000 (thousand) have signed up!?

As of today make that 500,001.:lmao:

 

And yes I do own a couple more than 1 share.:lmao:

 

And still these idiots are shorting the stock. My God when everyone figures out the total mess they've created the crap is going to make the fan EXPLODE 💥

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27 minutes ago, CSM (R) Thack said:

Correct me if I’m wrong…but that’s 500,000 (thousand) have signed up!?

Yes. It is projected that that is not even one percent of the true shareholders which puts the naked shares at a staggering number. I meant to say there were 513 million shares in the float and this 500,000 plus is not even 1 percent which calculates to the moon. And yes these idiots continue shorting the stock. 

I don't know. Gluttons for punishment?

 

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39 minutes ago, keylime said:

Yes. It is projected that that is not even one percent of the true shareholders which puts the naked shares at a staggering number. I meant to say there were 513 million shares in the float and this 500,000 plus is not even 1 percent which calculates to the moon. And yes these idiots continue shorting the stock. 

I don't know. Gluttons for punishment?

 

Correction. It is projected that the 500,000 signers is a small percentage of the true amount of shareholders that if they just averaged 100 shares each or 50 million shares total, that number projected out to the true number of shareholders is a staggering amount of naked shares. And that's just 100 shares. 

This is part of Adam Aaron's plan to expose the hedgefunds and the number of naked shorts. That's why giving away the NFT is Brilliant!

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1 hour ago, keylime said:

Yes. It is projected that that is not even one percent of the true shareholders which puts the naked shares at a staggering number. I meant to say there were 513 million shares in the float and this 500,000 plus is not even 1 percent which calculates to the moon. And yes these idiots continue shorting the stock. 

I don't know. Gluttons for punishment?

 

Gotcha…tracking!!!👍🇺🇸👍🇺🇸

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Maybe, just maybe, they will stop taking Wall Street banksters out for lunch when they rip us off?

The SEC Joins DOJ's War on Corporate Offenders

Tuesday, November 9, 2021

Last week we wrote about the three-pronged attack that the Department of Justice (DOJ) will use to get more aggressive in prosecuting cases and how they punish corporate offenders. Now, the U.S. Securities and Exchange Commission (SEC) has announced its own intention to conduct faster investigations, bring bigger cases, and to seek harsher penalties. In his first speech on enforcement, SEC Chairman Gary Gensler quoted the agency’s first Chair, Joseph Kennedy, to summarize his own agenda: “The Commission will make war without quarter on any who sell securities by fraud or misrepresentation.”

 

Chairman Gensler announced four principles that he’s asking that the Enforcement Division utilize to guide their investigations and recommendations to the Commission.

 

First, Gensler wants the Commission to focus on the “economic realities” of the activity at question. While also applicable elsewhere, this appears to focus on Chairman Gensler’s efforts to increase the SEC’s role in regulating cryptocurrency. In fact, he went off script during the speech and urged lawyers who represent clients in the crypto space to “come in, get them to register,” instead of trying to find ways to avoid SEC regulation through what Gensler calls “regulatory arbitrage.” Crypto trading has been one of several hot-topic areas, like climate change disclosures, special-purpose acquisition companies (SPACs), and trading apps, in which Gensler is trying to expand the SEC’s role. Implicitly acknowledging the lack of clear crypto regulations, Gensler wants companies to focus on the “spirit of the law,” and to err on the side of registration, rather than trying to take advantage of legal ambiguities.

 

Second, Gensler asked the Enforcement Division to focus on accountability. Recently, Enforcement Director Gurbir Grewal announced a shift back to the Obama-era policy of requiring admission of wrongdoing in certain SEC settlements. For decades, the SEC has settled nearly every case on a “no admit, no deny” basis in which the settling party neither admits nor denies the allegations or charges. While admissions will not likely be required in most cases, when they are, companies and individuals will face tough decisions. An admission of federal securities violations will often result in significant collateral consequences to defendants, such as shareholder claims, parallel criminal investigations, and reputational fallout for companies and individuals. Indeed, the DOJ announced it will use prior misconduct as part of its charging decisions and an admission in connection with an SEC action could weigh heavily with prosecutors. In addition, as we are already seeing, the SEC is becoming more aggressive in seeking relief, including seeking higher amounts for disgorgement and penalties and more aggressively using bars and injunctions, and, like DOJ, it is increasingly demanding that individuals be held responsible for corporate wrongdoing. As an example, the Division of Enforcement reportedly is seeking a hefty $125 million from Nikola Corp. to settle an investigation of alleged misstatements by its founder and executive chairman, who separately has been indicted and sued by the SEC.

 

Third, Gensler wants the SEC to pursue more “high-impact” cases. This principle dovetails with Gensler’s efforts to make the SEC more aggressive in novel areas, like cryptocurrency and decentralized finance apps, SPACs, and environmental, social, and governance (ESG). Speaking frankly, Gensler said that he wants the SEC to bring cases that cause law firms and advisors to send out alerts to their clients. This “high-impact” approach can lead to the SEC being accused of “regulating by enforcement,” where the SEC brings cases for alleged activity that is not squarely prohibited under the federal securities laws and regulations. While Gensler brushed aside this criticism, he and some of the other Commissioners appear ready to let the Enforcement Divisions pursue cases to change conduct rather than waiting for the often slow administrative or congressional process to address the novel issues.

 

Fourth, Chairman Gensler wants to improve and speed up the enforcement process. Gensler appeared to place the blame for the often slow investigation process on the defense bar, which, whether a fair claim or not, has caused Gensler to direct Commission staff to take fewer meetings with lawyers trying to persuade them against recommending the threatened charges. Gensler also wants the SEC to work more closely with other federal and state agencies, such as the Commodity Futures Trading Commission (CFTC) with whom the SEC is already closely aligned. Here, Gensler specifically referenced Deputy Attorney General Lisa Monaco’s recent speech on corporate criminal enforcement. Gensler wants the SEC to adopt principles from the new DOJ policy, specifically on (1) taking a company’s entire history of misconduct, not just the specific area at issue, into account in making enforcement action decision; (2) requiring companies looking for cooperation credit to provide the SEC with all relevant facts relating to the individuals involved in the alleged misconduct; and (3) considering on-going agency oversight for certain recidivist companies. Finally, in addressing how the SEC sources cases, Chairman Gensler indicated that the SEC will be seeking more from companies wanting cooperation credit, including reviewing and disclosing misconduct beyond that prompting the self-reporting.

 

So what does this all mean? For one, none of this comes as too much of a surprise as most everyone expected significantly more enforcement activity under the Biden administration. But, consistent with our guidance to gear up for the new DOJ policies, companies can and should take measures to get ahead of issues in order to be in the best posture should an enforcement inquiry arise. Companies should consider taking the following steps:

  • Meaningfully review and update the compliance program. Too often, compliance policies and procedures are viewed as “set it and forget it” because other priorities for time and budget prevail. The SEC, CFTC, and DOJ, however, have made clear that they expect companies to have an effective compliance program and will punish those who do not. Among other steps, companies should conduct an updated risk assessment, which is the foundation of any effective, risk-based compliance program. Particular attention should be given to new, hot issues, such as internal controls relating to disclosure of cybersecurity risks, which was the subject of a “high-impact” case brought by the SEC earlier this year. Companies should also conduct fresh audits to identify control gaps and then to incorporate the updated risk assessment, audit results, and “lessons learned” through prior incidents into an updated compliance program. Fresh, updated employee training can also be very impactful and often helps employees identify how processes can be improved.   

  • Review how the company’s whistleblower process is working. The SEC continues to have success with its whistleblower bounty program, but data shows that most people that report to the SEC first report internally and usually multiple times. It is important for a company to be able to take charge of an issue and, if needed, earn cooperation credit by self-reporting instead of having stakeholders run to the SEC, CFTC, or DOJ. Often, through the right communication and training, companies ensure that those who report internally feel like their reports are being taking seriously, which lessens the chance they run to the government. Boards/Audit Committees should also ask for details about internal reports and the process by which they were handled. For instance, a spike in hotline reports could signal management issues within a region or division.

  • Get outside experts involved for ESG, crypto, and other key areas. If you are in an industry particularly impacted by ESG or are involved in cytpocurrency or SPACs, get outside experts involved. In particular, companies should take a fresh look at their ESG-related disclosures and compliance policies. And, those in crypto or operating through SPACs need to review their business model to ensure compliance with any applicable securities laws or other regulatory bodies, like the CFTC. The SEC wants to regulate in these areas and will be looking for cases in which to try to change behavior through enforcement actions either alone or in coordination with other agencies.

 

https://www.natlawreview.com/article/sec-joins-doj-s-war-corporate-offenders

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I'm extremely excited to see where we are right now. 

I truly believe according to the year long Algo starting last December we are getting into rip mode. 

Volume is picking up. Getting back over 100 million this week will be a flare we are about to jack it up. Knock knock knocking on heaven's door! Hey hey hey!!!

BULLISH!!!

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