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SEC Demands Citadel Employee Cell Phone Records

The Securities and Exchange Commission has ordered Citadel and several other financial firms to produce employee cell phone records.

From a new report in Bloomberg:


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The Securities and Exchange Commission recently asked Steve Cohen’s Point72 Asset Management, Ken Griffin’s Citadel and several other firms to search through the devices for evidence of business dealings on unapproved channels, according to people familiar with the matter who asked not to be identified discussing the private requests. The SEC is also probing the practices of brokerages, money managers and private equity firms. 

Representatives for Point72 and Citadel declined to comment. Neither firm has been accused of wrongdoing.

By law, investment firms must retain all business communications. But sometimes, Wall Street traders would rather no one hears their conversation.

So, many turn to encrypted messaging apps like WhatsApp and Signal. Using their personal phones, traders can evade the scrutiny of their employer, as well as regulators.

What might be in those WhatsApp messages? Time will tell, but violations could include front-running clients’ trades or naked short selling.

The Financial Industry Regulatory Authority (Finra) has fined Citadel for front running clients in the past. Citadel has also received subpoenas in a probe of short sellers.

The SEC has already levied over $1 billion in fines on banks for failing to maintain records. But unless those fines get a lot bigger, nothing will change.

Citadel made $16 billion in profit last year. Any fine in the millions will be nothing more than a speeding ticket.

I urge the SEC to find out what is being hidden in these messages. And when they do, the penalty should sting, big time.

What do you think the SEC will find? Leave a comment and let me know!

Have a great weekend everyone!

More on markets:

Citadel’s Illegal Trades — The Tip of the Iceberg?

Major Hedge Fund Down 54% — Survival in Doubt

SEC Refuses to Address Massive Fraud in Markets

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Photo: Citadel CEO Ken Griffin

SEC Refuses to Address Massive Fraud in Markets

The Securities and Exchange Commission (SEC) just released its top enforcement priorities for the year. Rather than dig into systemic fraud in our markets, they’ll be regulating….confetti?


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According to a report out this morning on Reuters, the SEC will be focusing on:

”…behavioral prompts, differential marketing, game-like features…and other design elements or features designed to engage with retail investors on digital platforms.”

In plain English, they’re talking about the confetti some stock trading apps display when you make a trade. But that’s not all.

The SEC will also be regulating how funds can use certain words:

…funds with keywords such as “green,” “sustainable,” “ethical,” or “socially responsible” in their names will have to reflect an emphasis on these areas through their investing choices.

As if investors couldn’t simply look at the holdings and see if Exxon Mobil is there or not!

Combatting widespread financial fraud is nowhere in the SEC’s agenda.

Illegal naked short selling pervades our markets. Millions upon millions of trades fail to clear each day, especially in heavily shorted stocks like AMC Entertainment Holdings and GameStop.

But the SEC won’t be looking into that.

Despite $8 billion in losses on FTX, cryptocurrency regulation won’t be a focus for the SEC this year either. Why bother with that when the SEC could be requiring “a summary of registrants’ human capital resources,” whatever that is?

It’s no wonder author Jesse Eisinger called the feds “the chickensh*t club.”

The SEC is a toothless regulator. It busies itself with make-work, avoiding the real issues plaguing our markets.

Gary Gensler and the SEC need to start going after the real criminals.

What do you think of SEC enforcement? Leave a comment at the bottom and let me know!

More on markets:

Major Hedge Fund Down 54% — Survival in Doubt

Short Sellers Down $81 Billion in 2023

Citadel’s Illegal Trades — The Tip of the Iceberg?

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Photo: “CMI 101: Demystifying Derivatives with CFTC Chairman Gary Gensler” by Third Way is licensed under CC BY-NC-ND 2.0.

Short Sellers Down $81 Billion in 2023

Well, that was fast! With 2023 less than a month old, short sellers have already lost $81 billion.


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Many are running for the exits. From a new report from The Wall Street Journal:

Short sellers who have incurred hefty losses are actively trimming their positions, said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners. Investors betting against stocks have racked up $81 billion of mark-to-market losses on short positions this month through Thursday after accumulating $300 billion in gains in 2022, Mr. Dusaniwsky said.

Markets have rallied this year, with meme stocks leading the way. As short sellers race to close their positions, their losses are likely to grow:

Signs that inflation is cooling have stoked bets among investors that the Federal Reserve will pivot from raising interest rates to cutting them as soon as the second half of the year. That has helped risky assets across the board rise. Especially risky corners of the market, such as stocks with high short interest, have rallied even more. Analysts say that has likely forced short sellers to close out bearish positions to cut their losses—resulting in what is known on Wall Street as a short squeeze. 

Some of the most heavily shorted stocks have been among the best performers so far this year.

Meme stocks like AMC Entertainment Holdings, GameStop, and Bed Bath & Beyond are all up over 20%. The broader S&P 500 is up 6% for the year so far.

In addition to huge market losses, short sellers are also paying stratospheric interest rates to borrow shares. Rates to borrow AMC shares have ranged between 20% and over 100% per year in recent weeks.

It’s no wonder that some short sellers may be resorting to illegal tactics. There is evidence of widespread naked short selling in some heavily shorted stocks.

Common and preferred shares of AMC have seen millions of fails to deliver. These failed trades often occur when a short seller sells stock without borrowing it.

This is called naked short selling and it’s illegal under federal law. It’s also a powerful way to push down a stock’s price without paying any interest.

The coming months could push many short sellers to the brink.

A race to close out positions may cause heavily shorted stocks to rally further. Meanwhile, a more dovish Fed could cause a general market rally, adding to their losses.

Short sellers should avoid meme stocks like the plague. A heavily shorted stock with a passionate fan base is simply too hot to handle.

What do you think is next for short sellers? Leave a comment at the bottom and let me know!

More on markets:

Major Hedge Fund Down 54% — Survival in Doubt

Citadel’s Illegal Trades — The Tip of the Iceberg?

As Fed Rates Peak, Are Markets Ready to Take Off?

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Photo: AMC CEO Adam Aron

Citadel’s Illegal Trades — The Tip of the Iceberg?

South Korea has fined Citadel Securities for illegal stock trades made with high frequency algorithms. From a report out last night in Reuters:


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South Korea’s financial regulator has imposed a fine of 11.88 billion won ($9.66 million) on U.S.-based Citadel Securities, saying it disturbed the local stock market with high-frequency algorithm trading.

The Financial Services Commission (FSC) said in a statement released on Thursday the firm had distorted stock prices with artificial factors, such as orders on the condition of “immediate or cancel” and by filling gaps in bid prices.

These illegal trades were no isolated incident. Regulators found improper trades in thousands of stocks over a period of nearly a year:

The firm carried out such trading on an average of 1,422 stocks per day from Oct. 2017 to May 2018, totalling more than 500 billion won worth of trades, according to the statement.

Citadel’s illegal trades stand out as some of the most egregious ever in South Korea:

The Commission said it was the first time it had imposed fines on such high-frequency trading on the South Korean stock market, which has a high proportion of retail investors and little competition among algorithmic traders.


Citadel used strategies such as flash orders to gain an illegal advantage over other traders. This practice involves offering to buy or sell and then retracting the order in a fraction of a second.

Flash orders let you see the prices at which other traders are willing to buy or sell. This gives you an illegal edge over your competition.

In Korea, Citadel used these strategies to take advantage of mom and pop retail traders, which I find particularly heinous.

Citadel’s algos don’t stop in Korea.

The firm was recently fined by the US Financial Industry Regulatory Authority (FINRA) for frontrunning its customers. By placing trades ahead of customers, Citadel made money for its own account.

Breaking the law appears to be quite lucrative for Citadel.

Citadel Securities posted record revenues of $7.5 billion last year. Citadel’s hedge fund made even more, approximately $28 billion.

I think Citadel is using these illegal flash orders all over the world. They may also be using other illicit tactics we don’t know about yet.

After all, if you go to the trouble to create a program that can make you money, why not use it in as many places as possible?

The reality is that these speeding tickets will never stop Citadel. Fines in the millions are a cost of doing business for a multi-billion dollar operation.

Securities regulators worldwide should find out what exactly Citadel is doing in their markets. If they find more wrongdoing, they should simply ban the firm from trading for a period of years.

Nothing but a severe penalty will stop them.

Who says crime doesn’t pay?

What do you think is the future for Citadel? Leave a comment at the bottom and let me know!

More on markets:

Major Hedge Fund Down 54% — Survival in Doubt

Tiger Global Losing $185 Million a Day

As Fed Rates Peak, Are Markets Ready to Take Off?

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Photo: Citadel CEO Ken Griffin

Latest Data: APE Fails to Deliver Hit 7.1 Million

Fails to deliver in shares of AMC Entertainment Holdings Preferred Equity (APE) reached staggering levels in December. Failed trades hit over 7.1 million shares in the latest SEC report before falling to end the period.

AMC issued these preferred shares in August as a way to raise capital. Since then, they’ve fallen steadily, losing over 75% of their value.


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Failed trades in APE shares peaked on December 2nd at 7,134,531. AMC shares also showed elevated fails to deliver, at nearly 300,000 shares.

Huge numbers of failed trades in APE preceded a substantial drop in the stock price. The shares lost 23% of their value in the next week alone.

A persistent pattern of huge fails to deliver can be a sign of naked short selling. This illegal practice involves selling short shares you never borrowed.

Naked shorting is a powerful way to crush a stock. If you don’t have to find any shares to borrow or pay interest, you can short as many as you like!

We’ve also seen persistent, massive fails to deliver in AMC’s common shares. Like APE, that has been coupled with a major fall in price.

So what’s going on?

My bet is that hedge funds are breaking the law and naked shorting AMC and APE shares. Why else would these huge numbers of failed trades persist for so long?

To get a sense of how out of line these fails to deliver are with other stocks, let’s do a comparison. Here are the fails to deliver on December 2nd for some of the largest stocks in the market:

Amazon: 40,406

Apple: 319

Berkshire Hathaway (Class B shares): 36

Google: 151,519

Microsoft: 9,233

These stocks are hundreds of times the size of AMC. And yet, AMC sees more failed trades than all of them.

Combined.

The SEC must investigate the chaos in AMC and APE shares. It’s the only way we can have a fair, efficient market for everyone.

What do you think of the failed trades in AMC and APE? Leave a comment at the bottom and let me know.

There will be no blog on Monday for New Year’s. Thanks for a great 2022 and see you on Tuesday!

More on markets:

Is SBF Laundering Money As We Speak?

New Report: AMC Fails to Deliver Hit 4.3 Million

Tiger Global Losing $185 Million a Day

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Photo: AMC CEO Adam Aron

New Report: AMC Fails to Deliver Hit 4.3 Million

Fails to deliver in shares of AMC Entertainment Holdings reached extraordinary levels in November. 4.3 million shares have failed to clear by November 14th, the latest data available.


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This new report, out today from the SEC, shows the highest levels of fails to deliver in months. This is particularly striking given the much lower fails to deliver in the largest stocks.

Let’s see how many fails to deliver some of the largest stocks in the market had on November 14th:

Amazon: 253

Apple: 0

Google: 0

Microsoft: 11,553

These companies are hundreds of times larger than AMC. But somehow, a little theater chain dwarfs them all in failed stock trades.

Fails to deliver can happen for benign reasons. But a long and persistent pattern of fails to deliver, as in AMC stock, can point to something more nefarious.

Huge numbers of failed trades can indicate naked short selling. This is the illegal practice of selling short shares you never borrowed.

It’s a potent way to crush a stock’s price. After all, if you don’t have to borrow a stock, you can sell short all you want!

Increasing failed trades may be related to higher borrowing costs for AMC shares. With fees going from 20% to up to 100% a year, borrowing shares is more expensive than ever.

It’s a lot cheaper to naked short sell. Unfortunately, it’s also against the law.

I urge the SEC to investigate the long term pattern of chaos in AMC shares. Only a full investigation can restore confidence in markets.

What do you think of this huge fails to deliver number? Leave a comment at the bottom and let me know!

Today is the blog’s second birthday! Thank you guys for a great two years! 🙏

There’s a lot more to come!

More on markets:

Tiger Global Losing $185 Million a Day

Hedge Funds Lose Billions as FTX Implodes

Is SBF Headed to Prison?

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Latest Report: AMC Fails to Deliver Hit Over 2 Million

Fails to deliver in shares of AMC Entertainment Holdings have hit over 2 million shares, according to a new SEC report released this week.


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Failed trades peaked at 2,161,808 shares on September 28th. Fails to deliver remained elevated through the end of September, the last day covered in the report.

AMC’s new preferred shares, trading under the symbol APE, also saw large numbers of failed trades. They peaked on the same day, at 466,507 shares.

I find it suspicious that fails to deliver in both shares would peak at the exact same time. My hunch is that hedge funds launch coordinated attacks on both share classes at once.

One powerful weapon in their arsenal is naked short selling. This involves selling short shares you never borrowed.

Naked shorting is a powerful way to push down a stock’s price. If you never have to find shares to borrow or pay interest, you can short as many as you want!

Naked short sales often leave a trail of failed trades. You can’t settle a trade when the shares never existed.

Naked short selling is illegal in most circumstances. But why let that trouble you?

Another key piece of evidence is how out of line AMC’s fails to deliver are compared to much larger stocks. Here’s a snapshot from September 28th:

Alphabet (Google): 92

Amazon: 21,012

Apple: 11,083

Microsoft: 60,869

AMC: 2,161,808

APE: 466,507

These tech giants are hundreds of times the size of AMC. So why does AMC have dramatically more trades failing to clear?

Perhaps the tech giants are too big for hedge funds to attack.

Our markets rely on the confidence of investors. But it’s hard to maintain that confidence when stocks see huge numbers of failed trades and no one investigates.

What do you think of the chaotic market in AMC shares? Leave a comment at the bottom and let me know!

More on markets:

New Report: Millions of Fails to Deliver in AMC and APE Shares

Tiger Global Down 52% — Losses Over $18 Billion

Hedge Fund Manager’s Arrest Shows How Market Manipulation Works

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New Report: Millions of Fails to Deliver in AMC and APE Shares

Fails to deliver in shares of AMC Entertainment Holdings reached the millions in the first half of September. The chaos hit both AMC and AMC Preferred Equity (APE) shares, according to a new report out today from the SEC.


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APE fails to deliver peaked at 2.4 million shares on September 1st. AMC fails to deliver peaked a week later on September 8th, at 2.2 million shares.

AMC shares have had large and persistent fails to deliver for over a year. It’s telling that as soon as APE shares were issued, huge fails to deliver appeared there as well.

Meanwhile, much larger companies continue to have almost no trades failing. Let’s take a look at fails to deliver in a few major stocks on Sept 1st:

Amazon: 0

Apple: 5,679

Microsoft: 0

Tesla: 14,727

APE: 2,366,422

And again a week later:

Amazon: 17,603

Apple: 523,020

Microsoft: 179

Tesla: 10,561

AMC: 2,164,802

Fails to deliver in AMC and APE are dramatically larger than in much bigger companies. Why are these shares in constant chaos while other companies are unaffected?

I suspect it’s because of naked short selling by hedge funds. This illegal practice involves selling short shares you never borrowed.

It’s a powerful weapon to crush a stock. If you never have to find shares to borrow, you can sell short any amount!

This can reach absurd levels. In August, we saw fails to deliver in APE shares exceed the entire daily trading volume.

The SEC must investigate what’s going on in AMC and APE shares. Until they do, it’s hard to believe the prices we see are real.

What do you think of the huge number of failed trades in these shares? Leave a comment at the bottom and let me know!

Have a wonderful weekend everyone! 👋

More on markets:

Over 43 Million APE Shares Fail to Deliver — Market in Chaos

Hedge Fund Manager’s Arrest Shows How Market Manipulation Works

Morgan Stanley Investigation Spreads to Multiple Countries

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Over 43 Million APE Shares Fail to Deliver — Market in Chaos

The market in AMC Entertainment Holdings Preferred Equity (APE) shares is a mess. Fails to deliver (FTDs) peaked at over 43 million shares last month, according to a report just out from the SEC.


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These new shares were issued last month by AMC and began trading on August 22. FTDs peaked at 43,438,257 shares two days later.

This represents over 8% of all shares outstanding. And it all happened in 3 days!

FTDs like this is beyond a mix-up. It’s a total market meltdown.

FTDs remained elevated through the end of the August reporting period. They settled at 5,635,854 on August 31, the last data available.

Let’s compare the FTDs on August 24th in APE shares with those of some of the biggest stocks in the market:

Amazon: 0

Apple: 395,929

Google: 113

Microsoft: 0

Tesla: 530

APE: 43,438,257

APE shares have dramatically more FTD’s than other, much larger stocks.

FTDs can sometimes happen for benign reasons, like clerical errors. But when there’s a sustained pattern of massive trade failures, it often indicates naked short selling.

This generally illegal practice involves selling short shares without borrowing them first. It’s a powerful way to push down a stock’s price.

If you don’t have to find shares to borrow or pay interest, you can sell short as many shares as you like! All that selling makes a stock’s price crater.

If naked short sellers are targeting APE, so far they seem to be winning. The stock is down 43% since its debut.

The NYSE and SEC must look into this market breakdown immediately. One in three trades failing is not a functional market.

What do you think of the huge FTD numbers in APE shares? Leave a comment at the bottom and let me know!

Have a great weekend everyone!

More on markets:

AMC Fails to Deliver Pass 700,000 in New Report

Hedge Fund Manager’s Arrest Shows How Market Manipulation Works

Morgan Stanley Investigation Spreads to Multiple Countries

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New Index Will Drive Demand for AMC, Other Meme Stocks

Note: This is not financial advice.

Robinhood Markets is launching a new index fund to track meme stocks. From a report that broke this morning in The Wall Street Journal:


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Robinhood Markets is launching an index to track the favorite stocks of its millions of predominantly young, social-media-savvy customers.

The brokerage firm’s new “Robinhood Investor Index” will track the performance of the 100 investments most popular among its user base. Initially, the top five stocks in the index will be Tesla , Apple, Amazon.com, Ford Motor and meme-stock favorite AMC Entertainment Holdings. Robinhood said it would update the composition of the index monthly, offering a view into its customers’ changing tastes.

In an unusual approach to constructing an index, Robinhood said it would weight stocks in the index by the “conviction” customers have in them, defined as the percentage of assets in a customer’s portfolio devoted to a particular stock.

The new index will increase demand for meme stocks, especially those weighted heavily like AMC and Tesla.

When a stock is included in an index like the S&P 500 for the first time, the price generally jumps. This is because so many index funds track the S&P 500.

When a stock is added to it, those funds must buy the stock. Similarly, when investors buy shares of the new Robinhood index, Robinhood must buy stocks like Tesla, AMC, etc.

This increases demand for those stocks.

Indeed, a McKinsey study found that stocks added to the S&P 500 jumped a median of 5%. But the increase was short-lived, disappearing in just 20 days on average.

The effect of inclusion in the Robinhood index is likely to be more modest, given that $5.4 trillion tracks the S&P and the Robinhood index is just getting off the ground. Still, I expect a modest tailwind for meme stocks from this change.

The Robinhood index is an interesting approach. It allows investors to profit from the “wisdom of the crowd,” following investors who have strong conviction about particular stocks.

If an investor is confident enough to put their entire portfolio into a single stock, maybe they know something I don’t.

I’ll be curious to see how the Robinhood index does against other index funds. And you can bet every broker is rushing to create a meme index as we speak.

What do you think of Robinhood’s new meme stock index fund? Leave a comment at the bottom and let me know!

Have a great weekend everybody! 👋

More on markets:

AMC Fails to Deliver Pass 700,000 in New Report

Morgan Stanley Investigation Spreads to Multiple Countries

Hedge Fund Manager’s Arrest Shows How Market Manipulation Works

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More on Fundrise in this post.

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