Goldman Sachs accidentally discloses own "naked shorts"s

[Winehole23]

Last week, in response to an Overstock.com motion to unseal certain documents, the banks’ lawyers, apparently accidentally, filed an unredacted version of Overstock’s motion as an exhibit in their declaration of opposition to that motion. In doing so, they inadvertently entered into the public record a sort of greatest-hits selection of the very material they’ve been fighting for years to keep sealed.


There are even more troubling passages, some of which should raise a few eyebrows, in light of former Goldman executive Greg Smith's recent public resignation (http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?pagewanted=all), in which he complained that the firm routinely screwed its own clients and denigrated them (by calling them "Muppets," among other things).



Here, the plaintiff’s motion refers to an “exhibit 96,” which refers to “an email from [Goldman executive] John Masterson that sends nonpublic data concerning customer short positions in Overstock and four other hard-to-borrow stocks to Maverick Capital, a large hedge fund that sells stocks short.”


Was Goldman really disclosing “nonpublic data concerning customer short positions” to its big hedge fund clients? That would be something its smaller, “Muppet” customers would probably want to hear about.
When I contacted Goldman and asked if it was true that Masterson had shared nonpublic customer information with a big hedge fund client, their spokesperson Michael Duvally offered this explanation:

Among other services it provides, Securities Lending at Goldman provides market color information to clients regarding various activity in the securities lending marketplace on a security specific or sector specific basis. In accordance with the group's guidelines concerning the provision of market color, Mr. Masterson provided a client with certain aggregate information regarding short balances in certain securities. The information did not contain reference to any particular clients' short positions.
You can draw your own conclusions from that answer, but it's safe to say we'd like to hear more about these practices.
http://www.rollingstone.com/politics/blogs/taibblog/accidentally-released-and-incredibly-embarrassing-documents-show-how-goldman-et-al-engaged-in-naked-short-selling-20120515

[CosmicCowboy]

Naked shorts should be bigtime illegal. There is absolutely no justification for them other than to gamble on the market.

[boutons_deux]

This should encourage everybody to support the Repug/VRWC/Peterson objective to kill SS and had the $Ts all to Wall St.

[RandomGuy]

Fascinating. Have to read up on it.

[Goran Dragic]

Naked shorts should be bigtime illegal. There is absolutely no justification for them other than to gamble on the market.
Rofl I never thought I'd see the day where CosmicCowboy has a more leftwing stance on something than I did. IMO, if you can find someone stupid enough to be on the other side of it, you should be able to bet against the market, as long as it doesn't involve the fed covering someone's losses.

[RandomGuy]

Rofl I never thought I'd see the day where CosmicCowboy has a more leftwing stance on something than I did. IMO, if you can find someone stupid enough to be on the other side of it, you should be able to bet against the market, as long as it doesn't involve the fed covering someone's losses.

I dunno, information asymetry tends to impose a moral duty not to take advantage of the situation, IMO.

Yet another reason to limit financial sector "innovation". Their "innovation" tends to lead to Bernie Madoffs.

[DUNCANownsKOBE]

I dunno, information asymetry tends to impose a moral duty not to take advantage of the situation, IMO.

Yet another reason to limit financial sector "innovation". Their "innovation" tends to lead to Bernie Madoffs.
rofl using Bernie Madoff as an example. Bernie Madoff has nothing to do with "financial sector innovation." Bernie Madoff ran a ponzi scheme, something that's been illegal for over a century.

There should be better regulation about what Goldman Sachs has to disclose (like the naked shorts it has against certain securities), but the act itself should be legal. One thing is for sure is that expecting "moral duties" will get you nowhere. People, in particular people in finance, are greedy and won't be bending over backwards to fullfill an ethical duty anytime soon.

[Winehole23]

http://www.usatoday.com/money/companies/regulation/story/2012-08-10/justice-department-goldman-sachs/56924170/1

[ElNono]

http://www.usatoday.com/money/companies/regulation/story/2012-08-10/justice-department-goldman-sachs/56924170/1

Meanwhile, the little fish (http://dealbook.nytimes.com/2012/08/09/ex-goldman-programmer-is-arrested-again/)....

[Winehole23]

The Financial Industry Regulatory Authority (Finra), a private self-regulatory organization, charged KCG (http://disciplinaryactions.finra.org/Search/ViewDocument/66900) on October 31 with thousands of violations over three years of Regulation SHO (https://www.sec.gov/investor/pubs/regsho.htm), which according to the Securities and Exchange Commission (SEC) “was established to address concerns regarding persistent failures to deliver and potentially abusive ‘naked’ short selling.

Finra further found that KCG “failed to establish and maintain a supervisory system” to comply with Regulation SHO going back to 2012, when the company was re-constituted through a merger (http://dealbook.nytimes.com/2012/12/19/knight-capital-and-getco-to-merge/).

“So Finra is admitting that KCG never had a system in place,” DiIorio said in an emailed statement.

[Winehole23]

But despite the routine of repeated misconduct, KCG accepted a settlement on November 22 for a mere $105,000 and some new monitoring. KCG did not even have to admit wrongdoing.https://theintercept.com/2016/12/15/whistleblower-vindicated-massive-trading-firm-knight-capital-charged-with-abusing-naked-shorts/

[Winehole23]

Finra staff reviewed four separate time periods from 2012 to 2015, spot-checking for errors. Most of the problems were found between June and July 2013, when Finra found 3,477 separate instances of KCG engaging in “a short sale for its own account without first borrowing the security,” a description of naked short selling, “while it had a fail-to-deliver position… that had not been closed out.” According to a footnote, these naked shorts were done “to facilitate a customer(s) long sale order on a riskless principal basis.”


This matches DiIorio’s explanations. “This is how KCG generates trading profits in penny stocks,” he said. “There is no such thing as riskless principal basis unless you’re doing something illegal.”


The customers facilitating KCG’s short sales by buying the stock long, DiIorio claimed, are typically high net-worth individuals operating through Swiss banks, using the trading activity as part of a scheme to launder money and evade taxes.

[boutons_deux]

"Financial Industry Regulatory Authority (Finra), a private self-regulatory organization"

:lol self-regulation always works! :lol

[Winehole23]

former Fed Regulator taped Goldman insiders:




Segarra says she took meticulous notes and recorded 46 hours of conversations with colleagues and bankers during her seven months at the New York Fed. Neither the bank nor the regulator has disputed that the tapes are real.

The central battle in the book pits Segarra against Goldman Sachs and allegedly sleepy regulators over energy giant Kinder Morgan’s 2012 deal to acquire rival El Paso Corp. for $21.1 billion. Not only did Goldman advise both sides of the deal, its lead banker advising El Paso, Steve Daniel, owned $340,000 in Kinder Morgan stock.

None of that mattered to Solomon, who was Goldman’s co-head of investment banking at the time, according to Segarra.

“A conflict is a perception, OK, of something that could affect the advice you’re giving, the judgment, et cetera,” Solomon said during a meeting with the New York Fed and other regulators that Segarra says she recorded.

“Our job … is to discuss those things and to work collectively with [clients] to decide whether or not those perceptions inhibit us,” Solomon added.

That was after Delaware Judge Leo Strine had called Goldman’s double-dealing “disturbing” and “tainted by disloyalty” as he reluctantly OK’d the deal — and despite El Paso shareholders filing a class-action suit against it, alleging the tie-up was designed to benefit Goldman Sachs.

Solomon’s approach backfired: Goldman lost out on $20 million it would have collected in fees from El Paso after the shareholders won a $110 million judgment.
https://nypost.com/2018/10/11/whistleblowers-new-book-shares-secret-tapes-of-new-goldman-ceo/

[Winehole23]

In 2015, Goldman paid $50 million to settle accusations that former banker Rohit Bansal wined and dined a New York Fed analyst, Jason Gross, at Peter Luger Steak House in Brooklyn, and got secret examination documents in return. Bansal and Gross both got probation and paid fines.