When Fadein recently communicated with his Vanguard brokerage firm’s back office they complimented how knowledgeable the mining play folks are on NSS issues and they promised to follow closely the upcoming dividend distribution process. I suggest we further lever this superior knowledge over our enemies by collectively moving on to the next level of understanding by studying the following:
A quickie review of Medinah’s restricted dividend distribution process:
After the Ciclon transaction Medinah has about 730 million shares outstanding (o/s). About 650 million of these are held in “street name” at the DTCC and about 80 million are held by shareholders at home in a “registered” format. All 730 million Medinah shares “outstanding” have a “registered” owner. The “registered” owner of the 650 million “street name” shares is “CEDE and Co.” which is the nominee of the DTC which acts as the surrogate “custodian” of those shares. All “registered” owners got notice of the shareholder meeting at the same time.
The 650 million shares held at the DTCC are legitimate shares. They have paper-certificated representations held in the DTC vault system. These 650 million shares are held in the accounts of the various clearing firms (CFs) that compose and are “participants” of the NSCC subdivision of the DTCC. Each CF has a “shares account”. If you add up the REAL shares held in these “share accounts” they will indeed total up to 650 million REAL shares. The NSCC “shares accounts” hold the shares FOR WHICH GOOD FORM DELIVERY DID OCCUR. Everything looks perfect from the INTENTIONALLY RESTRICTED view of the DTCC. The NSCC only wants to see the post-manipulation results after their abusive “participants” have done their thing.
The number of paper-certificated shares in the DTC subdivision’s vaults match exactly with the number of shares held in the NSCC subdivision’s “shares accounts”. All a company’s transfer agent is allowed to see in this case is that CEDE and Co. is the registered holder of 650 million Medinah shares and that “X” amount of shareholders of Medinah hold 80 million shares at home individually registered in their name. Part of the task list of a corporate transfer agent/registrar is to detect and address any “counterfeiting” issues whether electronic or paper and ink related. Our clearance and settlement system intentionally blindfolds the TAs and registrars of corporations and prohibits them from performing this critical duty.
Let’s say for educational purposes only that there are 65 clearing firms at the DTCC that each hold 10 million REAL Medinah shares in their NSCC “shares accounts”. On 4/3, the “dividend payment date”, our transfer agent will send a certificate for 65 million restricted Medinah shares to the DTCC. They will credit each of those 65 accounts with 1 million restricted shares because of their holding 10 million shares each and the dividend being on a 1-for-10 basis. From the “blindfolded” viewpoint of the transfer agent and the “intentionally restricted” viewpoint of the DTCC everything balances out perfectly.
Let’s say that each of those 65 clearing firms, however, are sending out monthly brokerage statements IMPLYING that they are “holding long” 30 million Medinah shares instead of just 10 million. The disparity between the 10 million real shares they hold in their “shares accounts” and what they IMPLY they are “holding long” in their clients’ brokerage accounts is 20 million shares for each of the 65 CFs. How can we explain the disparity? If Medinah were a fully marginable security on the NYSE ARCA or the NASDAQ OMX one might assume that each of the 65 clearing firms had 20 million “margin a/c” shares on loan to short sellers. That explanation doesn’t fly for a nonmarginable penny stock like Medinah, however, and clearing firms know this.
Clearing firms are very complex and the inner machinations are nearly impossible to trace. This is especially true in regards to the “ex-clearing” arrangements they enter into with co-conspiring clearing firms OUTSIDE OF THE DTCC’s NSCC subdivision. Picture a CF as the hub of a spoked wheel. The individual “spokes” are the various “correspondent/introducing” brokerage firms that utilize that particular CF/”hub” to clear its trades. There are over 1,000 of these clearing firms (spoked wheels) in the U.S. that are NSCC “participants”. The central “hub”/CF can MASK its own delivery failures or those of one of its “spoke’s” via “netting out” against another “spoke’s” long position. “Theoretically” clearing firms are not allowed to “hypothecate” a client’s shares in a Type 1 cash account without their permission. Well, “theoretically” MF Global was not supposed to steal their client’s segregated cash and use it to put out their own internal fires. A corrupt clearing firm can easily run up a naked short position equaling the long positions of its various “correspondent” brokerage firms i.e. the “spokes”. All it has to do is have a positive number of shares at all times in its “shares account” at the NSCC. Remember, all the NSCC sees is the “post netting results of delivery failures versus long positions”.
The ideal clearing firm to engage in abusive naked short selling thefts would be one of the discount brokers that charge $9 or $10 per trade. Investors see cheap commissions and buy through and hold their long positions at these firms never wondering if the cheap commissions represent “loss leaders” for other nefarious activities where the real money is made. In order to take part in these thefts a clearing firm needs to either have a market making arm or deal with a corrupt MM that has visibility of buy orders and access to the universally abused “bona fide MM exemption” from needing to execute “pre-borrows” before admittedly “naked” (no borrow) short sales. This is because the check metaphorically stapled to each buy order is the target of this crime spree. You need visibility of and access to the money you’re about to steal. Note that the individual “spokes”/”correspondent” brokerage firms may know nothing about the shenanigans going on in the back offices of the “hub”. The quid pro quo in these relationships between corrupt clearing firms and their “correspondent” brokerage firms is cheap clearing fees in exchange for access to their long positions. Technically, the CF and not the investor or his brokerage firm “owns” the shares that the investor paid for.
What are these various clearing firms/”spoked wheels” going to do when they note that only 1 million restricted dividend shares arrived from Medinah’s TA and they are lacking the 2 million owing to the purchasers of the 20 million “missing” shares? This 20 million share disparity was called to the attention of each of these 65 CFs during the dividend declaration announcements. The 2 million share disparity was again called to their attention the day the 1 million restricted dividend shares landed in their “shares accounts”. Did these various clearing firms pick up the phone and call the parties that owed them the delivery of the 20 million missing common shares? Probably not. Did they warn the parties owing the delivery of the 20 million shares that they’d have to buy them in before the 3/29 “Ex-dividend date”? Definitely not! Are they going to ILLEGALLY credit the brokerage accounts of the purchasers of the 20 million “missing” shares with 100% BOGUS restricted electronic book entries (technically referred to as “security entitlements&rdquo IMPLYING that the parties that were short matched the dividends owing as per the law? Probably. Will they aid and abet the converting of these BOGUS restricted electronic book entries into BOGUS readily sellable Medinah “security entitlements” when the 6 month restriction ends. Definitely! They have to in order to cover up their own fraudulent acts perpetrated earlier.
Here’s the issue: Many development stage issuers refused to go bankrupt after being attacked. It is extremely easy to issue a restricted 10% share dividend. If that’s all it took to get the shorts to cover then everybody would be periodically distributing these dividends to thwart the naked short sellers. EVEN THE RELATIVELY “CLEAN” CLEARING FIRMS HAVE TO BREAK THE LAW YET ONCE AGAIN DURING THESE SHARE DIVIDEND DISTRIBUTIONS. You just don’t mess with far more powerful DTCC fraternity brothers. The bad guys are the big guys. The little guys on Wall Street depend upon the big and bad guys for scraps from their table like cheap clearing fees. Everybody on Wall Street is inextricably tied together in a variety of complex relationships. Even the relatively “clean” clearing firms need to perpetrate these cover-up frauds to keep this “house of cards” standing tall.
On Wall Street all of the purchases of Medinah shares by all of the various “spokes”/”correspondent” brokerage firms become a “long position” for that clearing firm. Any clearing firm can easily run up a naked short position of 99.9% of that cumulative long position without any bells and whistles going off at the NSCC. All a corrupt clearing firm needs to do is maintain a slightly positive “shares a/c” balance at the NSCC. The huge “self-clearing” firms like NITE and E-Trade with tremendous numbers of “spokes” and unmatched visibility of buy orders through their market making arms are obviously in the best position to orchestrate these thefts. But it still takes co-conspiring smaller clearing firms to refuse to demand that those with short positions on their books on a dividend record date match that dividend as per the law.
If you’re trying to get an appreciation for what the NSCC is all about picture about 1,000 spoked wheels some many with hundreds of different spokes. If you factor in the speed in which trading is done on Wall Street especially with the advent of “high frequency traders” (“HFTs&rdquo you can imagine the cloud of dust that is created. What is noteworthy is that the NSCC doesn’t desire to know if “Buyer Bob” from Main Street got delivery of the Medinah shares he purchased. They don’t even want to know anything about Bob’s broker/dealer. At the NSCC everything is in reference to the clearing firm of Bob’s broker/dealer. THIS VIEW IS AFTER ALL OF THE ILLEGAL HUB AND SPOKE “NETTING OUT” OF DELIVERY FAILURES AND LONG POSITIONS HAVE OCCURRED! The typical “Buyer Bob” bought nonexistent shares and never got delivery of that which he paid for. This fact is masked by the fact the long positions of those seeking cheap commissions slightly exceed the shares being bought by the “Buyer Bobs” of the world getting defrauded.
IMPLYING that the parties that were short matched the dividends owing as per the law? Probably. Will they aid and abet the converting of these BOGUS restricted electronic book entries into BOGUS readily sellable Medinah “security entitlements” when the 6 month restriction ends. Definitely! They have to in order to cover up their own fraudulent acts perpetrated earlier. 
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