Accidentally Released -- and Incredibly Embarrassing -- Documents Show How Goldman et al Engaged in 'Naked Short Selling'
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| [u/bobfern37](https://www.reddit.com/user/bobfern37/)| [Reddit](https://www.reddit.com/r/GME/comments/mexlpn/accidentally_released_and_incredibly_embarrassing/?utm_medium=android_app&utm_source=share) | 

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[DD](https://www.reddit.com/r/GME/search?q=flair_name%3A%22DD%22&restrict_sr=1)

[The gem of all gem articles.](https://www.google.com/amp/s/www.rollingstone.com/politics/politics-news/accidentally-released-and-incredibly-embarrassing-documents-show-how-goldman-et-al-engaged-in-naked-short-selling-244035/amp/)

Some of the best Goldman Sachs quotes:

1.  "Fuck the compliance area -- procedures, schmecedures," chirps Peter Melz, former president of Merrill Lynch Professional Clearing Corp. (a.k.a. Merrill Pro), when a subordinate worries about the company failing to comply with the rules governing short sales.

2.  former Merrill Pro president, Thomas Tranfaglia, saying in a 2005 email: "We are NOT borrowing negatives... I have made that clear from the beginning. Why would we want to borrow them? We want to fail them."

3.  Goldman executive admits in a 2006 email that just a little bit too much trading in Overstock was going on: "Two months ago 107% of the floating was short!"

4.  "We have to be careful not to link locates to fails [because] we have told the regulators we can't,"

5.  in one email, GSEC tells a client, Wolverine Trading, "We will let you fail."

6.  More damning is an email from a Goldman, Sachs hedge fund client, who remarked that when wanting to "short an impossible name and fully expecting not to receive it" he would then be "shocked to learn that [Goldman's representative] could get it for us."

[Here's my post regarding naked shorting](https://www.reddit.com/r/GME/comments/merag9/and_you_thought_the_sec_has_been_silent/gsjcf6n/?utm_source=share&utm_medium=ios_app&utm_name=iossmf&context=3) and the SEC's COMPLETE negligence.

Edit: apparently there isn't enough DD here to use the flair. I commented on another post with this, but the SEC was warned in 2008 that naked shorting would bite them in the ass

Lehman Brothers Chairman and CEO Dick Fuld told Congress that naked short selling played a major role in undermining his firm and precipitating the 2008 meltdown.

I'm going down a Citadel rabbit hole and am firmly convinced the whole system is fucked. Even ole Dick Fuld at Lehman warned the fucking SEC.

"The second issue I want to discuss is naked short selling, which I believe contributed to both the collapse of Bear Stearns and Lehman Brothers. Short selling by itself can be employed as a legitimate hedge against risk. Naked short selling, on the other hand, is an invitation to market manipulation. Naked short selling is the practice of selling shares short without first borrowing or arranging to borrow those shares in time to make delivery to the buyer within the settlement period -- in essence, selling something you do not own and might not ultimately deliver to the buyer.

Naked short selling, followed by false rumors, dealt a critical, if not fatal blow to Bear Stearns. Many knowledgeable participants in our financial markets are convinced that naked short sellers spread rumors and false information regarding the liquidity of Bear Stearns, and simultaneously pulled business or encouraged others to pull business from Bear Stearns, creating an atmosphere of fear which then led to a selffulfilling prophecy of a run on the bank. The naked shorts and rumor mongers succeeded in bringing down Bear Stearns. And I believe that unsubstantiated rumors in the marketplace caused significant harm to Lehman Brothers. In our case, false rumors were so rampant for so long that major institutions issued public statements denying the rumors.

Following the Bear Stearns run on the bank, we and many others called on regulators to immediately clamp down on naked short selling. The SEC issued a temporary order that went into effect on July 21 prohibiting "naked" short selling of certain financial firms, including Lehman, Merrill Lynch, Fannie Mae and Freddie Mac. This measure stabilized the share prices of Lehman Brothers and the other firms. However, this restriction was temporary, and on August 13 it expired after 17 trading days. History has already shown how wrong and ill-advised it is to allow naked short selling.

Many of the firms that have recently collapsed or have been forced into emergency mergers, takeovers, or government bailouts -- Bear Stearns, Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, AIG -- did so during the gaps of time in which there was no meaningful regulation of naked short selling. On September 15, when the market opened after the collapse of Lehman, naked shorts appeared to turn their attention to Morgan Stanley and Goldman Sachs. In the three days between the announcement of Lehman Brothers' bankruptcy and the SEC instituting an emergency ban on short selling, Goldman Sachs' and Morgan Stanley's share prices fell 30% and 39% respectively. None of this was a coincidence.

After seeing this stock price reaction in the week following Lehman Brothers' bankruptcy, the SEC, like the Federal Reserve, took immediate action to stabilize the system. On September 18, following the decision of the Financial Services Authority in the United Kingdom a day earlier, the SEC instituted an emergency ban and other restrictions on short selling financial institutions. In taking these steps, Chairman Cox explained: "Given the importance of confidence in our financial markets as a whole, we have become concerned about the sudden and unexplained declines in the prices of securities. Such price declines can give rise to questions about the underlying financial condition of an issuer, which in turn can create a crisis of confidence without a fundamental underlying basis. The crisis of confidence can impair the liquidity and ultimate viability of an issuer, with potentially broad market consequences." These new restrictions are set to expire no later than October 17. Permanent regulation of naked short selling is needed to prevent a similar demise for the firms that survived with the government's help."

Edit: a fellow ape found [this article](https://www.rollingstone.com/feature/wall-streets-naked-swindle-194908/) that corroborates exactly what Tricky Dick said in his testimony

Edit 2: another ape provided [this interesting documentary](https://youtu.be/Kpyhnmd-ZbU) going deep into the same topic

Edit 3: [This article from 2006](https://www.forbes.com/2006/08/25/naked-shorts-global-links-cx_lm_0825naked.html?sh=4aabd4078400) shows that the SEC new at least a YEAR before the crash that something wasn't right.

Suspicious trading last year in shares of Global Links, a small Nevada real estate holding company, was far more intense than previously thought.

New data from the U.S. Securities and Exchange Commission reveals trade settlement fails in early February 2005 that were 27 times greater than the total number of shares Global Links had issued at the time. The data show suspicious trading in Global Links far earlier and to a far larger degree than any previously released by the SEC.

An SEC spokesman had no comment on the data, which showed Global Links trade fails totaling 27.3 million shares on Feb. 4, coinciding with the first day that Feb. 1 trades should have settled. They were 23 million the next day and tapered off from there.

Questionable trading activity was not lost on Global Links Chief Executive Frank Dobrucki, who told shareholders in March 2005 that he believed there was fraud occurring. Without the reverse split and the events that came after it, "we may never have discovered how blatantly our stock was being abused."

Current SEC Chairman Christopher Cox acknowledged this practice in July when he put out for comment proposed amendments to Reg SHO. Large and persistent failures can be "indicative of manipulative short-selling," the SEC said. Well more than 120 public comment letters are now posted on the SEC Web site.

Stockholders reported they could not obtain delivery of shares they had bought. One such individual, Robert Simpson, a Michigan businessman who had inadvertently purchased 100% of the common stock outstanding in February, has yet to receive any of the shares he purchased.

The SEC is either asleep at the wheel or in on the fraud. The American people pay for the SEC, who then bend the knee to the suits on Wall Street. The regulators need jail time too.

Edit 4: Here's a [hilarious article in DEFENSE](https://www.google.com/amp/s/www.businessinsider.com/john-carney-why-matt-taibbi-is-dead-wrong-on-naked-short-selling-2009-9%3famp) of naked shorting. Dumbest shit I've ever read

Edit 5: NOTE: this article is old. In my opinion, the attitudes expressed by Wall Street players is relevant to the current GME (and others) situation. Please do not think that these quotes were from anytime in the past decade.

Edit 6: fellow ape posted the [original GS court docs.](http://media.economist.com/sites/default/files/pdfs/Plaintiffs%20Opp%20to%20MSJ.pdf) I HIGHLY recommend reading pages 15 through 19

Edit 7: [Another ape sent this SEC filing and provided a great description.](https://www.sec.gov/litigation/admin/2012/34-66283.pdf)

"Holy hell. This report references a different report, the January 31, 2012 report here, that explains how what all the fucking deep ITM puts are for. It's how you recycle FTDs.

Goddamnit. I knew that deep ITM calls generate synthetics, but deep ITM puts are how you clear FTDs for yourself. You can't clear your own FTD with synthetic shares generated via the call---"
