Tag: Naked Short Selling (Page 1 of 5)

Notorious Short Seller Bill Hwang Now Faces Painful Testimony

Notorious short seller Bill Hwang now faces a painful testimony by his head trader who states the hedge fund manager encouraged illegal trading.

Bill Hwang’s top trader at Archegos Capital Management gave damning testimony against the boss, telling a jury Hwang told him to do “the opposite” of what a “normal fund” would.

William Tomita took the stand Monday for what’s expected to be several days of testimony as the prosecution’s star witnesses in a criminal case against Hwang over the spectacular implosion of Archegos in 2021, reports Bloomberg.

He immediately admitted committing “financial crimes, namely market manipulation and lying to banks,” then implicated Hwang.

“I was directed to do so by my former boss,” Tomita said, identifying Hwang in court.

Of the major witnesses, Tomita worked most directly with Hwang himself and is therefore key to connecting the Archegos founder to the charged conduct.

Tomita said Hwang told his traders to use tactics that would maximize the effect on share prices, rather than gradually building their positions at the lowest cost and trying to minimize the impact of their own trading on the market.

At Archegos, Tomita said, he could see the effect of the volume of the firm’s trades versus others and knew he was moving the market. “I could see that it was me that generated the stock price,” he testified.

Hwang and his co-defendant, former Chief Financial Officer Patrick Halligan, have pleaded not guilty and are in the fifth week of testimony against them in their trial in lower Manhattan.

Hwang’s legal team claims he used multiple counterparties to minimize risk, not to improperly maximize leverage or conceal the nature of their trading as the government contends.

Halligan, the CFO, had no role in trading but is charged in connection with Archegos’ alleged lies to bank counterparties.

However, another key government witness, former chief risk officer Scott Becker, has already told the jury he duped banks into believing the firm’s positions were far less risky than they were.

In the end, Archegos’ meltdown would cost banks including Morgan Stanley $10 billion and help bring down Credit Suisse Group AG.

Tomita, who handled the trading on which the case against his former boss turns, provided a window into the tactics that catapulted Hwang’s fortune from $1.5 billion to $36 billion in the year before the firm’s collapse.

Stock market manipulation on Wall Street has gained more attention since the ‘meme stock’ frenzy of 2021.

The question now is, what are our regulators going to do about it?

Also Read: Massive Banks Are Now Getting Fined For Illegal Short Selling

Other Stock Market News Today

Market News Today - Notorious Short Seller Bill Hwang Now Faces Painful Testimony.
Market News Today – Notorious Short Seller Bill Hwang Now Faces Painful Testimony.

South Korea now finds banks pursued an illegal shorting scheme, uncovering a whopping $211.2 billion won ($156m), in manipulative trades.

South Korea’s financial watchdog said it has so far uncovered 211.2 billion won ($156 million) worth of illegal short trades by nine global investment banks, providing its latest formal update on a probe that began late last year, per Bloomberg.

The nine banks, whose names weren’t disclosed, violated mostly procedural rules while collectively shorting 164 stocks, according to a briefing given by the Financial Supervisory Service.

It is continuing to probe five other banks in the matter.

Two of the nine banks are already facing penalties imposed by the financial authorities and have been referred to prosecutors for further investigation for allegedly violating the nation’s capital markets law, Hahm Yong-il, senior deputy governor at the FSS, told reporters Friday.

The watchdog plans to review penalties on the other seven banks.

Activities of global banks and hedge funds have come under increased scrutiny in recent months in South Korea, as authorities boost steps to weed out naked short selling — a practice of selling shares without even borrowing them first.

While short selling remains legal in many markets, it is a contentious political issue in the emerging Asian nation, with its powerful retail investors often blaming it for stock declines, reports Bloomberg.

“The FSS found that the violation rate exceeded 20% in some cases, which suggests that illegal transactions have a big impact on a certain stock,” the financial regulator said in a statement earlier this year.

“It’s necessary to consider the impact of illegal short sales on an individual stock as such trades hinder fair pricing and increase short-term volatility,” it said.

Bloomberg reports the South Korea’s financial watchdogs derived the 20% figure by dividing the amount of violated orders on a certain stock by its daily trading value.

The FSS did not identify the equities that saw illegal trades and declined to say how frequently the trades exceeded that ratio.

In November, South Korea imposed a ban on short selling through mid-2024, a decision that drew big celebration from retail investors in the country.

Investors in the AMCMULNGTIIFNGR, and MMTLP communities are just a few of many who have been raising awareness of the malpractice happening in the U.S stock market via X.

Market News Today – South Korea Now Finds Banks Pursued Illegal Shorting Scheme.

Also Read: SEC Commissioner Now Says Securities Lending Facilitates Illegal Trading

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Market News Today - Notorious Short Seller Bill Hwang Now Faces Painful Testimony.
Market News Today – Notorious Short Seller Bill Hwang Now Faces Painful Testimony.

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South Korea Now Finds Banks Pursued Illegal Shorting Scheme

South Korea now finds banks pursued an illegal shorting scheme, uncovering a whopping $211.2 billion won ($156m), in manipulative trades.

South Korea’s financial watchdog said it has so far uncovered 211.2 billion won ($156 million) worth of illegal short trades by nine global investment banks, providing its latest formal update on a probe that began late last year, per Bloomberg.

The nine banks, whose names weren’t disclosed, violated mostly procedural rules while collectively shorting 164 stocks, according to a briefing given by the Financial Supervisory Service.

It is continuing to probe five other banks in the matter.

Two of the nine banks are already facing penalties imposed by the financial authorities and have been referred to prosecutors for further investigation for allegedly violating the nation’s capital markets law, Hahm Yong-il, senior deputy governor at the FSS, told reporters Friday.

The watchdog plans to review penalties on the other seven banks.

Activities of global banks and hedge funds have come under increased scrutiny in recent months in South Korea, as authorities boost steps to weed out naked short selling — a practice of selling shares without even borrowing them first.

While short selling remains legal in many markets, it is a contentious political issue in the emerging Asian nation, with its powerful retail investors often blaming it for stock declines, reports Bloomberg.

“The FSS found that the violation rate exceeded 20% in some cases, which suggests that illegal transactions have a big impact on a certain stock,” the financial regulator said in a statement earlier this year.

“It’s necessary to consider the impact of illegal short sales on an individual stock as such trades hinder fair pricing and increase short-term volatility,” it said.

Bloomberg reports the South Korea’s financial watchdogs derived the 20% figure by dividing the amount of violated orders on a certain stock by its daily trading value.

The FSS did not identify the equities that saw illegal trades and declined to say how frequently the trades exceeded that ratio.

In November, South Korea imposed a ban on short selling through mid-2024, a decision that drew big celebration from retail investors in the country.

Investors in the AMCMULNGTIIFNGR, and MMTLP communities are just a few of many who have been raising awareness of the malpractice happening in the U.S stock market via X.

Market News Today – South Korea Now Finds Banks Pursued Illegal Shorting Scheme.

Also Read: SEC Commissioner Now Says Securities Lending Facilitates Illegal Trading

Market News Published Daily 📰

Market News Today - South Korea Now Finds Banks Pursued Illegal Shorting Scheme.
Market News Today – South Korea Now Finds Banks Pursued Illegal Shorting Scheme.

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South Korea Regulators Now Probe Into Illegal Short Selling

South Korea regulators now probe into illegal short selling trades by global investment banks in efforts to root out manipulation.

Banks that have conducted short-selling trades most frequently in South Korea will be subject to the investigation that would start in November.

The regulator said it will collaborate with watchdogs in Hong Kong and Singapore for its probe, per BusinessTimes.

The FSS will “hold those responsible” and ensure “naked short selling practices don’t take hold,” the statement said.

Naked short-selling refers to the practice of selling shares that an investor doesn’t own and hasn’t borrowed.

The agency will look into all short-selling transactions since May 2021 when the country partially lifted a ban that was imposed during the pandemic.

The watchdog will also review the short-selling consignment order processes of Korean brokerages to establish if they were aware of illegal naked short selling by global investment banks.

A special 20-person investigation team will be launched on Nov 6, the FSS added.

Public perception of such trading practices in the Asian nation remains deeply negative, with local retail traders staging protests against these activities from time to time.

In the United States, naked short selling continues to be a big problem.

In September, Citadel Securities was charged for illegal short selling violations by the SEC.

According to the SEC’s order, for a five-year period, it is estimated that Citadel Securities incorrectly marked millions of orders, inaccurately denoting that certain short sales were long sales and vice versa.

“Compliance with the order marking requirements of Reg SHO is a key component of regulatory efforts to curtail abusive market practices, including ‘naked’ short selling,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement.

Also Read: “The Game is Rigged”, Says Ex-Citadel Data Scientist

Citadel Is Now Suing The SEC Over New Transparency Rule

Market News Today - South Korea Regulators Now Probe Into Illegal Short Selling.
Market News Today – South Korea Regulators Now Probe Into Illegal Short Selling.

Ken Griffin’s Citadel Securities is now suing the SEC over its new market transparency rules meant to keep institutions under tighter surveillance.

Citadel Securities and the American Securities Association, a trade group, announced on Tuesday that they are suing Wall Street’s top regulator over new rules on the funding of a comprehensive market data surveillance system.

The litigation, brought before the U.S. Court of Appeals for the 11th Circuit in Atlanta, escalates the investment industry’s battle with the U.S. Securities and Exchange Commission over the so-called Consolidated Audit Trail (CAT),” reports Reuters.

The ASA says that the SEC has “overstepped its statutory authority” and “failed to address investor and industry concerns” leaving them with no choice but to litigate.

“The Commission undertakes its regulatory responsibilities consistent with its authorities,” an SEC spokesperson said.

“The CAT is a repository of investor and transaction data meant to give regulators all-encompassing insight into U.S. market transactions.

The SEC mandated the CAT’s creation in 2012 as a response to the “flash crash” two years earlier, when a sudden plunge on major Wall Street indices temporarily erased nearly $1 trillion in market value.

Republican officials and industry representatives have said the system presents cybersecurity and privacy risks and is likely to pass undue costs on to investors.”

The Securities and Exchange Commission says the market maker violated a provision of Regulation SHO, the regulatory framework designed to address abusive short selling practices, which requires broker-dealers to mark sale orders as long, short, or short exempt.

Also Read: SEC’s Director of Enforcement Now Under Investigation for Corruption

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Market News Today - South Korea Regulators Now Probe Into Illegal Short Selling.
Market News Today – South Korea Regulators Now Probe Into Illegal Short Selling.

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The White House Vows to Monitor Illegal Short Selling

Market News Daily - The White House Vows to Monitor Illegal Short Selling.
Market News Daily – The White House Vows to Monitor Illegal Short Selling.

The White House has vowed to monitor illegal short selling activity after bank stocks have taken a massive plunge.

Shares of PacWest Bancorp (NASDAQ:PACW) fell more than -50% on Thursday and are down more than -70% in the past week alone.

Volume surged to 106.9 million, six times its average trading volume of only 17 million.

(Reuters) U.S. federal and state officials are assessing the possibility of “market manipulation” behind big moves in banking share prices in recent days, a source familiar with the matter said on Thursday, as the White House vowed to monitor “short-selling pressures on healthy banks.”

Shares of regional banks continued to fall this week after the collapse of First Republic Bank, the third U.S. mid-sized lender to fail in two months.

Short sellers made $378.9 million in paper profits on Thursday alone from betting against certain regional banks, according to Ortex.

Increased short-selling activity and volatility in shares have drawn increasing scrutiny by federal and state officials and regulators in recent days, given strong fundamentals in the sector and sufficient capital levels, said the source, who was not authorized to speak publicly.

“State and federal regulators and officials are increasingly attentive to the possibility of market manipulation regarding banking equities,” the source said.

White House press secretary Karine Jean-Pierre said the Biden administration was closely watching on the situation.

Temporary Short Selling Ban

Temporary Short Selling Ban

“This volatility is being fueled by emotion and misinformation that does not reflect the strong underlying fundamentals of our banks,” Johnson said in a statement.

“These institutions remain resilient and well-capitalized, and Americans can rest assured their deposits are safe.”

The S&P 600 bank index dropped over 3% on Thursday.

PacWest Bancorp shares tumbled over 50% after it confirmed it was exploring strategic options.

Western Alliance Bancorp denied a report from the Financial Times that said it was exploring a potential sale, and said it was exploring legal options.

Its shares plummeted more than 38%, with trading in the stock halted multiple times.

The increased short-selling activity has triggered some calls for a temporary ban, but an SEC official told Reuters on Wednesday the agency was “not currently contemplating” such a move.

The SEC first warned investors in March, during a previous period of high market volatility surrounding the collapse of Silicon Valley Bank and Signature Bank, that it was carefully monitoring market stability and would prosecute any form of misconduct.

Related: Congress Now Investigating Naked Short Selling Fraud

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Market News Today - The White House Vows to Monitor illegal Short Selling.
Market News Today – The White House Vows to Monitor Illegal Short Selling.

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