The SEC has now charged Citadel Securities for illegal short selling violations according to a new SEC filing published on Friday.
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.
To settle the SEC’s charges, Miami-based Citadel Securities agreed to pay a $7 million penalty.
$7 million is merely a slap on the wrist to the market maker giant.
The gains Citadel collected over the years trump the SEC’s fine — retail investors allege it’s simply the ‘cost of doing business’.
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.
The SEC’s order finds that the inaccurate marks resulted from a coding error in Citadel Securities’ automated trading system and that the firm provided the inaccurate data to regulators, including the SEC during this period.
“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.
“This action against Citadel Securities demonstrates that a broker-dealer’s failure to comply with the requirements of Reg SHO can have negative downstream consequences on the accuracy of the firm’s electronic records, including its electronic blue sheet reporting, depriving the Commission of important information about the markets it regulates.”
Related: Citadel Under Investigation by Department of Justice
Retail Investors Proven Right Once Again
Since the ‘meme stock’ frenzy of 2021, retail investors have alleged Citadel Securities of ‘naked short selling’ the market.
Mainstream media personalities such as Charles Gasparino have defended Ken Griffin and his hedge fund, ridiculing investors on their claims.
Now there’s no denying the regulators’ filing.
“The game is not fair and it never has been. Individual investors, even when operating in a swarm, are destined to lose. How do I know? I helped design the game,” says Patrick McConlogue, an ex-Citadel data scientist.
Patrick McConlogue appeared on Fox Business during the ‘meme stock’ frenzy of 2021 when retail investors created one of the biggest scares in Wall Street history.
GameStop and AMC shareholders were able to create panic on Wall Street by heavily buying shares of the overleveraged shorted stocks.
As share prices soared, short sellers experienced massive losses.
GameStop was able to put Melvin Capital out of business, but Patrick McConlogue says other hedge funds were able to make back billions in losses during the halt.
The halts allowed hedge funds to enter AMC and GameStop knowing shares would plummet, allowing them to capitalize on the deflation of the price.
Patrick says the rules of the game also heavily favor hedge funds, something retail investors have urged SEC Chairman Gary Gensler for years to change.
“I respect many of my colleagues, the problem isn’t the people, it’s the rules of the game which heavily favor the funds.”
Without admitting or denying the findings, Citadel Securities consented to a cease-and-desist order imposing a censure, a $7 million penalty.
The SEC’s investigation was conducted by Seth M. Nadler of the SEC’s Home Office.
Christopher Ray of the SEC’s Division of Trading and Markets; Elcin Yildirim, Alan Lenarcic, and Peter Csatorday of the SEC’s Division of Examinations; Mandy Sturmfelz of the SEC’s Market Abuse Unit; Damon Taaffe and Melissa Armstrong of the Home Office Trial Unit; and Kevin Gershfeld and Robert Nesbitt of the Enforcement Division’s Office of Investigative and Market Analytics provided assistance.
The investigation was supervised by Mr. Cave.
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Absolute bullshit on every level! Gary Gensler is only doing this to make himself look better. We know what Shitadel is all about and Ken Griffin and all his conflict of interests should be banned from the markets immediately. They’re all in bed together!
Error my ass this was purposely done right in our face basically saying we will do what we want and you retail investors are our piggy bank and always have been the rules are for you not for us
If the bank says you have $100,000,000 in your account when you know you only have $100 and you spend the $100,000,000. When the bank finds the mistake they are going to want their money back, and if you don’t have it, legal consequences will ensue.
“In my opinion” the $7,000,000 penalty fee that Citadel Securities was charged is not a solution to the so-called, “coding error in Citadel Securities’ automated trading system.”
That coding error caused tens of thousands if not millions of people around the world to lose tens of thousands if not millions of dollars. Some people probably lost their life savings. I don’t want to hear anything about people gambling or speculating on a meme stock. This is inexcusable and needs to be addressed properly.
“In my opinion” the SEC and other regulators turned their backs on what was a plain-as-day problem. Including the HALTS, FTDS, etc. What is needed to be done now, (not 5 or 10 years from now), is to pay the people back EVERY PENNY that THEY LOST on their investments. That adjustment would include going through all the trades that were made and giving all the monies that were invested back to the people regardless of how the markets ran.
“In my opinion”, what sounds like a pretty clever excuse, if not real, “The SEC’s order finds that the inaccurate marks resulted from a coding error in Citadel Securities’ automated trading system and that the firm provided the inaccurate data to regulators, including the SEC during this period.”, is simply no excuse for the outrages losses that resulted to investors.
Does the $7,000,000 penalty fee just go from one hand to the next and back again? WHERE IS THE MONEY THAT SO MANY INVESTORS LOST? Is the money safe and sound in Citadel Security’s pockets?
“In my opinion” Citadel Securities should be forced to pay back the money the investors lost. The flimsy fee that was imposed on Citadel Securities is a joke “in my opinion.”
WE WANT ALL OF OF OUR MONEY BACK, NOW. There should be suitable legislation in place to handle this matter. And I do not mean a court trial or a Judge’s decision, in the favor of plutocracy. I want all the investors to be paid back ALL of their losses due to the damage they received from Citadel Securities.
“WE THE PEOPLE”, “In my opinion”, think this is total BULLSHIT!
And on top of that, we know, that YOU KNOW that.
TOTALLY DISGUSTED, with the allowance, “in my opinion” of robbery in plain sight,
N.S.
P.S. Everyone infected by, “in my opinion”, this FILTHY DISREGARD for the wealth mismanagement placed upon the backs of the hard-working people of OUR country that has caused so many losses, should be writing letters to their Congress Person who are supposed to, act on our behalf, to force Citadel Securities to pay back ALL the money to the people, immediately. Whether or not they admitted to any wrongdoing.
According to this article Without admitting or denying the findings, Citadel Securities consented to a cease-and-desist order imposing a censure.
“In my opinion”, “The SEC’s order finds that the inaccurate marks resulted from a coding error in Citadel Securities’ automated trading system and that the firm provided the inaccurate data to regulators, including the SEC during this period” is an admission of guilt of using faulty equipment that caused extensive monetary damage, directly to the people involved. “in my opinion” Citadel Securities should be held accountable for all monetary damages that Their “coding error” has caused. Write letters to your Congressperson.
One letter from all of us should cause actions to be started.
Hate to say it but the sec is a bitch point blank period……
A true enforcement of law would be 700 million fine and a suspension from trading. This is a drop in the bucket. They’ll just keep doing it and pay fines
This was planned all along. Now the SEC can afford coffee for another few years
Gary is a Goldman Sach Alumni POS! They’re in cahoots and this is just to “show face”, it’s textbook BS
“In my opinion,” it is criminal theft from the people who have broken their backs to make this country what it is supposed to be. Punishable by hard prison time and the bankruptcy of Citadel Securities in the way of paying back all the investors and or “speculators” who put their money down on something that was more than mere speculation. “In my opinion,” this was an act of pure greed and the money needed to accomplish it. Don’t worry, after we are done breaking our backs to support our Country like the Patriots we are, we will be made poor and replaced. Don’t bring it to your fellow man, bring it to the filthy, greedy, power-hungry people who are responsible for breeding the upcoming situation of OUR country. The ugly, nasty, slobs that they are.
Massive theft over years are ‘legitimized’ by a paltry fine that does not relate in any way to the size and scope of blatant institutional theft.
White collar crime pays, unless someone other than a rich white dude is commiting it.
Shame on the US for continuing to subsidize corporate theft!
That 7 million dollars is just Gary’s retainer to keep his mouth shut on 9/27.
Leave your thoughts below.
This guy is pissed off.
Reply to Frank Nez’s article written on Sept. 22, 2023, on The SEC Now Charges Citadel for Illegal Short Selling Violations
I think that Violations should be replaced with Criminal Activity punishable by imprisonment and paying all the investors and/or speculators back all the money that they lost.
If the bank says you have $100,000,000 in your account when you know you only have $100 and you spend the $100,000,000. When the bank finds the mistake, they are going to want their money back, and if you do not have it, legal consequences will ensue.
“In my opinion,” the $7,000,000 penalty fee that the SEC charged Citadel Securities, is not a solution to the so-called, “coding error in Citadel Securities’ automated trading system.”
That coding error caused tens of thousands if not millions of people around the world to lose tens of thousands if not millions of dollars. Tens of thousands of people lost their life savings. I do not want to hear anything about people gambling or speculating on a meme stock. This is inexcusable.
“In my opinion” the SEC and other regulators turned their backs on what was a plain-as-day problem. Including the HALTS, FTDS, and NAKED SHORTING. What Citadel Securities needs to do now, (not 5 or 10 years from now), is to pay the people back EVERY PENNY that THEY LOST on their investments. That adjustment would include going through all the trades made and giving all the money invested back to the people regardless of how the markets ran.
“In my opinion”, what sounds like a pretty clever excuse, if not real, “The SEC’s order finds that the inaccurate marks resulted from a coding error in Citadel Securities’ automated trading system and that the firm provided the inaccurate data to regulators, including the SEC during this period.”, is simply no excuse for the outrages losses that resulted to investors.
Does the $7,000,000 penalty fee just go from one hand to the next and back again? WHERE IS THE MONEY THAT SO MANY INVESTORS LOST? Is the money safe in Citadel Security’s pockets?
“In my opinion,” Citadel Securities should pay back the money the investors lost. The flimsy fee imposed by the SEC on Citadel Securities is a joke “in my opinion.”
WE WANT ALL OF OUR MONEY BACK, NOW. There should be suitable legislation in place to oversee this matter. And I do not mean a court trial or a Judge’s decision, in the favor of plutocracy. I want all the investors to be paid back ALL their losses due to the damage they received from Citadel Securities.
“In my opinion,” “WE THE PEOPLE,” think this is total BULLSHIT!
And on top of that, we know, that YOU KNOW that.
DISGUSTED, with the allowance, “in my opinion” of robbery in plain sight,
N.S.
P.S. Everyone infected by, “in my opinion”, this FILTHY DISREGARD for the wealth mismanagement placed upon the backs of the hard-working people of OUR country that has caused so many losses, should be writing letters to their Congress Person who are supposed to, act on our behalf, to force Citadel Securities to pay back ALL the money to the people cheated, immediately. Whether or not they admitted to any wrongdoing.
According to this article Without admitting or denying the findings, Citadel Securities consented to a cease-and-desist order imposing a censure.
“In my opinion,” “The SEC’s order finds that the inaccurate marks resulted from a coding error in Citadel Securities’ automated trading system and that the firm provided the inaccurate data to regulators, including the SEC during this period” is an admission of guilt of using faulty equipment that caused extensive monetary damage, directly to the people involved. “In my opinion” Citadel Securities is accountable for all monetary damages that their “coding error” has caused to investors and speculators. Write letters to your Congressperson.
One letter from all of us should cause a call to action.