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Illegal Tactics and DTCC/Prime Broker Complicity In Naked Shorting & Retail Shutdown of GME (DTCC/Prime Brokers decision makers need to be questioned at the 2/18 GameStop Congress hearing)
TLDR: GameStop’s Congress hearing is on Feb 18th, they need to investigate the Prime Brokers and DTCC for their complicity in enabling naked shorting within GME and by extension, potential collusion to shut down trading on Jan 28th, the day the short squeeze was going to kick off. (stick to the end for an analysis of some illegal tactics short side hedge funds have been using) Thesis: On the day the retail market for GME shut down on 1/28 (the day the short squeeze would’ve happened had there been no market intervention), DTCC (clearing house monopoly) shut down retail buying in order to protect itself and Prime Brokers (which privately own the DTCC) from being exposed to the consequences of being party to illegal activity. I believe Prime Brokers and DTCC need to be called to the GameStop hearing on February 18th to be questioned for their complicity in enabling illegal naked shorting of the GME stock, as well as potential collusion to shut out retail buyers on 1/28. In my previous post (which I recommend reading for some context) I explored the subject of rampant illegal naked shorting in GME, and how Prime Brokers (consisting of banks like Goldman, Morgan, etc) and DTCC would be complicit in the naked shorting. This in turn raises the thought experiment that they would be incentivized to do anything possible to prevent the short squeeze from happening on 1/28 because had the short squeeze happened, the shorts would go bankrupt and their Prime Brokers who lent them their naked shorted shares would need to cover the shares. This would not only represent a humongous capital expense for Prime Brokers, the culpability of Prime Brokers (and that of the DTCC) in this situation would also have likely been exposed as well. A quick primer on what a Prime Broker is: Prime Brokers are essentially the service side of the short- selling business. They lend out securities and cash, you can think of them as the “house” in a casino: They provide a gambler with markers to play and to manage his winnings. According to Matt Taibi, “Under the original concept, if a hedge fund that wanted to short a stock they would first need to “locate” the stock with his Prime Broker but as time passed, Prime Brokers increasingly allowed their hedge-fund customers to use automated systems and “locate” the stock themselves, and what this does is enable short-sellers to sell stock without delivering and thereby perform naked shorts with counterfeit shares. (source: https://web.archive.org/web/20210213125246/https://www.rollingstone.com/feature/wall-streets-naked-swindle-194908/). (I highly recommend you read Matt Taibi’s article on naked shorting and how it was used to take down Bear Stearns and Lehman Brothers. There are so many parallels with GME it’s hard to miss. It’s amazing to consider that 12 years after this article was published and brought to public awareness, the problem of naked shorting still exists as a systemic issue.) Prime Brokers have a long history of being associated with naked shorting. To highlight a few examples, Prime Brokers like Merill Lynch and Goldman have long been implicated for naked shorting Overstock.com (https://www.rollingstone.com/politics/politics-news/accidentally-released-and-incredibly-embarrassing-documents-show-how-goldman-et-al-engaged-in-naked-short-selling-244035/, https://www.forbes.com/2007/02/02/naked-short-suit-overstock-biz-cx_lm_0202naked.html?sh=271400d1763f). Another example is when Goldman’s Prime Brokerage was implicated by the SEC in 2016 and got away with a small fine of 16 million (Source: https://www.sec.gov/news/pressrelease/2016-9.html). An example that very recently came in the news is a story where CIBC, BOA, UBS and TD Bank Prime Brokerages are accused of facilitating naked short selling and using counterfeit stock to attack and bring the stock price of a company from $34.77 to $1.83 (Source: https://www.securitiesfinancetimes.com/securitieslendingnews/industryarticle.php?article_id=224548). The DTCC also has a very long history of being associated with naked shorting. The Wall Street Journal noted that 1% of the DTCC’s volume end in failure to deliver which “have put DTCC in the middle of a long-running fight over whether unscrupulous investors are driving down hundreds of small companies' share prices… DTCC has turned a blind eye to the naked-shorting problem. ” (Source: https://www.wsj.com/articles/SB118359867562957720). The DTCC has also had numerous complaints submitted to the SEC for enabling naked shorting (source: https://www.sec.gov/rules/proposed/s72303/decosta122203.htm) and have been sued tens or hundreds of times for assisting naked shorts (source: https://smithonstocks.com/part-3-in-series-on-illegal-naked-shortings-role-in-stock-manipulation-prime-brokers-and-the-dtcc-have-a-troubling-monopoly-on-clearing-and-settling-stock-trades/ and http://counterfeitingstock.com/CS2.0/CounterfeitingStock.html and https://www.wsj.com/articles/SB118359867562957720) On 1/28 Robinhood received a letter from the DTCC at 4 am requiring them to halt trading or come up with 3 billion dollars, which Robinhood did not have, and therefore with one swoop of the pen the DTCC shut down buy side momentum but strangely allowed selling. Retail investors were shut out of the market and as any student of microeconomics would know, by shutting buy but only allowing sell, the price is bound to fall. Meanwhile while hedge funds were able to keep trading not only in the market but also crosstrade in the dark pools (“private” stock markets that retail is shut out of, more on this later), and use this crucial lifeline given to them by the DTCC to prevent the squeeze from happening that day. With retail abruptly being shut out from buy (even cash accounts were shut out, which didn’t make sense) and only allowed to sell, almost everyone could smell manipulation was afoot (which triggered the Congress hearing) and the most of the blame was pointed at Robinhood. Personally and in hindsight, I believe Robinhood was just a willing scapegoat. When we think about who had the most to lose if a short squeeze occurred, I’ll narrow it down to three entities, Shorts and their stakeholders (ie Citadel), Prime Brokers and the DTCC. It’s important to remember that the actual impetus that triggered the shutdown of the market for retail investors came from the DTCC. Working backwards, if you consider that GME was rampantly naked shorted and DTCC and Prime Brokers would have to be complicit in it, I believe the DTCC, Primer Brokers and possibly Citadel (who provides 40% of Robinhood’s revenue) brazenly manipulated the market on 1/28 by shutting down purchasing for retail buyers to prevent the squeeze from being squoze on that day as doing so would be catastrophic for all aforementioned parties involved. I believe that on the upcoming Gamestop Congress hearings the Financial Services Committee needs to call on decision makers of DTCC and Prime Brokers explore their role and complicity in the shut out of retail buyers that day as well as being enablers of naked shorting in GME. An interesting thought experiment: On 1/28 when the price was 450+ and shorts were likely under 100, if we assume prime brokers allowed naked shorting in GME, then when the squeeze was about to happen (or happening), if Prime Brokers had margin had called the shorts, they would presumably also also gone down because shorts would not be able to pay in that event and the brokers would be holding the bag. By that logic, they have every incentive in this case to NOT to margin call and instead the most logical option would probably would have been to make a backroom deal, which is what I personally think most likely happened. If you’ve read up to this point, you might be thinking what can I do about this? I am aware that there a lot of cynicism that we can’t do anything, that there will be no justice for retail investors who were harmed this situation, and that institutions and people in power will prevent anything from being done. I feel this sometimes too, but remember: A single voice can be drowned out, but if we all speak together then we will make our voice heard. Ape Strong Together. With the hearing coming up on February 18th, I highly recommend you email and tweet the representatives involved in the hearing, as well as your own district representatives, and urge them to read into the factors presented in this post and call the DTCC and Prime Brokers to the hearingl. They need to be questioned on why GME has so many counterfeit shares, failed to deliver, their complicity in naked shorting, and investigated for their role in the retail shut down of 1/28. Below are 4 members of congress I recommend both tweeting and emailing Alexandria Ocasio-Cortez https://twitter.com/AOC, email: [[email protected]](mailto:[email protected]) Al Green https://twitter.com/repalgreen, email: [[email protected]](mailto:[email protected]) Maxine Waters https://twitter.com/maxinewaters, email: [[email protected]](mailto:[email protected]) Nancy Pelosi Email: https://twitter.com/SpeakerPelosi email: [[email protected]](mailto:[email protected]). And you can find other members of Financial Services Committee here to reach out to: https://financialservices.house.gov/about/committee-membership.htm What follows should probably be a separate post, but I will take the opportunity to summarize some of the illegal tactics that shorts have been identified to be using in their war with retail investors. Note that this may not be an exhaustive list and there may be newer tactics deployed in the future. Retail investors might not have the same tricks, resources and willingness to break the law for profit as hedgies do, but my hope and belief is that if we pool our knowledge and analysis, we will figure out their game and effectively adapt. Feel free to forward the list below to any representatives and lawmakers if you concur that these tactics were used: Rampant Naked Shorting - With the extremely high number of Fail to Delivers (FTID) , short interest being as high as 226% recently, and institutions alone holding a staggering 177% of the total float (likely due in large part to counterfeit shares), signs strongly point to GME being rampant with naked shorts and counterfeit shares. I believe the original goal of shorts was to drive GME to bankruptcy with these naked shorts, using the laddering of naked shorts (aka short ladder attack), executed with the help of counterfeit stock which is a classic and reliable method of driving down the stock price. I believe the GME stock has seen relentlessly aggressive short attacks, especially on the week of Monday February 1st, which drove the stock price down and triggered panic selling. Ladder Attacks with the help of Dark Pools - Another identified method of ladder attacks was identified to come from crosstrading with darkpools (the stock market has its own private stock exchange where institutions can trade…). Essentially darkpools are private stock markets retail investors do not have access to, where short side funds can purchase securities “off market” and then sell “on-market”, with the effect of creating a lot more downward pressure on the market without the upward pressure from buying. Illegally masking shorts with synthetic longs. Another tactic shorts are suspected of using in GME is the use of illegally using options to evade short positions in violation of Reg SHO which SEC describes in this risk alert and which I elaborate in this post. Essentially it’s the use of using options to create synthetic longs to illegally and artificially cover and prolong short positions and at same time obscuring the true short interest %. If you consider that it would be far more profitable for shorts to not cover at high prices but instead ladder attack the price and wait for retail investors to lose interest and close their shorts at as low of a price as possible, then you can see why this strategy would be very effective. Using way out-of-money call options to obscure true short interest. You may have heard about the 43 million worth of 800 dollar calls purchased when the price was 100 and found it odd. Later it was identified as a tactic to cheaply purchase synthetic call options (since at 800 its way out of money) to obscure their short positions (with the added benefit of hedging at 800 if a squeeze does happen) One thing I want to note, particularly to legislators at the GameStop hearing: Retail investors were not incited to pump GME. Retail investors spotted a unique Short Squeeze opportunity created by the greed of short side hedge funds, whereby GameStop was being abusively naked shorted with the goal of bringing it to bankruptcy, and hedge funds were so greedy about it that they shorted the company with a short interest of 226% of float, meaning A LOT of counterfeit shares were being used to short the company. Retail investors saw this as an opportunity to short squeeze the hedge fund shorters, which is a legal and legitimate investment strategy. The short squeeze would have happened had everyone played fair, but instead, financial institutions who were culpable to the naked shorting intervened and shut down retail buying, hurting the retail investors and successfully manipulating the market. The investment itself was in my opinion a sound decision based on the short squeeze, but in hindsight retail investors did not seriously consider the risk of the market would be blatantly and publicly manipulated and that the market would be rigged against them. If this post was useful (and I hope it was! Gave up my Friday night to write this for you Apes), please upvote for visibility and share it far and wide. The GameStop hearings could be a first step and hope towards legislative change, and it’s extremely important that the right story is told at those hearings (and by the right story I mean the real truth of what happened.) I hope the truly culpable parties are investigated and brought to justice. Again, I know many of us feel cynical that anything meaning will be done towards finding justice against the lawbreakers in this case, but if you feel even an ounce of injustice or empathy at how retail investors were unfairly harmed in the course of investing in GME, I strongly urge you to contact a legislator associated with the GameStop hearings and bring this to their attention so they can review this case with more complete information. In addition I recommend you to contact the SEC and any journalist you know or via journalist tip lines. It’s not going to be easy but the more awareness we raise the higher the likelihood our voices will be heard and positive change will be made. As we navigate the rocky waters ahead, I’ll gift you with a favorite quote of mine: The only difference between a nightmare and a dream is how big your balls are. 🚀🚀🚀 Disclaimer: I am not an investment advisor, I just like the stock. Ps. If you’ve read to the end, I’ll leave you with a few more thoughts and reminders: - If I were to distill life into one thing, it would be to never lose hope. - Remember that if you’ve lost money in any way shape or form, don’t be depressed, money can always be made back and the important thing is to maintain a good attitude. - Only invest what you can afford to lose. - Perhaps the most important factor in good investing is patience. If you’d like to read more about counterfeiting stocks this is a good place to start http://counterfeitingstock.com/CS2.0/CounterfeitingStock.html
"I think I've lived long enough to see competitive Counter-Strike as we know it, kill itself." Summary of Richard Lewis' stream (Long)
I want to preface that the contents of this post is for informational purposes. I do not condone or approve of any harassments or witch-hunting or the attacking of anybody.
Richard Lewis recently did a stream talking about the terrible state of CS esports and I thought it was an important stream anyone who cares about the CS community should listen to. Vod Link here: https://www.twitch.tv/videos/830415547 I realize it is 3 hours long so I took it upon myself to create a list of interesting points from the stream so you don't have to listen to the whole thing, although I still encourage you to do so if you can. I know this post is still long but probably easier to digest, especially in parts. Here is a link to my raw notes if you for some reason want to read through this which includes some omitted stuff. It's in chronological order of things said in the stream and has some time stamps. https://pastebin.com/6QWTLr8T
Intro
"The last month has convinced me, that we are going to be heading into a dark place for Counter-Strike esports in 2021."
"I think I've seen the scene essentially kill itself."
"For the past 5 to 6 years, we've basically been in a holding pattern of people coming into our game wanting to run it, wanting to run all of the esports and wanting to profiteer and its been sort of a concerted effort to drive them off and push them away."
"We're spread way too thin."
"If Riot don't get involved and stop the scumbags that have moved over to Valorant from getting their feet under the table, Valorant is going to have real problems."
RL thinks too much has happened all at once for us to do anything except watch it play out, like:
Recent CSPPA strike against BLAST
ESIC failures and them not being supported enough
Teams cheating i.e. coaches/bugs
Widespread match fixing
The Pandemic
"People who try to hold bubble events are so incompetent and fuck up and people get the 'rona and its their fault."
"People who say Flashpoint is a bubble is full of shit and is a lie and people are now suffering for that lie."
"To save money they let people go home and break the bubble for a week."
"Not just Flashpoint peoples decision, they have a partner that handles the production." (hinting FACEIT)
"People are trapped in hotels essentially under house arrest because of COVID restrictions and has fucked peoples lives up."
"It's all too much, all of this incompetence, all of this greed, maybe we ride it out."
RL says he has talked to the Riot devs (the ones working on Valorant) and says, "They are so cognizant of all the fuck ups and all the problems we have in Counter-Strike."
He continues to say that this is factored into their business plan and that we never had a competitor, but just so happens to have one coincide, when we are at our worst.
CSPPA - Counter-Strike Professional Players' Association
"Who does this union really fucking serve?"
RL believes that the CSPPA is a mockery.
He points out the hypocrisy that they wouldn't strike for the pros who were kicked out of ESL Pro League, or for Jamppi or dream3r.
He also says ESL paid CSPPA and are racketeering and many other TOs have to pay them to get their "seal of approval"
He says they would strong-arm TOs saying "well if you don't give us the money, these guys are so we'll just have to commit to playing their event."
Also points out that they will strike against a competitor they are not in agreement with (Flashpoint)
RL: "It's what it says about every other time you haven't done it and it's about every time you don't do it now moving forward." "The issues they've chosen to ignore this year alone are embarrassing."
Then he points out that there was no strike for Valve qualifiers even if we have no major but Jamppi and dream3r can't play in them.
"and Valve have said 'Oh yeah we know actually their stories are accurate, Jamppi didn't cheat, now in a legally binding document. Yep dream3r did have his account hacked in a LAN café', but they still can't play. Where is the fucking solidarity? Gone. Doesn't exist. It's not important [because] it doesn't affect you." "That's what the union does right now, it looks after all the tier 1 people."
He says the CSPPA doesn't represent all players all the time and has driven a divide where you have the haves and have-nots
"We have a tier of players that operate with impunity and do not help their tier 2 or tier 3 players out at all." "If you are not a tier 1 player you do not matter, they don't event ask your opinion."
He tells chrisJ to admit and own the fact that the reason he didn't speak up during the ESL Pro League debacle is because it didn't affect him
"They are looking after some players at the expense of other players. How the fuck is that a union?"
He says the BLAST situation is a reasonable dispute and supports the players but is not the right time for a strike and have not even identified the correct enemy
He thinks players are lashing out now due to previous incidents and are upset that BLAST are working with ESIC
He stated that CSPPA shouldn't beefing with ESIC and they should be working in harmony
He says what they need to do is talk with the teams/organizations that have sold that right to BLAST
RL: "Your employers, the people who pay you that massive exorbitant salaries, when you don't stream and you don't do interviews and you offer no value beyond your ability to click heads and you get 25k dollars a month." "Why don't you talk to them about it? Oh right. You're happy to take away BLAST's paper, but you don't want to risk your own."
"I am seeing such unbelievable cowardice from the players here with the battles you choose."
"Where was the strike action when in the qualifiers for the world championship, there were teams and players engaged in huge conflicts of interest?" "Where was the strike action when your image rights were taken and sold to every league you've ever been in every union type organization you've ever been associated with like, WESA, to your org every time you sign a contract, to the leagues you play in."
"Your image rights are essentially worthless now, there's about 10 fucking separate parties that have them, and how many of them are giving you anything for it? Not much pretty much your org by the way."
"That's a big issue. Your image is you, your image is your brand. What are you doing about that? Nothing."
He is also angry at SirScoots who is "popping off" at people on Twitter who all want the same thing, which is 'A unified Counter-Strike scene for everybody, that works for everybody, that has a sustained ecosystem that nourishes everybody.' "We don't have that now."
He also says their rankings are a joke
"Just so happened, oh look TACO, that very important prominent member of the board, we pushed his team artificially up when they weren't even in the fucking top 20, not by a long shot."
He also says the ineptitude of the CSPPA cost Flashpoint a monitor sponsor
"Is it really a player association or is it like a fucking agency at this point"
ESIC - Esports Integrity Commission
"They have been put in an impossible position."
RL says that Ian Smith, the founder of ESIC and who was done work in mainstream sports, is a good and honorable man who has dedicated his life to integrity and sports. He takes on both sides, ensuring match fixers are punished, but also doing appeals and ensuring those punishments were fair.
"ESIC is a tiny organization" and are in need of money, "They didn't run a grift like the CSPPA did."
"Saying 'you want our support and you want the players to turn up you better pay us.' They don't do that."
"Had startup seed money from MTG and since then they've been pecking shit with the hens."
Ian Smith made sure that the money given by MTG (Modern Times Group, parent company of ESL, ESEA, DreamHack) was nothing more than startup money and wouldn't be in debt to them
Ian Smith sat down with other TO's not part of MTG and wanted to partner with them. They declined and called ESIC "ESL spies and we will never align ourselves with you"
"They only were just able to afford, hiring a PR guy on a full time salary to deal with the press and send out those releases you've seen, this year."
"They have a tiny group of staff investigating these things and they have taken on the biggest problems in our scene: the cheating, the match fixing."
ESIC have had "unprecedented levels of cheating to deal with, because there's something wrong with our scene ever since we went online. There's something wrong with it, everyone's lost their fucking pride and self-respect and they got no passion for it anymore, so they think fuck it, what's in it for me?"
He calls out coaches who are talking about players rights when they would rob and steal from them.
Also says more coaches being banned are coming
He also points out flaws in community's reaction to the punishments to coaches bans: "Half of the cunts still have jobs and some of the cunts got new jobs. We didn't even shun the cheating coaches."
ESIC have "found I think another 2 or 3 exploits like that one and they are investigating them all right now, it's going on right now."
"I know that there are going to be more names getting banned, again."
"So they're doing that on a skeleton crew while, investigating 3 continents worth of match fixing in MDL and semi-pro level CS." "They're doing this with half a dozen people." "They don't have any money or any help. People barely even fucking cooperate with them, they are treated like pariahs. It's ridiculous."
"Why are the CSPPA popping off at ESIC on my Twitter timeline, when you should be working together." "because its all about what's in it in for me." "2020, the online era of CS: 'What is in it for me?' How can I cheat, how can I get my paper, how can I bleed this scene one last time before I fuck off and play shooty shooty bang bang Riot Games babys first fps."
RL says that in the CIS region, teams have gone to tournaments and have been eliminated multiple times by the same team. We found out they were cheating and those players who lost, have been cut from their roster, careers ended because of cheaters.
Stream Sniping
"They're all at it in the online era, they're all at it, they're all cheating, they're all using exploits, probably that see through smoke bug got used a bunch of times"
RL talks about how there is no integrity from dead (the player), always denying when caught doing something
On the topic of 'BLAST never said we couldn't stream snipe': "Lies, BLAST never said you could do that, they had to sort of retcon it." "because what happened after that they fucking started snitching and squealing"
"Suddenly you had like, 10 of the top 15 teams in the world, staring into the abyss of being banned for 6-12 months in line with ESIC recommendations."
He says that ESIC was put in a tough situation and couldn't enforce the bans because it would have resulted in killing CS. What resulted was, BLAST, ESIC, and teams came together and gave them a warning and told them, in RL's words "don't do this again or you're gonna get got."
He then says the top teams brushed this off and didn't give a fuck
The new MiBR team playing Flashpoint, that wasn't involved in the previous incidents are doing it again (stream sniping). He gave credit to Flashpoint for the quick resolution and punishment and respect for cogu's response to the situation.
"ESIC came out and said, once more, 'Guys, zero tolerance from now on.'" RL then got upset at community's reaction calling ESIC "pussies" for their non enforcement and said if we want competitive CS we cant ban the top 10 teams.
He points out how players have no integrity and will do anything for an edge as long as they won't get detected or banned or it's within a grey area.
"All of this shit was mad avoidable, even in the pandemic era."
He talks about why aren't we filming them. Why aren't there representatives for leagues and tournaments making sure players aren't cheating?
Match Fixing
"How many years have we let our scene be fucking pillaged by these greedy cunts?" "We just let it happen."
RL says that gambling and skins betting which existed in moderation was "accelerated and blown up by the Call of Duty greedy fucks."
"Never forget TmarTn was on the board of EnVyUs." "His website, CSGOLotto, they had a bunch of off-the-books sponsorships." "NBK promoted them. People forget."
"Those people who had access to the skins, go to the players" "Even people like s1mple, best player in the world, even he scammed knives and skins off fucking fans."
Owners of skin casino sites would approach pros and lend them skins to use in tournaments and possibly keep them after reaching a deal
Players would tip off inside info about matches and teams in exchange for skins. Info such as: roster changes, how they played in scrims
They would use this info to bet and subvert the odds on their sites. "That happened religiously, I can't even tell you how many times it happened."
"I had access to the biggest database of information, from an inside betting circle in NA, and it would take information and screenshots from other pro players, who were feeding them info in exchange for money or skins."
"Some of these players are still playing." "Incredibly, there are players still in the CSPPA today, complaining about the BLAST recordings, that were embroiled in this murky shit back then."
RL also says that there were tournaments where teams contrived with each other, who should throw, who should win.
"There's a handful of people that are trying to fucking clean it up, and you think you get something over the line and you see something like the CSPPA and it's run by corrupt fucking chuckle heads, and now you've got another corrupt body you have to fight on a fucking daily basis, it's demoralizing."
"It's too far gone. Our entire semi-professional scene is compromised."
"It's rife guys, I'm not going to lie any more. It's not just China, it's not just Russia, it's here, it's NA, it's Europe, it's Australia, so much more than you think, so much more than we can prove."
"I get sent chat logs all the time […] and they're morons, these players, short-sighted, amateur, morons and they're doing it on WhatsApp." People would get cut from the bets because they want to make more money, then they leak the logs. He says, from the chat logs, they spread "little" bets across every site they can (400 to 1k dollars) to prevent shifting odds
He says the scumbags who've fucked off to Valorant will do the same there if Riot doesn't do something and says Valorant "is an esports scene heading for a very early fall based on the sheer volume of scumbags that are already there."
"That's tier 2 CS in a nutshell these days. They know they're never going to play in a major, so what's the punishment?"
"All of these tier 2 fucks that are fixing games now they are like the fucking mafia compared to iBuyPower" "These guys are working with organized criminals to fix entire seasons worth of games. That's what's going on in your tier 2 CS."
"I'm literally being told that there are players fixing games at all levels of Chinese esports and motherfuckers with guns are turning up to team houses and stuff."
North America
"Everyone in NA has left we've lost a continents worth of support during this pandemic and Valve haven't said a fucking word."
RL says the Call of Duty "goblins" that destroyed CS for years are the same people who are now trying to leave CS. "The nerve to treat a game where the fans, and the community, and the TO's were nothing but good to you." "To just kick the players out now and go and leave and say 'It just doesn't make financial sense.' Oh you'll slither back when we have a major though for them stickers won't you."
There's a cascading effect in NA where people don't bother with CS anymore and people like Chaos suffer.
He says NA team owners are incompetent for always wanting it easy and always wanting a guarantee on their investment without skill or nuance.
RL says he would be able to market a team correctly and would have a good ROI and also points out how TSM wouldn't even be bothered to tweet that their team, which was one of the best in the world, was playing at the Major.
He also says not all NA owners are like that, compliments and respects Jason Lake who nearly lost everything to keep Complexity going.
He then calls out the incompetence in Infinite Esports when they acquired OpTic Gaming and bought an Indian CS team.
He says HECZ is not to blame here and that they couldn't tell forsaken was cheating when it was so obvious.
They measured his reaction time to the likes of dev1ce and s1mple
When an enemy showed up on his screen he won that duel something like 44% of the time
"was like the number 1 player in the world statistically"
He brought a laptop to their bootcamp and refused to use the high end PCs that hey provided
He respects Andy Miller (NRG CEO) and HECZ but says that the attitude of not being able to easily monetize their teams is "piss weak" and there needs to be a risk.
He says Chaos EC shouldn't be cutting their roster and should be competent enough to be able to figure out how to make money off their team.
He says there are still opportunities in NA and people are panicking and pulling out, and says Valorant will be the same if not worse.
He also says "bums" who couldn't even get out of groups in NA competitions, are making crazy money in Valorant and says it will continue to inflate.
He also said that he heard rumors that EG (Evil Geniuses) are done.
He also thinks that the rumors of a Valve franchised league from before was sparked up from "these lazy fabled weak NA fucking team owners basically trying to see if Valve would bite at the hook if it was dangled and they didn't"
Slasher says NA team owners are really in favor of franchised leagues because they want to make more money. "Most of the powerful team owners right now are on board with ditching this third party organization structure, or they are trying to play this power politics with all the TOs, and that is contributing to a lot of the problems there"
RL says that Riot has proved they can run a franchised league (LCS) and will be profitable in 2021 which is what a lot of team owners care about and says the competition will only serve to snatch people away from CS.
RL continues to say, "I am so sick and tired of what we have done to this scene, I am just exhausted with it." "I think we have legitimately fucked it, I really think we have. I think we're staring into almost like a CGS (Championship Gaming Series) wasteland in NA." "Counter-Strike esports is a fucking joke."
Talent
"TO's have treated CS talent like absolute human garbage for years now."
RL says that people like Sean Gares and ddk switching over to Valorant isn't for financial reasons because they are making less over there.
He points out that TO's can't even give talent a 3 month in advance calendar.
Because of the pandemic TO's won't hire certain people and some people are working more hours for the same money.
He says we as a community don't respect journalists enough which is why we don't have good journalists.
He also says DeKay is leaving the scene soon and that Thorin is close to leaving also
He says he had to talk a caster down from quitting and was struggling to find reasons.
He says that DreamHack told Vince they would hire him but not if he wants to stick with dusT and says that this is the norm in esports. "Constant leveraging of people against each other." and says this is why we don't have a talent union.
New gen casters are getting put into shit situations and the community's reaction to them is adding fuel to the fire
He says the reason Moses left was because of the terrible conditions
He says that Anders had to constantly leave his family and kid because someone fucked up or broke promises and had to constantly tell his kid to their face that "daddy can't be home this weekend."
He says that esports has always been a lie to sell you this dream, "Meanwhile there's about 2% of the cunts getting all the checks."
Valve
"Anything that Riot does, is better than Valve's inaction"
Slasher says that the larger aspect of esports as a whole compared to other entertainment mediums and Valve's lack of inattention are the bigger problems. He continues saying that the fact that Valve let their game be ran as an esport, they need to take on the responsibilities of it.
Both Slasher and RL wants Valve to take control but not on the level of Riot Games, there needs to be a balance.
In case it was ever a question: Gabe Newell has been to 0 CSGO Majors.
RL calls Valve out saying they could have done something during the gambling era.
He says Valve used to come to the majors, but doesn't think they do anymore.
RL had met with Valve at the Cluj-Napoca Major and had tried to appeal iBP's indefinite punishment and had also gave Brax's life story:
A recent family member passed away, they had lost a lot of income, they had to live in trailer, iBuyPower did not pay any salaries, and was pressured by family to make money who didn't support his career.
RL said that Valve told him, "How dare you try and make us feel guilty." "We shouldn't feel bad about enforcing the only thing that matters that we need to make players afraid of: cheating and match fixing"
RL also tried to share other info about match fixing and nothing came of it
RL points out that Source 2 or a new engine is not something you will want based on the experience of transitioning from CS 1.6 to CS:S. "Valve's track record with brand new engines being launched, not fucking great from what I remember."
Slasher says "If there is anything the community should do, is pressure Valve to hire a community manager."
They say that we need a commissioner, a community manager (not the person who runs the Twitter who posts memes all day), then we need to have a circuit
RL reiterates that Valve doesn't care about CS esports and says they need to change the culture at Valve to make them care about CS esports
Slasher says a systemic problem is making it so working on CSGO would be a bad decision for you as an employee for Valve
He also hasn't talked to Valve in ages and have sent over bugs and cheats and doesn't get emails back anymore
Slasher says we should be directing attention at the developer leads, pointing out Ido Magal, if he even is still the project lead
RL thinks that Ido and Brian are the only people that "vaguely even give a fuck about CS" and were the only people that RL recalled that actually read Reddit and paid attention from time to time
"It is really fucking precarious. Somebody has got to step the fuck up and start giving a shit"
Slasher suggests org owners, with CSPPA, with ESIC, with TOs have a concerted effort against Valve
"Riot Games are doing better things than Valve in the esports space" which is something RL didn't think he'd say.
"People who used to be talent, working with unions, arguing with other talent, when the unions fucked them over, can't understand their perspective, TOs fucking over broadcast talent, broadcast talent wanting to leave and go and work for orgs, orgs having no money, Valve might take coaches away because all the coaches are cheating, ESIC has about 4 people in a fucking call doing the investigations, everyone thinks they're spies for ESL, ESL are just the evil fucking overlords wanting to rule the scene and will just somehow, like cockroaches outliving a nuclear bomb, and Valve are in a fucking holiday in Hawaii thinking about the next Dota character because they don't give a fuck about us."
Closing Statements
"We've peaked. If we want to sustain and exist, now is the time to figure it out. No esports lasts as long as this, we've already done 8 years. We've already broke the records. We have got to figure out a way to coexist and drive the negative forces out and we need to do it as a collective and we're not doing that."
RL compared the Counter-Strike scene to the people on the Titanic who ran around with guns robbing people while the boat was sinking.
"We have given up on being a respectable esports scene." "We are now a conduit to make money for those who want to just milk it, just have one last ride, one last roll of the dice. It's done." "What a fucking mess. What have we done to our fucking scene?"
"There's just too much self-interest driving all of this." "I don't see a way we stop the dominoes." "When it's that bad, when there's that many dishonest people that ESIC have to come out and say that if we punish them all there's no one left. What does that tell you?"
"How many opportunities have we had to clean house? How many times have we said, 'this must never happen again', and another scandal." "The entire skins betting operations was the biggest criminal conspiracy in esports ever executed and no one has been punished for it." "The people who could be driving that don't want to."
"Right now people are fans of those organizations because the scene has value. It is worth being a fan of Astralis because they are excellent at Counter-Strike. It is worth being a fan of s1mple because he is the best player in Counter-Strike, maybe the exception of ZywOo. If the scene is devalued, if the scene loses its meaning, those things lose its meaning too, and people will leave, people will stop tuning into the games. I have seen it happen in multiple esports, this is not my first time at the rodeo. I am getting big Brood War vibes right now and I don't like it."
"The role you play in all of this as fans, as viewers, as listeners, as consumers of esports content, it's absolutely imperative that you know who the good guys are. It's absolutely imperative that you use your voice. It's absolutely imperative that when things are bad, you know who, at least, is trying to make them good, and you have to apply your criticism to the right targets."
He continues saying it's no good in continuing to attack ESIC and saying how they are bad, ESIC have it hard
He says CSPPA are on the right side of the argument on BLAST but have been on the wrong side of many arguments many times.
"If you are not willing to stand along side the weakest member of the union, with the least amount of influence, and the least amount of power, then it is not a union at all and you shouldn't pose as one." "You wanna serve a bunch of special interest do it, everyone else in esports fucking does, but do not pose as something you are not." "We love the players. I've been fighting for players rights for as long as I've been able to, but the CSPPA is not what we needed."
"They are not applying the pressure to the right people, they are not fighting the right battles, they are not helping their weaker members."
He says what orgs have done by keeping or hiring coaches is bad. "When you give up on holding an appreciable standard, you've lost the scene" "Competition matters, rules matter, punishments matter, achievements matter, excellence matters" "If you start stripping that away, you have nothing" "You guys need to take that knowledge and apply it sensibly."
"Valve has sold you all down the river, they sold everyone in the esports scene down the river, tournament organizers are selling their talent down the river. Don't hate on them for sounding tired after a 16 hour day. Don't hate on them because the hype for a matchup they've seen for the 20th time in the past 3 months, they can't be as excited or it sounds contrived. Support your guys, they're there for you, these are your people."
"This community has got to start acting like one for the first fucking time. Just put the petty shit away, let's try and fix this fucking scene while we still have one to save."
"You can't rely on Valve, you can't rely on ESL, you can't rely on the CSPPA, you can't rely on anyone." "Once again, it's gonna be the likes of us, the amateurs, the people who give a fuck, rolling up our sleeves and grafting." "I'm old and tired and I don't want to have to do it again. People need to pick up the torch and do it."
"Like Michal did, like Dudenhoeffer did. You see something wrong, fix it. You see somebody doing something wrong, call it out. If you think something could be better, let people know."
"Vote with your wallets if you're not happy with the direction Valve goes in. If when we do get to the Major, they serve up another subpar, same old bullshit stickers and signatures package again, do not buy it."
"You're a powerful block and if you use it correctly we can fucking avert this disaster."
"I'm not doing another year in this broken, bust-up fucking scene, where everyone is miserable, everyone is broke, everyone is tired, and everyone is trying to fucking rob everyone else, blind, while the fucking people who are meant to be protecting you, are just fucking enhancing it and lining their own pockets."
"I'm not doing it anymore and you shouldn't want to do it either."
"I stand by every fucking thing I said. I mean it, because this game fucking matters to me, this scene fucking matters to me. I put my life into this, my adult life, and to see it in this state is fucking sad."
Imagine you’re a hedge fund CEO or senior executive. You’ve always had an inflated ego, and going to Wharton for an MBA definitely didn’t help in that regard. You interned at GS for the summer of 2003 and told all your friends about it, probably even brought it up oh so casually on dates. When you were hired as a trader by a moderately good to great fund, you probably lost a good deal of friends from your previous life, because they “just don’t get you now.” You’re in a different league than them, even your classmates that now work at lesser funds. You act friendly, liking Facebook posts, returning their calls, but there’s a nagging feeling that they’re holding you back. That you’ve made it, and you don’t need some loser that doesn’t even work on the East Coast. Jump ahead a few years It’s September 20th, 2008. Bear Stearns closed months earlier, Lehman went bankrupt a few days ago. "Buddies" of yours from both funds have been texting you, some you know from college. Maybe you’ll take pity on them and put in a good word, maybe you’ll tell them nothing’s available right now and that you’re sorry. You don’t tell them you were part of your fund's effort to short sell theirs into oblivion. Maybe you really are sorry though. What you’re more sorry about, however, is that your bonuses are probably going to be shit for a few years. They could even dip into five figures, god forbid. Your thoughts are of course directed to the millions of people losing their jobs across the country by the news, but inevitably your bonus reduction resurfaces as your biggest concern. “It’s not like I can do anything,” you say, after downing some wine. You go to sleep fairly easily, while across the country, innumerable people are forced to contemplate moving. Let’s jump ahead a few more years It’s mid-March, 2020. At this point, its become evident that COVID-19 is going to ravage the world, in some capacity (not gonna put politics into this because that’s not the point). As either a CEO or senior executive at a mid-range hedge fund, your thoughts gravitate towards your craft. It’s clear the market is going to tank, so you do what you do best. You short the shit out of several clearly sinking industries (https://www.cnn.com/2020/03/31/investing/short-sellers-market-coronavirus/index.html). But you don't stop there. You go on CNBC, Fox Business, maybe even the BBC, and announce doom and gloom. Doing this will get people to dump their stocks, meaning your shorts print even more money. Oh well, if there’s a positive to be gained from this whole thing it’s your fund making good money, right? By late March or early April, your wife convinces you that going with the kids to the Hampton’s would be the best choice, since the upper east side is getting a little claustrophobic. You’ll need to cancel your two week St. Barts vacation, what a bummer. You rent out a nice beach house in Sag Harbor for 125k a month, managing to beat out the other bidder by upping them by 10k. Once again, millions of people are losing their jobs, and you’re shorting the companies they work for. What else should you do? Only a few months forward this time It’s October. Weeks turned into months, and while you’ve started getting back to the city more and more, you’re still staying in Sag. Sometimes you have family friends over for an ostensibly socially distanced wine + cigar. You don’t think much of the events of the summer, aside from that one tweet you had PR send out in July. Your kids might have thoughts, you haven’t asked. Just a few more months, I promise It’s January. For really no other reason than the prospect of making more money, you along with a few other funds have decided to open naked shorts on GameStop. While technically not allowed, there are loopholes. Why would the loopholes be there, if not to be exploited, right? Not like you don’t do the same thing with your taxes. Then, the unthinkable happens A bunch of retail investors, led by a specific part of Reddit, decide to fuck your position by dramatically raising the share price. Since you firmly believe these people incapable of sticking to such an audacious play, you do nothing. Before long though, you start to become slightly unnerved by how steady the growth of the stock is. It's approaching $100, and you're losing hundreds of thousands to millions every day on short interest. So, you decide to take action. You get on CNBC, and cry about fundamentals. About volatility crushing these people. They don't listen, and keep buying. A week passes with you and your rich friends trying various strategies, none of it working. You're aware of another fund leaning on a popular trading app to force them into not accepting buy orders for GME, amongst others. You're not above sacrificing pride for money, so you announce your fund has closed its shorts. You're lying, of course. What kind of looks what you get at future parties if you cowed to these people? No, fuck that. You've read all the right books, been to the right schools, made the right friends, networked at the right parties and functions. You will not close, everything in your life has conditioned you not to. In fact, you'll double down. You go on CNBC some more. Artificially lower the stock price by trading between a few other funds. None of it's working, and you're intensely aware of another potential gamma squeeze on Friday. Restrictions on buying help during the day, but after hours, the stock jumps. That momentum carries it into a solid Friday. You won't budge, but at this point you're losing millions of dollars a day. So, here we are These people do not care about you. You're the least of their concerns, actually. They care about money and fund image, in that order. We have a real chance to make guys exactly like this hurt where it counts (for them), and I want people to understand that. I'm not saying throw your rent into GME. I'm saying you have the chance to really be a part of something, to screw the people that have been doing the screwing for your whole life. The house has been running a fixed casino, and you have the chance to hit back. Do not close. We have them, and they know it. We're winning, and if we keep winning they will give in.
With the recent influx of new users - I decided to post a guide to Pump and Dump schemes - what they are, how to avoid them and how to move on from them
TLDR: Following the recent DOGE and XRP situations, and our influx of new users - I have decided to put together a quick guide on what a pump and dump is, how to spot it, how to avoid it, and what to do should you fall for one. This is just my thoughts on the issue and by no means exhaustive. I welcome comments and my biggest recommendation if you fell for one of these schemes is to accept it, address your emotions, seek support - either by those around you or here if you feel more comfortable, then commit to educating yourself.
Summary:
A pump and dump scheme is where a group of people pitch a coin (or stock) to other people to spike short term volume, and therefore the price, in order to profit from selling their own supply at the higher price to the newer investors.
How to spot a PnD:
Promises of huge gains
Forced short time frames to make a decision
No discussion of risk - or questioning permitted
The opportunity finds you, you don't find the opportunity
Comparison to recent success stories - e.g. GME (dubious whether this will even be a success long term for individuals)
Tips to avoid - see below but the main two for me are:
Recognise emotional decision making, in yourself, and when it comes from others (people you may normally trust). You need to recognise this behaviour, and cut it out at source. To step back and breathe.
Ask yourself, what are they selling me on, and why? If they find you, you are being sold. That is all there is to it.
What is a Pump and Dump scheme?
A Pump and Dump scheme (PnD from here on in), is where an investor, or group of investors promote a coin they already hold (or are purchasing) in order to cause positive sentiment and the price to rise. At this point these investors will then sell their coins to the newer investors, causing the price to crash and leave the people who fell for the PnD with a large potential loss, or coins which are now worth a lot less than the price they paid for them. These are not new and were traditionally done via phone call. If you have watched the Wolf of Wall Street, or similar films about penny stocks, you have seen this stuff in action. If you are buying, you are the retail investor who gets taken for a ride. With the recent influx of new users to this site, and following the PnD schemes surrounding Doge and XRP, lets take a look at how to spot a PnD scheme
How to spot a PnD scheme?
Promises of huge gains, in a short amount of time. If it sounds too good to be true, it is. In crypto (and stocks) if someone is talking to you about something, they are selling you their position. If it is positive - they likely own it, if it negative - they either want prices to fall or they hold a competitor. Ask yourself, why someone would be going out their way to tell you something is a once in a lifetime opportunity? If it was, they would be keeping it secret and accumulating themselves. These people are salesman, and you are the one buying the bullshit
Linked to the above there is often a time element - 'get in quick, or you will miss it', they are relying on your impulsive decision making to jump in - they are manipulating you to over ride the logical part of your brain which makes decisions based on information and context
There is no discussion of any potential risks or downsides, and you are removed from groups or harassed for asking basic questions - this is a hive mind at work, and you are being censored from raising any concern or legitimate question.
There may be reference to 'how this time is different', or it plays on recent successes which are in no way comparable - e.g Game Stop - anyone who paused for a second would realise why not only was financially the short squeeze on GME completely different, but also the moral stand point was too. XRP, for example, is a centralised system which enriches the founders beyond belief. Yet these groups tried to ride the sentiment of GME to convince others to join - as a show of rebellion and alliance.
Social media storms are cooked up, it seems like out of nowhere this is all anyone can talk about - when has this ever proven a successful decision? Once everyone is talking about it, you are already too late. You may not lose money, if you are lucky, but you are still the one being duped. Again this is feeding on emotion and Fear of Missing Out. There will be groups created and ran by mods who run them like cults - no talk of anything but price going up is accepted.
There is a time or plan attached - e.g. Pump and Hold at 8:30. For the love of god, if this is the case, sell before then. All the leaders of these groups will have done. All of these public announcements are done again to create legitimacy and make you feel at ease - as a collective.
Generally any concept of 'we are in this together', coming from a group trying to actively push up the price of something short term = PnD. You are not in this together, markets are competitive - they are survival of the fittest whether you like it or not. They want your money, when you listen to them - you are basically offering to hand it over. People invest to make money, especially when the entire premise is pushing a price up to get rich. They do not want what is good for you, they are using you and they will take your money if you allow them to. They are telling you, because you are the opportunity - not the coin.
Be aware, people telling you to hold and buy more, are using you. They want you to push the price back up so they can sell. If you are in these groups - on social media, be aware you may be talking to bots, or at the least people who are trying to dump on you. When it drops, get out.
How to avoid PnDs in future
'Why are they telling me this?' - this is the first and main question to ask yourself. What does the person sharing the information have to gain from telling me? In this case - you invest and push the price up, allowing them to make greater profit. Understand why they would be sharing details with you - if it such a great thing, why are they sharing it?
if it is a friend telling you, ask for more information - why it is doing well, what the plan is etc - if they can't explain it properly, this is a big red flag and they likely have fallen for it too.
Look out for how someone talks to you about it - is it emotionally driven, does it make you excited? scared to miss out? - This is exactly when you need to step back, breathe and ask yourself if you are thinking correctly. Emotional decision making is not a good thing here, and then ask if they are intentionally trying to get an emotional reaction out of you? (see the above - FOMO, get rich quick etc)
Is there any room for nuance? Are you able to discuss the potential cons or risk? If you are laughed at, or harassed, others are told to ignore you (he won't be getting rich, weak hands, pathetic seller) - this is a huge sign that you are investing in something where no other thoughts are allowed. The reason for this, once you are out the bubble - logic returns and you see the smoke and mirrors for what they are. PnD groups work like a cult, only one form of thinking is allowed, everything else is censored.
Did this come out of nowhere, do I even know anything about this? If you don't know anything about it, except it makes money, don't invest in it. This is a terrible decision for two reasons. Firstly, and most obviously, you have asymmetric information - you have no idea why and what you are buying, therefore can't make an informed decision - only an emotional one. Equally, this kind of thing pushes panicked, emotional selling. When you don't know fundamental reasons why you invest in something, when the price dips you will sell. Why? because when your brain asks you the question 'shit it is dropping, what do we do?!' - your logical brain won't have an answer, because you never gave it the information to form one. This second part is more relevant to regular investments, not PnDs of course, but is worth bearing in mind before you invest in anything.
Was the coin relatively stagnant, or has it dipped recently? PnDs typically target coins which haven't moved much recently, or have lower trading volume, this allows for a much easier spiking of the price due to a small change in demand equalling a big change in price. If you look at the charts and it was doing nothing until this big flurry of activity - you are being taken for a ride.
Look for the news, if it is pumping, don't listen to people inside the group - search for reasons why something is pumping. If you can't find anything of value, there probably isn't anything, and you are gambling on emotional decisions.
The opportunity finds you, you don't find the opportunity. Getting rich off 'undervalued' coins, or finding a hidden gem is not easy. They are hidden for a reason. If someone is coming to you with this, remember they are selling. You are buying.
If someone does approach you, talk to someone else outside of the bubble - find another group e.g. CC, or other investors - talk to them, get outside perspective before investing.
look for examples of populist sentiment. Do you hear things about an other? - e.g. haters, those missing out who are jealous. Are you made to feel like you are part of a special group? The ones with insider information? This is a lie, it is very very common manipulation within populist movements, cults etc - to create a narrative of an other to entrench tribalism within the group. This is done to make you switch your brain off, to rule on emotion.
is there a recent comparable story that was successful? e.g. GME (yes this isn't the same at all in reality, but the story being sold is - or at least plays on the hype of GME). If there is, you are being played. The real opportunity, just like the hidden gem, is the first one. When people tell you this is happening again, they are simply using the positive news from one case and applying it to their own - often because it lacks any actual, real, tangible reason for succeeding or being a good investment.
I fell for a PnD, what next?
Have you sold yet - No? Are you in profit? Sell. Whilst you still can. Greed will tell you not to, and perhaps you can eek out a little more money. But you are gambling, and gambling extremely high risk against people trying to take all your money.
Yes, you have sold. Did you make a profit? Yes - great. You are still a an idiot, just a lucky one. Tell yourself that. There is a difference between opportunist traders taking advantage of PnDs and someone getting lucky and getting out before it collapses. Do not confuse the two. The first group know what they are doing (and they may still lose, but they are aware of the real risk). You are fucking lucky. Don't do it again. So count your blessings, go through the same process of learning about PnDs and begin to understand why you fell for it, how to avoid it in future and realise you are up - you won. Don't go back in, you are asking to lose.
Yes you have sold? Did you make profit? No? Ok, this is normal - 90% + of people doing this will end up in the same situation.
Recognise and accept your mistake. Do not feel ashamed of it, it is ok. You were played, it happens to all of us in our lives at some point.
Step away from whatever device you used to invest. DO NOT ATTEMPT TO WIN IT BACK RIGHT AWAY. You will most likely make things worse, investing again on emotions - even worse emotions now, shame, anger, disbelief.
Talk to the important people in your life if you feel comfortable, if not, come here or to other anonymous groups for support. It is important to share what happened, to vent emotionally whatever it is you feel.
Realise it is only money, even if gambled way more than you should have done, long term you will get out of this. Focus on other areas of your life for the time being - emotional investment, fulfilment and development - seek out things which may centre to your emotions again, whatever that may be - getting out in nature, cooking, reading, adrenaline sports - whatever the shit you need, do it.
Consider who, if anyone needs to know. Did you borrow from you and your wife's joint account? Accept a loan from a mate? These people need to know the truth. Do not hide it and hope to win it back. Tell the truth. They deserve it.
Do not repeat the same actions, if you want to win long term from this - you need a different approach. Step away from the high stakes casino and figure out long term strategies to make money.
Learn to diversify and manage risk. You are taking a huge gamble going all in on something - even if it isn't a scam, you need to protect yourself through diversifying your investments. Get rich quick schemes are the fastest way to lose money.
Educate yourself on these behaviours - I would recommend 'Thinking Fast and Slow' by Daniel Kahnemann as a personal favourite. This book helps to look at and address the biases that make up our emotional decision making, and learn how to recognise these and instead 'think slow'. You won't regret reading it.
Illegal Tactics and DTCC/Prime Broker Complicity In Naked Shorting & Retail Shutdown of GME (DTCC/Prime Brokers decision makers need to be questioned at the 2/18 GameStop Congress hearing)
TLDR: GameStop’s Congress hearing is on Feb 18th, they need to investigate the Prime Brokers and DTCC for their complicity in enabling naked shorting within GME and by extension, potential collusion to shut down trading on Jan 28th, the day the short squeeze was going to kick off. (stick to the end for an analysis of some illegal tactics short side hedge funds have been using) Thesis: On the day the retail market for GME shut down on 1/28 (the day the short squeeze would’ve happened had there been no market intervention), DTCC (clearing house monopoly) shut down retail buying in order to protect itself and Prime Brokers (which privately own the DTCC) from being exposed to the consequences of being party to illegal activity. I believe Prime Brokers and DTCC need to be called to the GameStop hearing on February 18th to be questioned for their complicity in enabling illegal naked shorting of the GME stock, as well as potential collusion to shut out retail buyers on 1/28. In my previous post (which I recommend reading for some context) I explored the subject of rampant illegal naked shorting in GME, and how Prime Brokers (consisting of banks like Goldman, Morgan, etc) and DTCC would be complicit in the naked shorting. This in turn raises the thought experiment that they would be incentivized to do anything possible to prevent the short squeeze from happening on 1/28 because had the short squeeze happened, the shorts would go bankrupt and their Prime Brokers who lent them their naked shorted shares would need to cover the shares. This would not only represent a humongous capital expense for Prime Brokers, the culpability of Prime Brokers (and that of the DTCC) in this situation would also have likely been exposed as well. A quick primer on what a Prime Broker is: Prime Brokers are essentially the service side of the short- selling business. They lend out securities and cash, you can think of them as the “house” in a casino: They provide a gambler with markers to play and to manage his winnings. According to Matt Taibi, “Under the original concept, if a hedge fund that wanted to short a stock they would first need to “locate” the stock with his Prime Broker but as time passed, Prime Brokers increasingly allowed their hedge-fund customers to use automated systems and “locate” the stock themselves, and what this does is enable short-sellers to sell stock without delivering and thereby perform naked shorts with counterfeit shares. (source: https://web.archive.org/web/20210213125246/https://www.rollingstone.com/feature/wall-streets-naked-swindle-194908/). (I highly recommend you read Matt Taibi’s article on naked shorting and how it was used to take down Bear Stearns and Lehman Brothers. There are so many parallels with GME it’s hard to miss. It’s amazing to consider that 12 years after this article was published and brought to public awareness, the problem of naked shorting still exists as a systemic issue.) Prime Brokers have a long history of being associated with naked shorting. To highlight a few examples, Prime Brokers like Merill Lynch and Goldman have long been implicated for naked shorting Overstock.com (https://www.rollingstone.com/politics/politics-news/accidentally-released-and-incredibly-embarrassing-documents-show-how-goldman-et-al-engaged-in-naked-short-selling-244035/, https://www.forbes.com/2007/02/02/naked-short-suit-overstock-biz-cx_lm_0202naked.html?sh=271400d1763f). Another example is when Goldman’s Prime Brokerage was implicated by the SEC in 2016 and got away with a small fine of 16 million (Source: https://www.sec.gov/news/pressrelease/2016-9.html). An example that very recently came in the news is a story where CIBC, BOA, UBS and TD Bank Prime Brokerages are accused of facilitating naked short selling and using counterfeit stock to attack and bring the stock price of a company from $34.77 to $1.83 (Source: https://www.securitiesfinancetimes.com/securitieslendingnews/industryarticle.php?article_id=224548). The DTCC also has a very long history of being associated with naked shorting. The Wall Street Journal noted that 1% of the DTCC’s volume end in failure to deliver which “have put DTCC in the middle of a long-running fight over whether unscrupulous investors are driving down hundreds of small companies' share prices… DTCC has turned a blind eye to the naked-shorting problem. ” (Source: https://www.wsj.com/articles/SB118359867562957720). The DTCC has also had numerous complaints submitted to the SEC for enabling naked shorting (source: https://www.sec.gov/rules/proposed/s72303/decosta122203.htm) and have been sued tens or hundreds of times for assisting naked shorts (source: https://smithonstocks.com/part-3-in-series-on-illegal-naked-shortings-role-in-stock-manipulation-prime-brokers-and-the-dtcc-have-a-troubling-monopoly-on-clearing-and-settling-stock-trades/ and http://counterfeitingstock.com/CS2.0/CounterfeitingStock.html and https://www.wsj.com/articles/SB118359867562957720) On 1/28 Robinhood received a letter from the DTCC at 4 am requiring them to halt trading or come up with 3 billion dollars, which Robinhood did not have, and therefore with one swoop of the pen the DTCC shut down buy side momentum but strangely allowed selling. Retail investors were shut out of the market and as any student of microeconomics would know, by shutting buy but only allowing sell, the price is bound to fall. Meanwhile while hedge funds were able to keep trading not only in the market but also crosstrade in the dark pools (“private” stock markets that retail is shut out of, more on this later), and use this crucial lifeline given to them by the DTCC to prevent the squeeze from happening that day. With retail abruptly being shut out from buy (even cash accounts were shut out, which didn’t make sense) and only allowed to sell, almost everyone could smell manipulation was afoot (which triggered the Congress hearing) and the most of the blame was pointed at Robinhood. Personally and in hindsight, I believe Robinhood was just a willing scapegoat. When we think about who had the most to lose if a short squeeze occurred, I’ll narrow it down to three entities, Shorts and their stakeholders (ie Citadel), Prime Brokers and the DTCC. It’s important to remember that the actual impetus that triggered the shutdown of the market for retail investors came from the DTCC. Working backwards, if you consider that GME was rampantly naked shorted and DTCC and Prime Brokers would have to be complicit in it, I believe the DTCC, Primer Brokers and possibly Citadel (who provides 40% of Robinhood’s revenue) brazenly manipulated the market on 1/28 by shutting down purchasing for retail buyers to prevent the squeeze from being squoze on that day as doing so would be catastrophic for all aforementioned parties involved. I believe that on the upcoming Gamestop Congress hearings the Financial Services Committee needs to call on decision makers of DTCC and Prime Brokers explore their role and complicity in the shut out of retail buyers that day as well as being enablers of naked shorting in GME. An interesting thought experiment: On 1/28 when the price was 450+ and shorts were likely under 100, if we assume prime brokers allowed naked shorting in GME, then when the squeeze was about to happen (or happening), if Prime Brokers had margin had called the shorts, they would presumably also also gone down because shorts would not be able to pay in that event and the brokers would be holding the bag. By that logic, they have every incentive in this case to NOT to margin call and instead the most logical option would probably would have been to make a backroom deal, which is what I personally think most likely happened. If you’ve read up to this point, you might be thinking what can I do about this? I am aware that there a lot of cynicism that we can’t do anything, that there will be no justice for retail investors who were harmed this situation, and that institutions and people in power will prevent anything from being done. I feel this sometimes too, but remember: A single voice can be drowned out, but if we all speak together then we will make our voice heard. Ape Strong Together. With the hearing coming up on February 18th, I highly recommend you email and tweet the representatives involved in the hearing, as well as your own district representatives, and urge them to read into the factors presented in this post and call the DTCC and Prime Brokers to the hearingl. They need to be questioned on why GME has so many counterfeit shares, failed to deliver, their complicity in naked shorting, and investigated for their role in the retail shut down of 1/28. Below are 4 members of congress I recommend both tweeting and emailing Alexandria Ocasio-Cortez https://twitter.com/AOC, email: [[email protected]](mailto:[email protected]) Al Green https://twitter.com/repalgreen, email: [[email protected]](mailto:[email protected]) Maxine Waters https://twitter.com/maxinewaters, email: [[email protected]](mailto:[email protected]) Nancy Pelosi Email: https://twitter.com/SpeakerPelosi email: [[email protected]](mailto:[email protected]). And you can find other members of Financial Services Committee here to reach out to: https://financialservices.house.gov/about/committee-membership.htm If there's one thing I took away from this its that we can't wait for other people to do the right thing, we each need to individually step up to ensure it happens What follows should probably be a separate post, but I will take the opportunity to summarize some of the illegal tactics that shorts have been identified to be using in their war with retail investors. Note that this may not be an exhaustive list and there may be newer tactics deployed in the future. Retail investors might not have the same tricks, resources and willingness to break the law for profit as hedgies do, but my hope and belief is that if we pool our knowledge and analysis, we will figure out their game and effectively adapt. Feel free to forward the list below to any representatives and lawmakers if you concur that these tactics were used: Rampant Naked Shorting - With the extremely high number of Fail to Delivers (FTID) , short interest being as high as 226% recently, and institutions alone holding a staggering 177% of the total float (likely due in large part to counterfeit shares), signs strongly point to GME being rampant with naked shorts and counterfeit shares. I believe the original goal of shorts was to drive GME to bankruptcy with these naked shorts, using the laddering of naked shorts (aka short ladder attack), executed with the help of counterfeit stock which is a classic and reliable method of driving down the stock price. I believe the GME stock has seen relentlessly aggressive short attacks, especially on the week of Monday February 1st, which drove the stock price down and triggered panic selling. Ladder Attacks with the help of Dark Pools - Another identified method of ladder attacks was identified to come from crosstrading with darkpools (the stock market has its own private stock exchange where institutions can trade…). Essentially darkpools are private stock markets retail investors do not have access to, where short side funds can purchase securities “off market” and then sell “on-market”, with the effect of creating a lot more downward pressure on the market without the upward pressure from buying. Illegally masking shorts with synthetic longs. Another tactic shorts are suspected of using in GME is the use of illegally using options to evade short positions in violation of Reg SHO which SEC describes in this risk alert and which I elaborate in this post. Essentially it’s the use of using options to create synthetic longs to illegally and artificially cover and prolong short positions and at same time obscuring the true short interest %. If you consider that it would be far more profitable for shorts to not cover at high prices but instead ladder attack the price and wait for retail investors to lose interest and close their shorts at as low of a price as possible, then you can see why this strategy would be very effective. Using way out-of-money call options to obscure true short interest. You may have heard about the 43 million worth of 800 dollar calls purchased when the price was 100 and found it odd. Later it was identified as a tactic to cheaply purchase synthetic call options (since at 800 its way out of money) to obscure their short positions (with the added benefit of hedging at 800 if a squeeze does happen) One thing I want to note, particularly to legislators at the GameStop hearing: Retail investors were not incited to pump GME. Retail investors spotted a unique Short Squeeze opportunity created by the greed of short side hedge funds, whereby GameStop was being abusively naked shorted with the goal of bringing it to bankruptcy, and hedge funds were so greedy about it that they shorted the company with a short interest of 226% of float, meaning A LOT of counterfeit shares were being used to short the company. Retail investors saw this as an opportunity to short squeeze the hedge fund shorters, which is a legal and legitimate investment strategy. The short squeeze would have happened had everyone played fair, but instead, financial institutions who were culpable to the naked shorting intervened and shut down retail buying, hurting the retail investors and successfully manipulating the market. The investment itself was in my opinion a sound decision based on the short squeeze, but in hindsight retail investors did not seriously consider the risk of the market would be blatantly and publicly manipulated and that the market would be rigged against them. If this post was useful (and I hope it was! Gave up my Friday night to write this for you Apes), please upvote for visibility and share it far and wide. The GameStop hearings could be a first step and hope towards legislative change, and it’s extremely important that the right story is told at those hearings (and by the right story I mean the real truth of what happened.) I hope the truly culpable parties are investigated and brought to justice. Again, I know many of us feel cynical that anything meaning will be done towards finding justice against the lawbreakers in this case, but if you feel even an ounce of injustice or empathy at how retail investors were unfairly harmed in the course of investing in GME, I strongly urge you to contact a legislator associated with the GameStop hearings and bring this to their attention so they can review this case with more complete information. In addition I recommend you to contact the SEC and any journalist you know or via journalist tip lines. It’s not going to be easy but the more awareness we raise the higher the likelihood our voices will be heard and positive change will be made. As we navigate the rocky waters ahead, I’ll gift you with a favorite quote of mine: The only difference between a nightmare and a dream is how big your balls are. 🚀🚀🚀 Disclaimer: I am not an investment advisor, I just like the stock. Ps. If you’ve read to the end, I’ll leave you with a few more thoughts and reminders: - If I were to distill life into one thing, it would be to never lose hope. - Remember that if you’ve lost money in any way shape or form, don’t be depressed, money can always be made back and the important thing is to maintain a good attitude. - Only invest what you can afford to lose. - Perhaps the most important factor in good investing is patience. If you’d like to read more about counterfeiting stocks this is a good place to start http://counterfeitingstock.com/CS2.0/CounterfeitingStock.html
[Video Games] The Rise and Fall and Rise Again and Fall Again of Lab Zero Games
The last drama post I did about Kuma Miko seemed to have gotten some praise, but some wished to see a Hobby Drama post that had consequences outside “people got angry over it”. So without any further delay, here’s a story about a studio that’s close to my heart, one that I’ve backed twice and seen die twice. Note: This is a fairly lengthy drama, so forgive me if I’m not able to provide all of my sources. Most of the front half of this comes from this video, which chronicles the first half of Lab Zero entirely in Russian. From Ahad to Mike Z Let’s start in the beginning. Alex Ahad is a freelance illustrator who, in between other work, had created character designs for a prospective fighting game. Mike Zaimont is a professional fighting game player best known for games like BlazBlue and Marvel Vs. Capcom, but since 1999 had been coding a custom engine in his free time, which he hoped could be used for a fighting game. The two met in 2008, and the two quickly realized that with each other’s help, their dream could come true. In 2010, the two joined the newly developed game studio Reverge Labs. Joining their team was Mariel “Kinuko” Cartwright, a friend of Ahad’s and daughter of a Disney animator who helped animate games such as Scott Pilgrim vs. The World and Shantae; Peter Bartholow, who acted as CEO of Reverge as well as their PR arm; and an assortment of other animators and designers. Their goal: a fighting game in the style of Marvel vs. Capcom 2 with hand-drawn animation that they called Skullgirls. After obtaining publishers in Autumn Games and Konami (at the time of development the Microsoft required indie devs to have a retail publisher in order to bring their games to Xbox Live Arcade), the team got to work on Skullgirls. Initial impressions were favorful - people liked Ahad’s unique character designs, the fluid animation, and the solid engine Mike Z built - but upon release, there were some concerns. The time and money needed to develop each character meant a starting roster of only eight characters, a far cry from other fighting games (the original MvC had 15 characters in 1998), and due to the team trying to get the game out, there was no in-game move list. Some were also concerned that the cast, consisting entirely of women, was too fanservice-filled, although Bartholow said that the characters were just attractive women who could fight as opposed to characters using their sexuality in battle (Ahad said that sex wasn’t his main focus, he just wanted to have monster girls fight each other). The team at Reverge Labs stressed that they would continue to update the game, with plans to add DLC if the game sold well enough. Good thing nothing could go wro- Everything goes wrong Alongside publishing Skullgirls, Autumn Games and Konami had previously published a karaoke game called Def Jam RapStar. Unfortunately, around March 2012, the time Skullgirls released, both parties were at the end of several lawsuits made against them - one argued that Autumn and Konami did not get the rights to some of the songs used in the game, while another claimed that the game was funded with a bank loan which Autumn Games was unable to pay back. The result of these costly lawsuits was that Autumn was unable to pay Reverge the money made from Skullgirls - this led to the entire Reverge team being laid off around July, and the future of the game in the air. And so, the team decided on a whim to reconvene as a new development studio, Lab Zero Games. At a fundraiser for breast cancer research which included a fighting game tournament, Mike Z revealed the first DLC fighter and promised that new information about her and the team would be posted soon. This would turn out to be an Indiegogo fundraising campaign that asked for $150,000 to develop the first DLC fighter, with more characters promised if people backed enough. In the end, $829,829 was raised in the campaign, enough to fund five DLC characters, a bevy of stages and voice packs, and other features. It was quickly becoming a cult classic. The Skullgirls Curse And so work on Skullgirls DLC was underway. However, a variety of events happened to befall Lab Zero during development, some causing controversy and others just annoying the team. Some dubbed this “The Skullgirls Curse”. So let’s go over some of them:
Paypal Woes: During the Indiegogo DLC campaign, Lab Zero announced that Ahad had created around 30 prospective designs for DLC characters, and that there would be a vote to see which characters would be the two “mystery characters” teased in the Indiegogo campaign. As you would guess, this caused the Skullgirls fanbase to get heated, to the point where some stressed that they would ask Indiegogo for their money back if their character didn’t win. PayPal, who managed the funds for this campaign, was concerned about these threats and put nearly all of the money on hold. Bartholow tried to negotiate with PayPal, and was eventually able to get the funding - once PayPal was given a hefty sum as collateral.
Bad Juju - If you notice on the list of prospective DLC characters, one character is Juju, a character who was designed by Ahad from a fan’s suggestion on a Whiteboard Wednesday art stream. Ahad seemed to like the idea of the character, and kept building her up until she became a legit character in the game. The original fan made a joke on Facebook that he’d like to be compensated for the design, which led Lab Zero to negotiate obtaining the character rights from him. They eventually worked out a contract that would give them the rights to the character, but only if the original fan didn’t reveal it until Lab Zero announced it themselves. The fan then posted about it on the Skullgirls forum the very next day, breaking the NDA immediately and making it so that Lab Zero couldn’t use the character at all.
Don’t be (Red) Cross with me: One of the characters included in the base game of Skullgirls is Valentine. As you can tell, the two biggest features of her character are her being a nurse and a ninja - as such, her costume is decorated with red crosses. This was upsetting to the real Red Cross, which fights hard to prevent its trademark from being associated with violence - as such, when they came to the Skullgirls publisher demanding a change, all red crosses in the game had to be changed to magenta.
#FucKonami: In November 2013, due to Konami barely helping at all with the publishing process for Skullgirls (they refused to greenlight any patch or DLC until Lab Zero tested it itself on their own time and money, they didn’t help with Microsoft’s certification process for Xbox, etc), Lab Zero dissolved their publishing agreement. This led to a massive snafu where, due to the dissolution, the original Skullgirls was taken down on consoles, and Lab Zero had to scramble to get a new publisher on the consoles side and then reupload the game as Skullgirls: Encore. It was a tangled web of issues which the above YouTube video relays, but required certification from both console storefronts and even the Japan storefront, as their publisher there was also coincidentally being dissolved at the same time without Lab Zero knowing.
EVO 2014: During one of the largest fighting game tournaments of 2014, Skullgirls was promised a space for airing their tournament stream by controller distributor Madcatz. Lab Zero and Autumn provided a pot for the tourney, and everything was smooth sailing - until a multitude of delays made it so that the entire time Skullgirls had for streaming was replaced with Tekken tournaments. By the time these issues were fixed, only the final four matches were able to be shown.
What’s the worst kind of ship? Censor-SHIP!: In April 2015, one of the patches of Skullgirls altered the animation of some characters, which according to Lab Zero themselves was because of their own artistic values (while they admitted that panty shots in a fighting game comprised entirely of girls is unavoidable, they didn’t want to go out of their way to show them). As you might expect, this led to a massive onslaught of negative Steam reviews and caustic tweets from people who abhor censorship of any kind. Funnily enough, this brigade started around October, six months after the changes were made, and only via word of mouth - people didn’t even notice there was a change until someone told them about it.
Backer characters: As part of their Indiegogo campaign, some of the highest-paying backers could have their original characters put in the background of some custom stages. Lab Zero warned these backers that these stages would be a casino and a ballroom, respectively, so their OCs should ideally be designed with a formal flair. Some backers did follow this unspoken rule - ZONE, a notoriously NSFW Flash animator who helped work on the DLC characters, made a perfectly formal look for his mascot Zone-tan. As for the others, well...
SonicFox: This isn’t included in the compilation video mentioned above as this occurred way after all the initial Skullgirls drama. Basically, SonicFox is a five-time EVO champion and one of the best Skullgirls players in the world. In May 2020, after Skullgirls was mostly complete, they were given a cameo in Skullgirls’ training stage. Of note is that SonicFox is black, non-binary, and a furry, and the character added to the game was their fursona, who has a trans rights flag in the inside of their jacket you can only see for like one frame. People reacted as you would expect. Also, one of the original backers requested to change their character as they were now transitioning, which didn’t get as much flak, so that’s nice I guess.
So as you can see, Skullgirls had a menagerie of problems and issues during its dev time. However, their Skullgirls curse seemed to have faded away, as they had a new game in store. If I was Indivisible Indivisible was a new project of Lab Zero, announced in 2015 as Skullgirls DLC production was nearing an end. Billed as a platformer RPG similar to games like Valkyrie Profile, it would tell the story of Ajna, a young girl whose town is stricken by tragedy and she finds out that she’s a portion of the god of creation, who has grown discontent with the world and wishes to remake it anew. Its Indiegogo campaign focused on Incarnations, party members who came from a variety of cultures, religions, and demographics not usually represented in popular culture. And as you can see by the fact that it got over two million dollars in funding, people were excited to see what Lab Zero could do. They even got enough funding to get Studio Trigger, of anime fame, to create the opening for the game. Of course, it wouldn’t be Lab Zero without the occasional issue here and there. As shown above, some Incarnations were changed or scrapped during development, which irked some who backed because of that character specifically (not naming any names, but look in the incarnation list and see if you notice any). Backer characters were included again, and although there were more places to add them so they didn’t look out of place, you still had the occasional few that did. Critics liked the art and presentation of the game, but disliked some gameplay issues: the second half of the game became a cakewalk once you progressed far enough, it was a bit of a pain to go from one end of the map to another, especially for side quests, and a bunch of party members simply weren’t complete. Most egregiously of all, the Nintendo Switch version of the game was ported by a different company and released before Lab Zero was even aware of it - which forced them to scramble again to patch it up so it was on par with other consoles. Still, it was a better situation they were in than when Skullgirls started. They had a legit publisher in 505 Games, people were satisfied with the base game, and Mike Z mentioned how the base game would continue to be refined with gameplay changes, small additions, and guest incarnations from other indie games.NBC even announced that Indivisible would be adapted into a television program for their Peacock streaming service. Things were looking up for Lab Zero. Everything goes wrong... AGAIN During the production of Indivisible, Alex Ahad was let go by Lab Zero. Not much is mentioned about it except that he was growing increasingly hostile, making it difficult to work with him, and his art was not meeting the standards for the game. He left, tried to sue Lab Zero, and eventually agreed to a sizable settlement. Mariel became the lead artistic director in his stead, and the art team had to be rearranged to compensate. Now, as Lab Zero was preparing to transition from being employee-owned, Mike Z was made the temporary head of the studio. In June of 2020, Mike Z did an “I can’t breathe” joke during a Skullgirls livestream just days after George Floyd’s death - he later apologized for this, claiming he was trying to bring attention to the issue. Soon, more peopleprovided proof that Mike Z has had a history of sexual harassment. Kinuko chimes in as well, noting that while she tolerated inappropriate behavior for years, when she talked to Mike Z about it, he blamed her for his actions. She talked with others in the team, who came to the conclusion that Zaimont had treated all of them like this. Some Lab Zero employees resigned on their own, while others pushed for Zaimont to resign. However, as Mike was still head of the studio, he dissolved the studio board and laid off the rest of the staff. So where does that leave everyone?
Ahad is still doing art on his own, and gets by with commissions and his Patreon.
Kinuko, as well as the majority of Lab Zero, created a new studio called Future Club, which has promised to create new titles with the same art style they refined from Skullgirls and Indivisible.
Autumn Games still own the rights to Skullgirls, and with the help of some former Lab Zero devs, created a mobile version of the game. It’s surprisingly not bad, although it’s of course stuffed with microtransactions. However, they’ve apparently made enough to fund a completely new character for the game for both the mobile and console/PC versions.
After everything with Mike Z, 505 games put out a statement which signaled the end of all development of the game, leaving it unfinished. Mike Z has been suspended from Skullgirls streams and the like, making his future in the gaming world unclear.
There’s probably something I’ve missed in all of this, but yep. I backed them twice, both for Skullgirls and Indivisible. I don’t regret it, and I’m looking forward to whatever Future Club does, but I won’t lie - I’ll always miss what could have been.
Reading negative user reviews on metacritic for FTL is a blast
https://www.metacritic.com/game/pc/ftl-faster-than-light/user-reviews?sort-by=most-helpful&num_items=100&dist=negative I sometimes look up negative reviews for games/books/movies I like. I find it amusing that media I enjoy thoroughly can be despised by other people (of course with my nose in the air due to their obvious lack of good taste...). I thought I'd share some of FTL's negative user reviews, hopefully you'll find it as entertaining as I did. Each and every negative user review of FTL boils down to: it's not my fault that I lost, the game's unfair. This had me chuckling after reading that 90-something no-pause-hard-winstreak achievement that was recently posted here. Ctrl+F:ing "Luck", "Random" and "Frustr*" got a lot of hit, by the way. Some excerpts: "[...]your chances of winning a particular run are controlled very minimally by you. All you do is steer the ship and click on parts of enemy ships." "The game's set up is completely randomized, so much so to the point that it's completely unfair. It's quite possible to start a brand new game and die in a matter of moves, not because you are being stupid, not because you are a bad gamer, but simply because that's how the game generated." "This game sucks. Basically it's all about luck, no strategy nor skill is involved. Even on sale spare you this pain and use your money for something else... Anything else would be better, thrust [sic] me." "FTL can be perfectly summed up in two terms: Luck and RNG. That's it. 95% of this game is basically out of your control. Events are random. Outcomes are random. Upgrade materials and new items are random. Your weapon shots are random. It is all random. So all you can do is pray to the RNG gods for mercy throughout the game only for the final battle to completely destroy you because it is artificial difficulty in the highest magnitude. All that time wasted." "The single biggest factor in this game is luck. As every encounter is completely random it removes any real sort of skill or challenge from the game, or a sense of achievement to more accurate. When you do 'finish' it you realise it wasn't because you did anything in particular, but because you happened upon the right encounters" "Insanely overrated. Its basically a casino game where you get lucky and get the items you need or you simply dont and there isnt a thing you can do about it. " (Petition to add "Casino game" to Steam game tags please) We're probably not without fault, and I can sympathize -- I sometimes throw my hands in the air and yell "What!" when an early missile hits something it shouldn't hit, but I still find these emotional reviews a blast to read.
Illegal Tactics and DTCC/Prime Broker Complicity In Naked Shorting & Retail Shutdown of GME (DTCC/Prime Brokers decision makers need to be questioned at the 2/18 GameStop Congress hearing)
TLDR: GameStop’s Congress hearing is on Feb 18th, they need to investigate the Prime Brokers and DTCC for their complicity in enabling naked shorting within GME and by extension, potential collusion to shut down trading on Jan 28th, the day the short squeeze was going to kick off. (stick to the end for an analysis of some illegal tactics short side hedge funds have been using) Thesis: On the day the retail market for GME shut down on 1/28 (the day the short squeeze would’ve happened had there been no market intervention), DTCC (clearing house monopoly) shut down retail buying in order to protect itself and Prime Brokers (which privately own the DTCC) from being exposed to the consequences of being party to illegal activity. I believe Prime Brokers and DTCC need to be called to the GameStop hearing on February 18th to be questioned for their complicity in enabling illegal naked shorting of the GME stock, as well as potential collusion to shut out retail buyers on 1/28. In my previous post (which I recommend reading for some context) I explored the subject of rampant illegal naked shorting in GME, and how Prime Brokers (consisting of banks like Goldman, Morgan, etc) and DTCC would be complicit in the naked shorting. This in turn raises the thought experiment that they would be incentivized to do anything possible to prevent the short squeeze from happening on 1/28 because had the short squeeze happened, the shorts would go bankrupt and their Prime Brokers who lent them their naked shorted shares would need to cover the shares. This would not only represent a humongous capital expense for Prime Brokers, the culpability of Prime Brokers (and that of the DTCC) in this situation would also have likely been exposed as well. A quick primer on what a Prime Broker is: Prime Brokers are essentially the service side of the short- selling business. They lend out securities and cash, you can think of them as the “house” in a casino: They provide a gambler with markers to play and to manage his winnings. According to Matt Taibi, “Under the original concept, if a hedge fund that wanted to short a stock they would first need to “locate” the stock with his Prime Broker but as time passed, Prime Brokers increasingly allowed their hedge-fund customers to use automated systems and “locate” the stock themselves, and what this does is enable short-sellers to sell stock without delivering and thereby perform naked shorts with counterfeit shares. (source: https://web.archive.org/web/20210213125246/https://www.rollingstone.com/feature/wall-streets-naked-swindle-194908/). (I highly recommend you read Matt Taibi’s article on naked shorting and how it was used to take down Bear Stearns and Lehman Brothers. There are so many parallels with GME it’s hard to miss. It’s amazing to consider that 12 years after this article was published and brought to public awareness, the problem of naked shorting still exists as a systemic issue.) Prime Brokers have a long history of being associated with naked shorting. To highlight a few examples, Prime Brokers like Merill Lynch and Goldman have long been implicated for naked shorting Overstock.com (https://www.rollingstone.com/politics/politics-news/accidentally-released-and-incredibly-embarrassing-documents-show-how-goldman-et-al-engaged-in-naked-short-selling-244035/, https://www.forbes.com/2007/02/02/naked-short-suit-overstock-biz-cx_lm_0202naked.html?sh=271400d1763f). Another example is when Goldman’s Prime Brokerage was implicated by the SEC in 2016 and got away with a small fine of 16 million (Source: https://www.sec.gov/news/pressrelease/2016-9.html). An example that very recently came in the news is a story where CIBC, BOA, UBS and TD Bank Prime Brokerages are accused of facilitating naked short selling and using counterfeit stock to attack and bring the stock price of a company from $34.77 to $1.83 (Source: https://www.securitiesfinancetimes.com/securitieslendingnews/industryarticle.php?article_id=224548). The DTCC also has a very long history of being associated with naked shorting. The Wall Street Journal noted that 1% of the DTCC’s volume end in failure to deliver which “have put DTCC in the middle of a long-running fight over whether unscrupulous investors are driving down hundreds of small companies' share prices… DTCC has turned a blind eye to the naked-shorting problem. ” (Source: https://www.wsj.com/articles/SB118359867562957720). The DTCC has also had numerous complaints submitted to the SEC for enabling naked shorting (source: https://www.sec.gov/rules/proposed/s72303/decosta122203.htm) and have been sued tens or hundreds of times for assisting naked shorts (source: https://smithonstocks.com/part-3-in-series-on-illegal-naked-shortings-role-in-stock-manipulation-prime-brokers-and-the-dtcc-have-a-troubling-monopoly-on-clearing-and-settling-stock-trades/ and http://counterfeitingstock.com/CS2.0/CounterfeitingStock.html and https://www.wsj.com/articles/SB118359867562957720) On 1/28 Robinhood received a letter from the DTCC at 4 am requiring them to halt trading or come up with 3 billion dollars, which Robinhood did not have, and therefore with one swoop of the pen the DTCC shut down buy side momentum but strangely allowed selling. Retail investors were shut out of the market and as any student of microeconomics would know, by shutting buy but only allowing sell, the price is bound to fall. Meanwhile while hedge funds were able to keep trading not only in the market but also crosstrade in the dark pools (“private” stock markets that retail is shut out of, more on this later), and use this crucial lifeline given to them by the DTCC to prevent the squeeze from happening that day. With retail abruptly being shut out from buy (even cash accounts were shut out, which didn’t make sense) and only allowed to sell, almost everyone could smell manipulation was afoot (which triggered the Congress hearing) and the most of the blame was pointed at Robinhood. Personally and in hindsight, I believe Robinhood was just a willing scapegoat. When we think about who had the most to lose if a short squeeze occurred, I’ll narrow it down to three entities, Shorts and their stakeholders (ie Citadel), Prime Brokers and the DTCC. It’s important to remember that the actual impetus that triggered the shutdown of the market for retail investors came from the DTCC. Working backwards, if you consider that GME was rampantly naked shorted and DTCC and Prime Brokers would have to be complicit in it, I believe the DTCC, Primer Brokers and possibly Citadel (who provides 40% of Robinhood’s revenue) brazenly manipulated the market on 1/28 by shutting down purchasing for retail buyers to prevent the squeeze from being squoze on that day as doing so would be catastrophic for all aforementioned parties involved. I believe that on the upcoming Gamestop Congress hearings the Financial Services Committee needs to call on decision makers of DTCC and Prime Brokers explore their role and complicity in the shut out of retail buyers that day as well as being enablers of naked shorting in GME. An interesting thought experiment: On 1/28 when the price was 450+ and shorts were likely under 100, if we assume prime brokers allowed naked shorting in GME, then when the squeeze was about to happen (or happening), if Prime Brokers had margin had called the shorts, they would presumably also also gone down because shorts would not be able to pay in that event and the brokers would be holding the bag. By that logic, they have every incentive in this case to NOT to margin call and instead the most logical option would probably would have been to make a backroom deal, which is what I personally think most likely happened. If you’ve read up to this point, you might be thinking what can I do about this? I am aware that there a lot of cynicism that we can’t do anything, that there will be no justice for retail investors who were harmed this situation, and that institutions and people in power will prevent anything from being done. I feel this sometimes too, but remember: A single voice can be drowned out, but if we all speak together then we will make our voice heard. Ape Strong Together. With the hearing coming up on February 18th, I highly recommend you email and tweet the representatives involved in the hearing, as well as your own district representatives, and urge them to read into the factors presented in this post and call the DTCC and Prime Brokers to the hearingl. They need to be questioned on why GME has so many counterfeit shares, failed to deliver, their complicity in naked shorting, and investigated for their role in the retail shut down of 1/28. Below are 4 members of congress I recommend both tweeting and emailing Alexandria Ocasio-Cortez https://twitter.com/AOC, email: [[email protected]](mailto:[email protected]) Al Green https://twitter.com/repalgreen, email: [[email protected]](mailto:[email protected]) Maxine Waters https://twitter.com/maxinewaters, email: [[email protected]](mailto:[email protected]) Nancy Pelosi Email: https://twitter.com/SpeakerPelosi email: [[email protected]](mailto:[email protected]). And you can find other members of Financial Services Committee here to reach out to: https://financialservices.house.gov/about/committee-membership.htm What follows should probably be a separate post, but I will take the opportunity to summarize some of the illegal tactics that shorts have been identified to be using in their war with retail investors. Note that this may not be an exhaustive list and there may be newer tactics deployed in the future. Retail investors might not have the same tricks, resources and willingness to break the law for profit as hedgies do, but my hope and belief is that if we pool our knowledge and analysis, we will figure out their game and effectively adapt. Feel free to forward the list below to any representatives and lawmakers if you concur that these tactics were used: Rampant Naked Shorting - With the extremely high number of Fail to Delivers (FTID) , short interest being as high as 226% recently, and institutions alone holding a staggering 177% of the total float (likely due in large part to counterfeit shares), signs strongly point to GME being rampant with naked shorts and counterfeit shares. I believe the original goal of shorts was to drive GME to bankruptcy with these naked shorts, using the laddering of naked shorts (aka short ladder attack), executed with the help of counterfeit stock which is a classic and reliable method of driving down the stock price. I believe the GME stock has seen relentlessly aggressive short attacks, especially on the week of Monday February 1st, which drove the stock price down and triggered panic selling. Ladder Attacks with the help of Dark Pools - Another identified method of ladder attacks was identified to come from crosstrading with darkpools (the stock market has its own private stock exchange where institutions can trade…). Essentially darkpools are private stock markets retail investors do not have access to, where short side funds can purchase securities “off market” and then sell “on-market”, with the effect of creating a lot more downward pressure on the market without the upward pressure from buying. Illegally masking shorts with synthetic longs. Another tactic shorts are suspected of using in GME is the use of illegally using options to evade short positions in violation of Reg SHO which SEC describes in this risk alert and which I elaborate in this post. Essentially it’s the use of using options to create synthetic longs to illegally and artificially cover and prolong short positions and at same time obscuring the true short interest %. If you consider that it would be far more profitable for shorts to not cover at high prices but instead ladder attack the price and wait for retail investors to lose interest and close their shorts at as low of a price as possible, then you can see why this strategy would be very effective. Using way out-of-money call options to obscure true short interest. You may have heard about the 43 million worth of 800 dollar calls purchased when the price was 100 and found it odd. Later it was identified as a tactic to cheaply purchase synthetic call options (since at 800 its way out of money) to obscure their short positions (with the added benefit of hedging at 800 if a squeeze does happen) One thing I want to note, particularly to legislators at the GameStop hearing: Retail investors were not incited to pump GME. Retail investors spotted a unique Short Squeeze opportunity created by the greed of short side hedge funds, whereby GameStop was being abusively naked shorted with the goal of bringing it to bankruptcy, and hedge funds were so greedy about it that they shorted the company with a short interest of 226% of float, meaning A LOT of counterfeit shares were being used to short the company. Retail investors saw this as an opportunity to short squeeze the hedge fund shorters, which is a legal and legitimate investment strategy. The short squeeze would have happened had everyone played fair, but instead, financial institutions who were culpable to the naked shorting intervened and shut down retail buying, hurting the retail investors and successfully manipulating the market. The investment itself was in my opinion a sound decision based on the short squeeze, but in hindsight retail investors did not seriously consider the risk of the market would be blatantly and publicly manipulated and that the market would be rigged against them. If this post was useful (and I hope it was! Gave up my Friday night to write this for you Apes), please upvote for visibility and share it far and wide. The GameStop hearings could be a first step and hope towards legislative change, and it’s extremely important that the right story is told at those hearings (and by the right story I mean the real truth of what happened.) I hope the truly culpable parties are investigated and brought to justice. Again, I know many of us feel cynical that anything meaning will be done towards finding justice against the lawbreakers in this case, but if you feel even an ounce of injustice or empathy at how retail investors were unfairly harmed in the course of investing in GME, I strongly urge you to contact a legislator associated with the GameStop hearings and bring this to their attention so they can review this case with more complete information. In addition I recommend you to contact the SEC and any journalist you know or via journalist tip lines. It’s not going to be easy but the more awareness we raise the higher the likelihood our voices will be heard and positive change will be made. As we navigate the rocky waters ahead, I’ll gift you with a favorite quote of mine: The only difference between a nightmare and a dream is how big your balls are. 🚀🚀🚀 Disclaimer: I am not an investment advisor, I just like the stock. Ps. If you’ve read to the end, I’ll leave you with a few more thoughts and reminders: - If I were to distill life into one thing, it would be to never lose hope. - Remember that if you’ve lost money in any way shape or form, don’t be depressed, money can always be made back and the important thing is to maintain a good attitude. - Only invest what you can afford to lose. - Perhaps the most important factor in good investing is patience. If you’d like to read more about counterfeiting stocks this is a good place to start http://counterfeitingstock.com/CS2.0/CounterfeitingStock.html
Illegal Tactics and DTCC/Prime Broker Complicity In Naked Shorting & Retail Shutdown of GME (DTCC/Prime Brokers decision makers need to be questioned at the 2/18 GameStop Congress hearing)
TLDR: GameStop’s Congress hearing is on Feb 18th, they need to investigate the Prime Brokers and DTCC for their complicity in enabling naked shorting within GME and by extension, potential collusion to shut down trading on Jan 28th, the day the short squeeze was going to kick off. (stick to the end for an analysis of some illegal tactics short side hedge funds have been using) Thesis: On the day the retail market for GME shut down on 1/28 (the day the short squeeze would’ve happened had there been no market intervention), DTCC (clearing house monopoly) shut down retail buying in order to protect itself and Prime Brokers (which privately own the DTCC) from being exposed to the consequences of being party to illegal activity. I believe Prime Brokers and DTCC need to be called to the GameStop hearing on February 18th to be questioned for their complicity in enabling illegal naked shorting of the GME stock, as well as potential collusion to shut out retail buyers on 1/28. In my previous post (which I recommend reading for some context) I explored the subject of rampant illegal naked shorting in GME, and how Prime Brokers (consisting of banks like Goldman, Morgan, etc) and DTCC would be complicit in the naked shorting. This in turn raises the thought experiment that they would be incentivized to do anything possible to prevent the short squeeze from happening on 1/28 because had the short squeeze happened, the shorts would go bankrupt and their Prime Brokers who lent them their naked shorted shares would need to cover the shares. This would not only represent a humongous capital expense for Prime Brokers, the culpability of Prime Brokers (and that of the DTCC) in this situation would also have likely been exposed as well. A quick primer on what a Prime Broker is: Prime Brokers are essentially the service side of the short- selling business. They lend out securities and cash, you can think of them as the “house” in a casino: They provide a gambler with markers to play and to manage his winnings. According to Matt Taibi, “Under the original concept, if a hedge fund that wanted to short a stock they would first need to “locate” the stock with his Prime Broker but as time passed, Prime Brokers increasingly allowed their hedge-fund customers to use automated systems and “locate” the stock themselves, and what this does is enable short-sellers to sell stock without delivering and thereby perform naked shorts with counterfeit shares. (source: https://web.archive.org/web/20210213125246/https://www.rollingstone.com/feature/wall-streets-naked-swindle-194908/). (I highly recommend you read Matt Taibi’s article on naked shorting and how it was used to take down Bear Stearns and Lehman Brothers. There are so many parallels with GME it’s hard to miss. It’s amazing to consider that 12 years after this article was published and brought to public awareness, the problem of naked shorting still exists as a systemic issue.) Prime Brokers have a long history of being associated with naked shorting. To highlight a few examples, Prime Brokers like Merill Lynch and Goldman have long been implicated for naked shorting Overstock.com (https://www.rollingstone.com/politics/politics-news/accidentally-released-and-incredibly-embarrassing-documents-show-how-goldman-et-al-engaged-in-naked-short-selling-244035/, https://www.forbes.com/2007/02/02/naked-short-suit-overstock-biz-cx_lm_0202naked.html?sh=271400d1763f). Another example is when Goldman’s Prime Brokerage was implicated by the SEC in 2016 and got away with a small fine of 16 million (Source: https://www.sec.gov/news/pressrelease/2016-9.html). An example that very recently came in the news is a story where CIBC, BOA, UBS and TD Bank Prime Brokerages are accused of facilitating naked short selling and using counterfeit stock to attack and bring the stock price of a company from $34.77 to $1.83 (Source: https://www.securitiesfinancetimes.com/securitieslendingnews/industryarticle.php?article_id=224548). The DTCC also has a very long history of being associated with naked shorting. The Wall Street Journal noted that 1% of the DTCC’s volume end in failure to deliver which “have put DTCC in the middle of a long-running fight over whether unscrupulous investors are driving down hundreds of small companies' share prices… DTCC has turned a blind eye to the naked-shorting problem. ” (Source: https://www.wsj.com/articles/SB118359867562957720). The DTCC has also had numerous complaints submitted to the SEC for enabling naked shorting (source: https://www.sec.gov/rules/proposed/s72303/decosta122203.htm) and have been sued tens or hundreds of times for assisting naked shorts (source: https://smithonstocks.com/part-3-in-series-on-illegal-naked-shortings-role-in-stock-manipulation-prime-brokers-and-the-dtcc-have-a-troubling-monopoly-on-clearing-and-settling-stock-trades/ and http://counterfeitingstock.com/CS2.0/CounterfeitingStock.html and https://www.wsj.com/articles/SB118359867562957720) On 1/28 Robinhood received a letter from the DTCC at 4 am requiring them to halt trading or come up with 3 billion dollars, which Robinhood did not have, and therefore with one swoop of the pen the DTCC shut down buy side momentum but strangely allowed selling. Retail investors were shut out of the market and as any student of microeconomics would know, by shutting buy but only allowing sell, the price is bound to fall. Meanwhile while hedge funds were able to keep trading not only in the market but also crosstrade in the dark pools (“private” stock markets that retail is shut out of, more on this later), and use this crucial lifeline given to them by the DTCC to prevent the squeeze from happening that day. With retail abruptly being shut out from buy (even cash accounts were shut out, which didn’t make sense) and only allowed to sell, almost everyone could smell manipulation was afoot (which triggered the Congress hearing) and the most of the blame was pointed at Robinhood. Personally and in hindsight, I believe Robinhood was just a willing scapegoat. When we think about who had the most to lose if a short squeeze occurred, I’ll narrow it down to three entities, Shorts and their stakeholders (ie Citadel), Prime Brokers and the DTCC. It’s important to remember that the actual impetus that triggered the shutdown of the market for retail investors came from the DTCC. Working backwards, if you consider that GME was rampantly naked shorted and DTCC and Prime Brokers would have to be complicit in it, I believe the DTCC, Primer Brokers and possibly Citadel (who provides 40% of Robinhood’s revenue) brazenly manipulated the market on 1/28 by shutting down purchasing for retail buyers to prevent the squeeze from being squoze on that day as doing so would be catastrophic for all aforementioned parties involved. I believe that on the upcoming Gamestop Congress hearings the Financial Services Committee needs to call on decision makers of DTCC and Prime Brokers explore their role and complicity in the shut out of retail buyers that day as well as being enablers of naked shorting in GME. An interesting thought experiment: On 1/28 when the price was 450+ and shorts were likely under 100, if we assume prime brokers allowed naked shorting in GME, then when the squeeze was about to happen (or happening), if Prime Brokers had margin had called the shorts, they would presumably also also gone down because shorts would not be able to pay in that event and the brokers would be holding the bag. By that logic, they have every incentive in this case to NOT to margin call and instead the most logical option would probably would have been to make a backroom deal, which is what I personally think most likely happened. If you’ve read up to this point, you might be thinking what can I do about this? I am aware that there a lot of cynicism that we can’t do anything, that there will be no justice for retail investors who were harmed this situation, and that institutions and people in power will prevent anything from being done. I feel this sometimes too, but remember: A single voice can be drowned out, but if we all speak together then we will make our voice heard. Ape Strong Together. With the hearing coming up on February 18th, I highly recommend you email and tweet the representatives involved in the hearing, as well as your own district representatives, and urge them to read into the factors presented in this post and call the DTCC and Prime Brokers to the hearingl. They need to be questioned on why GME has so many counterfeit shares, failed to deliver, their complicity in naked shorting, and investigated for their role in the retail shut down of 1/28. Below are 4 members of congress I recommend both tweeting and emailing Alexandria Ocasio-Cortez https://twitter.com/AOC, email: [[email protected]](mailto:[email protected]) Al Green Al Green https://twitter.com/repalgreen, email: [[email protected]](mailto:[email protected]) , email: [[email protected]](mailto:[email protected]) Maxine Waters https://twitter.com/maxinewaters, email: [[email protected]](mailto:[email protected]) Nancy Pelosi Email: https://twitter.com/SpeakerPelosi email: [[email protected]](mailto:[email protected]). And you can find other members of Financial Services Committee here to reach out to: https://financialservices.house.gov/about/committee-membership.htm What follows should probably be a separate post, but I will take the opportunity to summarize some of the illegal tactics that shorts have been identified to be using in their war with retail investors. Note that this may not be an exhaustive list and there may be newer tactics deployed in the future. Retail investors might not have the same tricks, resources and willingness to break the law for profit as hedgies do, but my hope and belief is that if we pool our knowledge and analysis, we will figure out their game and effectively adapt. Feel free to forward the list below to any representatives and lawmakers if you concur that these tactics were used: Rampant Naked Shorting - With the extremely high number of Fail to Delivers (FTID) , short interest being as high as 226% recently, and institutions alone holding a staggering 177% of the total float (likely due in large part to counterfeit shares), signs strongly point to GME being rampant with naked shorts and counterfeit shares. I believe the original goal of shorts was to drive GME to bankruptcy with these naked shorts, using the laddering of naked shorts (aka short ladder attack), executed with the help of counterfeit stock which is a classic and reliable method of driving down the stock price. I believe the GME stock has seen relentlessly aggressive short attacks, especially on the week of Monday February 1st, which drove the stock price down and triggered panic selling. Ladder Attacks with the help of Dark Pools - Another identified method of ladder attacks was identified to come from crosstrading with darkpools (the stock market has its own private stock exchange where institutions can trade…). Essentially darkpools are private stock markets retail investors do not have access to, where short side funds can purchase securities “off market” and then sell “on-market”, with the effect of creating a lot more downward pressure on the market without the upward pressure from buying. Illegally masking shorts with synthetic longs. Another tactic shorts are suspected of using in GME is the use of illegally using options to evade short positions in violation of Reg SHO which SEC describes in this risk alert and which I elaborate in this post. Essentially it’s the use of using options to create synthetic longs to illegally and artificially cover and prolong short positions and at same time obscuring the true short interest %. If you consider that it would be far more profitable for shorts to not cover at high prices but instead ladder attack the price and wait for retail investors to lose interest and close their shorts at as low of a price as possible, then you can see why this strategy would be very effective. Using way out-of-money call options to obscure true short interest. You may have heard about the 43 million worth of 800 dollar calls purchased when the price was 100 and found it odd. Later it was identified as a tactic to cheaply purchase synthetic call options (since at 800 its way out of money) to obscure their short positions (with the added benefit of hedging at 800 if a squeeze does happen) One thing I want to note, particularly to legislators at the GameStop hearing: Retail investors were not incited to pump GME. Retail investors spotted a unique Short Squeeze opportunity created by the greed of short side hedge funds, whereby GameStop was being abusively naked shorted with the goal of bringing it to bankruptcy, and hedge funds were so greedy about it that they shorted the company with a short interest of 226% of float, meaning A LOT of counterfeit shares were being used to short the company. Retail investors saw this as an opportunity to short squeeze the hedge fund shorters, which is a legal and legitimate investment strategy. The short squeeze would have happened had everyone played fair, but instead, financial institutions who were culpable to the naked shorting intervened and shut down retail buying, hurting the retail investors and successfully manipulating the market. The investment itself was in my opinion a sound decision based on the short squeeze, but in hindsight retail investors did not seriously consider the risk of the market would be blatantly and publicly manipulated and that the market would be rigged against them. If this post was useful (and I hope it was! Gave up my Friday night to write this for you Apes), please upvote for visibility and share it far and wide. The GameStop hearings could be a first step and hope towards legislative change, and it’s extremely important that the right story is told at those hearings (and by the right story I mean the real truth of what happened.) I hope the truly culpable parties are investigated and brought to justice. Again, I know many of us feel cynical that anything meaning will be done towards finding justice against the lawbreakers in this case, but if you feel even an ounce of injustice or empathy at how retail investors were unfairly harmed in the course of investing in GME, I strongly urge you to contact a legislator associated with the GameStop hearings and bring this to their attention so they can review this case with more complete information. In addition I recommend you to contact the SEC and any journalist you know or via journalist tip lines. It’s not going to be easy but the more awareness we raise the higher the likelihood our voices will be heard and positive change will be made. As we navigate the rocky waters ahead, I’ll gift you with a favorite quote of mine: The only difference between a nightmare and a dream is how big your balls are. 🚀🚀🚀 Disclaimer: I am not an investment advisor, I just like the stock. Ps. If you’ve read to the end, I’ll leave you with a few more thoughts and reminders: - If I were to distill life into one thing, it would be to never lose hope. - Remember that if you’ve lost money in any way shape or form, don’t be depressed, money can always be made back and the important thing is to maintain a good attitude. - Only invest what you can afford to lose. - Perhaps the most important factor in good investing is patience. If you’d like to read more about counterfeiting stocks this is a good place to start http://counterfeitingstock.com/CS2.0/CounterfeitingStock.html Note: This is a re-post for visibility
Illegal Tactics and DTCC/Prime Broker Complicity In Naked Shorting & Retail Shutdown of GME (DTCC/Prime Brokers decision makers need to be questioned at the 2/18 GameStop Congress hearing)
TLDR: GameStop’s Congress hearing is on Feb 18th, they need to investigate the Prime Brokers and DTCC for their complicity in enabling naked shorting within GME and by extension, potential collusion to shut down trading on Jan 28th, the day the short squeeze was going to kick off. (stick to the end for an analysis of some illegal tactics short side hedge funds have been using) Thesis: On the day the retail market for GME shut down on 1/28 (the day the short squeeze would’ve happened had there been no market intervention), DTCC (clearing house monopoly) shut down retail buying in order to protect itself and Prime Brokers (which privately own the DTCC) from being exposed to the consequences of being party to illegal activity. I believe Prime Brokers and DTCC need to be called to the GameStop hearing on February 18th to be questioned for their complicity in enabling illegal naked shorting of the GME stock, as well as potential collusion to shut out retail buyers on 1/28. In my previous post (which I recommend reading for some context) I explored the subject of rampant illegal naked shorting in GME, and how Prime Brokers (consisting of banks like Goldman, Morgan, etc) and DTCC would be complicit in the naked shorting. This in turn raises the thought experiment that they would be incentivized to do anything possible to prevent the short squeeze from happening on 1/28 because had the short squeeze happened, the shorts would go bankrupt and their Prime Brokers who lent them their naked shorted shares would need to cover the shares. This would not only represent a humongous capital expense for Prime Brokers, the culpability of Prime Brokers (and that of the DTCC) in this situation would also have likely been exposed as well. A quick primer on what a Prime Broker is: Prime Brokers are essentially the service side of the short- selling business. They lend out securities and cash, you can think of them as the “house” in a casino: They provide a gambler with markers to play and to manage his winnings. According to Matt Taibi, “Under the original concept, if a hedge fund that wanted to short a stock they would first need to “locate” the stock with his Prime Broker but as time passed, Prime Brokers increasingly allowed their hedge-fund customers to use automated systems and “locate” the stock themselves, and what this does is enable short-sellers to sell stock without delivering and thereby perform naked shorts with counterfeit shares. (source: https://web.archive.org/web/20210213125246/https://www.rollingstone.com/feature/wall-streets-naked-swindle-194908/). (I highly recommend you read Matt Taibi’s article on naked shorting and how it was used to take down Bear Stearns and Lehman Brothers. There are so many parallels with GME it’s hard to miss. It’s amazing to consider that 12 years after this article was published and brought to public awareness, the problem of naked shorting still exists as a systemic issue.) Prime Brokers have a long history of being associated with naked shorting. To highlight a few examples, Prime Brokers like Merill Lynch and Goldman have long been implicated for naked shorting Overstock.com (https://www.rollingstone.com/politics/politics-news/accidentally-released-and-incredibly-embarrassing-documents-show-how-goldman-et-al-engaged-in-naked-short-selling-244035/, https://www.forbes.com/2007/02/02/naked-short-suit-overstock-biz-cx_lm_0202naked.html?sh=271400d1763f). Another example is when Goldman’s Prime Brokerage was implicated by the SEC in 2016 and got away with a small fine of 16 million (Source: https://www.sec.gov/news/pressrelease/2016-9.html). An example that very recently came in the news is a story where CIBC, BOA, UBS and TD Bank Prime Brokerages are accused of facilitating naked short selling and using counterfeit stock to attack and bring the stock price of a company from $34.77 to $1.83 (Source: https://www.securitiesfinancetimes.com/securitieslendingnews/industryarticle.php?article_id=224548). The DTCC also has a very long history of being associated with naked shorting. The Wall Street Journal noted that 1% of the DTCC’s volume end in failure to deliver which “have put DTCC in the middle of a long-running fight over whether unscrupulous investors are driving down hundreds of small companies' share prices… DTCC has turned a blind eye to the naked-shorting problem. ” (Source: https://www.wsj.com/articles/SB118359867562957720). The DTCC has also had numerous complaints submitted to the SEC for enabling naked shorting (source: https://www.sec.gov/rules/proposed/s72303/decosta122203.htm) and have been sued tens or hundreds of times for assisting naked shorts (source: https://smithonstocks.com/part-3-in-series-on-illegal-naked-shortings-role-in-stock-manipulation-prime-brokers-and-the-dtcc-have-a-troubling-monopoly-on-clearing-and-settling-stock-trades/ and http://counterfeitingstock.com/CS2.0/CounterfeitingStock.html and https://www.wsj.com/articles/SB118359867562957720) On 1/28 Robinhood received a letter from the DTCC at 4 am requiring them to halt trading or come up with 3 billion dollars, which Robinhood did not have, and therefore with one swoop of the pen the DTCC shut down buy side momentum but strangely allowed selling. Retail investors were shut out of the market and as any student of microeconomics would know, by shutting buy but only allowing sell, the price is bound to fall. Meanwhile while hedge funds were able to keep trading not only in the market but also crosstrade in the dark pools (“private” stock markets that retail is shut out of, more on this later), and use this crucial lifeline given to them by the DTCC to prevent the squeeze from happening that day. With retail abruptly being shut out from buy (even cash accounts were shut out, which didn’t make sense) and only allowed to sell, almost everyone could smell manipulation was afoot (which triggered the Congress hearing) and the most of the blame was pointed at Robinhood. Personally and in hindsight, I believe Robinhood was just a willing scapegoat. When we think about who had the most to lose if a short squeeze occurred, I’ll narrow it down to three entities, Shorts and their stakeholders (ie Citadel), Prime Brokers and the DTCC. It’s important to remember that the actual impetus that triggered the shutdown of the market for retail investors came from the DTCC. Working backwards, if you consider that GME was rampantly naked shorted and DTCC and Prime Brokers would have to be complicit in it, I believe the DTCC, Primer Brokers and possibly Citadel (who provides 40% of Robinhood’s revenue) brazenly manipulated the market on 1/28 by shutting down purchasing for retail buyers to prevent the squeeze from being squoze on that day as doing so would be catastrophic for all aforementioned parties involved. I believe that on the upcoming Gamestop Congress hearings the Financial Services Committee needs to call on decision makers of DTCC and Prime Brokers explore their role and complicity in the shut out of retail buyers that day as well as being enablers of naked shorting in GME. An interesting thought experiment: On 1/28 when the price was 450+ and shorts were likely under 100, if we assume prime brokers allowed naked shorting in GME, then when the squeeze was about to happen (or happening), if Prime Brokers had margin had called the shorts, they would presumably also also gone down because shorts would not be able to pay in that event and the brokers would be holding the bag. By that logic, they have every incentive in this case to NOT to margin call and instead the most logical option would probably would have been to make a backroom deal, which is what I personally think most likely happened. If you’ve read up to this point, you might be thinking what can I do about this? I am aware that there a lot of cynicism that we can’t do anything, that there will be no justice for retail investors who were harmed this situation, and that institutions and people in power will prevent anything from being done. I feel this sometimes too, but remember: A single voice can be drowned out, but if we all speak together then we will make our voice heard. Ape Strong Together. With the hearing coming up on February 18th, I highly recommend you email and tweet the representatives involved in the hearing, as well as your own district representatives, and urge them to read into the factors presented in this post and call the DTCC and Prime Brokers to the hearingl. They need to be questioned on why GME has so many counterfeit shares, failed to deliver, their complicity in naked shorting, and investigated for their role in the retail shut down of 1/28. Below are 4 members of congress I recommend both tweeting and emailing Alexandria Ocasio-Cortez https://twitter.com/AOC, email: [[email protected]](mailto:[email protected]) Al Green https://twitter.com/repalgreen, email: [[email protected]](mailto:[email protected]) Maxine Waters https://twitter.com/maxinewaters, email: [[email protected]](mailto:[email protected]) Nancy Pelosi Email: https://twitter.com/SpeakerPelosi email: [[email protected]](mailto:[email protected]). And you can find other members of Financial Services Committee here to reach out to: https://financialservices.house.gov/about/committee-membership.htm What follows should probably be a separate post, but I will take the opportunity to summarize some of the illegal tactics that shorts have been identified to be using in their war with retail investors. Note that this may not be an exhaustive list and there may be newer tactics deployed in the future. Retail investors might not have the same tricks, resources and willingness to break the law for profit as hedgies do, but my hope and belief is that if we pool our knowledge and analysis, we will figure out their game and effectively adapt. Feel free to forward the list below to any representatives and lawmakers if you concur that these tactics were used: Rampant Naked Shorting - With the extremely high number of Fail to Delivers (FTID) , short interest being as high as 226% recently, and institutions alone holding a staggering 177% of the total float (likely due in large part to counterfeit shares), signs strongly point to GME being rampant with naked shorts and counterfeit shares. I believe the original goal of shorts was to drive GME to bankruptcy with these naked shorts, using the laddering of naked shorts (aka short ladder attack), executed with the help of counterfeit stock which is a classic and reliable method of driving down the stock price. I believe the GME stock has seen relentlessly aggressive short attacks, especially on the week of Monday February 1st, which drove the stock price down and triggered panic selling. Ladder Attacks with the help of Dark Pools - Another identified method of ladder attacks was identified to come from crosstrading with darkpools (the stock market has its own private stock exchange where institutions can trade…). Essentially darkpools are private stock markets retail investors do not have access to, where short side funds can purchase securities “off market” and then sell “on-market”, with the effect of creating a lot more downward pressure on the market without the upward pressure from buying. Illegally masking shorts with synthetic longs. Another tactic shorts are suspected of using in GME is the use of illegally using options to evade short positions in violation of Reg SHO which SEC describes in this risk alert and which I elaborate in this post. Essentially it’s the use of using options to create synthetic longs to illegally and artificially cover and prolong short positions and at same time obscuring the true short interest %. If you consider that it would be far more profitable for shorts to not cover at high prices but instead ladder attack the price and wait for retail investors to lose interest and close their shorts at as low of a price as possible, then you can see why this strategy would be very effective. Using way out-of-money call options to obscure true short interest. You may have heard about the 43 million worth of 800 dollar calls purchased when the price was 100 and found it odd. Later it was identified as a tactic to cheaply purchase synthetic call options (since at 800 its way out of money) to obscure their short positions (with the added benefit of hedging at 800 if a squeeze does happen) One thing I want to note, particularly to legislators at the GameStop hearing: Retail investors were not incited to pump GME. Retail investors spotted a unique Short Squeeze opportunity created by the greed of short side hedge funds, whereby GameStop was being abusively naked shorted with the goal of bringing it to bankruptcy, and hedge funds were so greedy about it that they shorted the company with a short interest of 226% of float, meaning A LOT of counterfeit shares were being used to short the company. Retail investors saw this as an opportunity to short squeeze the hedge fund shorters, which is a legal and legitimate investment strategy. The short squeeze would have happened had everyone played fair, but instead, financial institutions who were culpable to the naked shorting intervened and shut down retail buying, hurting the retail investors and successfully manipulating the market. The investment itself was in my opinion a sound decision based on the short squeeze, but in hindsight retail investors did not seriously consider the risk of the market would be blatantly and publicly manipulated and that the market would be rigged against them. If this post was useful (and I hope it was! Gave up my Friday night to write this for you Apes), please upvote for visibility and share it far and wide. The GameStop hearings could be a first step and hope towards legislative change, and it’s extremely important that the right story is told at those hearings (and by the right story I mean the real truth of what happened.) I hope the truly culpable parties are investigated and brought to justice. Again, I know many of us feel cynical that anything meaning will be done towards finding justice against the lawbreakers in this case, but if you feel even an ounce of injustice or empathy at how retail investors were unfairly harmed in the course of investing in GME, I strongly urge you to contact a legislator associated with the GameStop hearings and bring this to their attention so they can review this case with more complete information. In addition I recommend you to contact the SEC and any journalist you know or via journalist tip lines. It’s not going to be easy but the more awareness we raise the higher the likelihood our voices will be heard and positive change will be made. As we navigate the rocky waters ahead, I’ll gift you with a favorite quote of mine: The only difference between a nightmare and a dream is how big your balls are. 🚀🚀🚀 Disclaimer: I am not an investment advisor, I just like the stock. Ps. If you’ve read to the end, I’ll leave you with a few more thoughts and reminders: - If I were to distill life into one thing, it would be to never lose hope. - Remember that if you’ve lost money in any way shape or form, don’t be depressed, money can always be made back and the important thing is to maintain a good attitude. - Only invest what you can afford to lose. - Perhaps the most important factor in good investing is patience. If you’d like to read more about counterfeiting stocks this is a good place to start http://counterfeitingstock.com/CS2.0/CounterfeitingStock.html
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