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I don’t know how superstitous the folks out in Utah are, but this Friday the 13th seems to have been a bad one for the Deep Capture crew.  Apparently has been down all day and still is as of 5:30pm EST.  A ping to the site timed out, so it’s not just a software glitch.

More updates when I care enough to check again.


They say you can’t keep a good man down, and apparently that also holds true for Mark Mitchell.  A post today on Silicon Investor reveals that our favorite desultory journalist is now saying that Deep Capture was “only half the story” and that a new piece of, er, journalism is being formed in his very-imitable-but-who-would-want-to style.

The featured thesis, at least for now, is that the Bernie Madoff scandal is, despite what you may have heard, actually a story about naked shorting.  And no, I’m not kidding.  And scarily enough, I suspect, neither is Mitchell.

Time will tell if I decide to journey through this new wilderness of verbage currently under construction.  I may seek out Bear Grylls for some advice in the meantime.

This entry may just be a one-off, given that it was entirely unplanned, but Jeff Matthews posted in his blog today about a frankly sickening display on the Deep Capture site accusing hedge funds of effectively killing US soldiers in Iraq, and I felt very strongly the need to link it up.

The logic, if you can call it that, is that because a certain defense contractor appeared on the Reg SHO list at one point, its subsequent demise was caused by naked shorting, which meant that our soldiers were prevented from getting vital lifesaving equipment by hedge funds.

Not content to point out the post hoc ergo propter hoc fallacy, Jeff busts the the whole thing from beginning to end, far more thoroughly than I ever could, so I’ll just defer to him.

Now, I don’t currently intend this as a new direction for this blog, as I have no interest in scouring the Deep Capture website on any kind of regular basis for latest on whatever they’ve decided to puke up.  But, you know, if I hear things…

Well I guess the silence speaks for itself.  The chopper has landed and I’ve stepped aboard, to return to the civilized world, albeit a world remarkably changed in the last twenty weeks.  But getting into that would be a topic for another blog.

As a parting gift, for those with enough morbid curiousity to care how the story ends, I’ve decided to do a one-sentence review of each of the remaining sections.

21. Mitchell recaps the story thus far, but phrases it in the hypothetical for some reason.
22. Roddy Boyd, who from Mitchell’s writings seems to be a habitual Bugs Bunny impressionist, is in the spotlight.
23. Gary Weiss, Sam Antar, Mr. Pink and Floyd Schneider each take their turn in the slime machine.
24. A section ostensibly devoted to Gary Weiss, but soon strays into Manuel Asensio and Ed Manfredonia, the latter of whom once offered a job Mitchell probably now wishes he’d taken.
25. Speaking of jobs, Mitchell recalls an event from his final days at CJR, when a fellow named Michael Wilkins showed up with a bundle of money in tow, after which Mitchell seems to decide he doesn’t want to talk about what happened.
26. We are introduced to Judd Bagley, cyberstalker extraordinaire.
27. An odd little tale about Gary Weiss, Ian Williams, their wives and the U.N.
28. A super-sized section on Weiss and the various wars over Wikipedia.
29. A much shorter section wherein Mitchell throws his hands up and trashes Wikipedia.
30. Mitchell moves on to the DTCC, quite possibly the most poorly understood entity in the world of stocks, and naturally adds to the misunderstanding.
31. The narrative suddenly reverts back to 2004, and talks about David Rocker, who is not the Mob, but from Mitchell’s point of view might as well be.
32. Jim Cramer, supposedly acting on Rocker’s behalf, comes on CNBC to cast aspersions on Overstock’s revenue projections, except they apparently weren’t projections so much as hypotheses, or something, so it was all unfair I guess.
33. Patrick Byrne snaps, and starts talking to the Easter Bunny.
34. The Easter Bunny sounds like a nut in 2004, as opposed to today, where he… well never mind.
35. Roddy Boyd publishes a picture of Byrne with a UFO; Boyd later had to apologize to the UFO.
36. Mitchell decides Refco collapsed because of phantom shares.
37. Mitchell nominates the Easter Bunny for a Pulitzer.
38. The Easter Bunny is unmasked, or not, and Patrick fires a mole, who now has a much better job.
39. Mitchell trashes another article dubious of the naked-shorting gospel, contributed to by a man supposedly named Spyro Contogouris.
40. Mitchell turns to trash the article’s author, Bethany MacLean, but finds himself a bit constrained given how she was instrumental in cracking the Enron story.
41. Mitchell finally decides MacLean was unfair to MBIA, the mortgage insurer that Mitchell offhandedly admits was now having “some difficulty” (no kidding!)
42. Showing remarkable focus for once, Mitchell stays on MacLean, detailing how she apparently convinced Eliot Spitzer to investigate MBIA.
43. Still more MacLean, as Mitchell complains about another “hatchet job” against Byrne, like he has room to talk.
44. Mitchell concedes one point made by MacLean, to the effect that Byrne changed his opinion of a column 180 degrees in the space of two days.
45. Mitchell sulks that a conference on naked shorting got less press than the sentencing of Anthony Elgindy.
46. Mitchell starts out by trashing a church pastor, then switches up and talks about how Byrne didn’t get timely delivery of Overstock stock once.
47. We’re back to the journalist subpeona episode, with a bonus sulk that Mitchell can’t get himself booked on CNBC.
48. Mitchell stumbles into the arena of PIPE investments, which are in fact a real problem, but of course can’t resist adding his own twist about how they need bashing messages to work.
49. The Easter Bunny holds court at the Forbes mansion (no, seriously).
50. The highly amusing tale of the Dateline NBC piece on “StockGate”, which was pulled at the last minute to Mitchell’s obvious vexation.
51. Mitchell decides the pulling of “StockGate” was the doing of the DTCC.
52. The “pajamahadeen” (Mitchell’s term, I swear!) takes to the street in protest.
53. Patrick Byrne buys into the whole thing, and boy hasn’t that done him a world of good.
54. The StockGate story finally airs, but Mitchell is incensed that NBC has decided against taking sides.
55. Byrne goes on Ron Insana’s CNBC show and makes an ass of himself, again.
56. Mitchell still doesn’t get why the naked shorting story hasn’t ignited the firestorm he thinks it merits.
57. Patrick Byrne gets on CNBC to plug a website.
58. Patrick interviews with a reporter named Karen Richardson, then rushes to his hotel room and trashes the story before she even writes it.
59. Karen Richardson gets curious about Byrne’s medical history, as are we all.
60. I think this is another summary section, but it’s so disjointed I totally can’t tell.
61. Mitchell realizes he hasn’t yet trashed Chris Byron, so he takes care of that.
62. Mitchell apparently gets a mole into a meeting where a bunch of Mitchell’s favorite journalists have a big laugh off of Byrne’s antics.
63. Gary Matsumoto, whose signature journalistic piece is about soldiers being used unwittingly for medical experiments, embraces the naked shorting tale fully and promises a breakthrough article on the topic.
64. Milberg gets theirs, and more on the Wikipedia wars.
65. Gary Aguirre’s battle with the SEC, which has nothing to do with naked shorting, but the SEC was on the enemies’ list at the time, so of course Byrne and company jumped all over it.
66. The media’s reaction to the Aguirre battle, and how Roddy Boyd supposedly wanted to destroy Pulitzer winner Gretchen Morgenson.
67. The SEC officially declares David Patch a “bozo”.
68. Next up is Escala, who the news media records was a giant Ponzi scheme, but of course Mitchell knows their only problem was — say it with me — phantom shares.
69. Mitchell attends a cocktail party where someone says that naked shorting happens a lot.
70. The SEC backs off of Gradient Analytics and starts an investigation of Overstock, which of course proves they’re now all in on the scheme.
71. Senator Orrin Hatch is apparently even more nuts than Patrick Byrne.
72. Mitchell remembers that he left the Wilkins narrative unfinished and tries to resume it.
73. Mitchell mentions his resgination from CJR, and is gentle with them but trashes his successor.
74. Something about shears through a restaurant window and SEC action against Goldman Sachs, of which Mitchell’s angle is consternation that it apparently has nothing to do with Patrick Byrne.
75. Patrick Byrne gets a death threat at a greasy-spoon diner in NYC, but apparently the threatener didn’t mean it.
76. A rough month for Byrne, as the Utah legislature decides not to commit financial suicide based on Byrne’s paranoia.
77. Byrne goes totally unhinged and sues everybody.
78. Matsumoto writes his naked shorting piece…
79. …and everybody ignores it.
80. Christopher Cox unexpectedly hops on the naked shorting bandwagon, or at least that’s how it’s interpreted.
81. Bear Stearns collapses, and Mitchell declares that the culprit is… well you take a guess.

And that’s that.  Today Patrick Byrne is trying to claim that this whole economic mess could have been averted had everyone just listened to him, but nobody has time for him anymore.  Not even me.

Stay strong, everyone.

With the voting over (but, in typical fashion, still in the process of being tabulated as I write this, although it may be finally over by the time you read this) for that big promotional award I alluded to in the prologue of this blog, I suppose that technically the purpose behind this blog is likewise over.  I frankly haven’t even bothered checking to see if I was even on the ballot.

Which begs the question, should I even bother anymore?  Even at one entry a week it’s still time I could be directing elsewhere.  And after the big Sam Antar-Dave Patch throwdown in the comments a few weeks back there’s definitely a sense things had kind of a hit a peak.

Besides which, with all the various and bizarre developments both at Overstock and in the stock market in general, the whole anti-free speech crusade (technically called anti-naked shorting) seems to have lost all its momentum as it becomes undeniably clear that we have much, much bigger problems to attend to that have nothing to do with delivery failures.

As such, analyzing a very poorly-written and unfocused hit piece, by someone you’d think would have higher standards, on pretty much everyone who ever ruffled the feathers of one Patrick Byrne in the past five years seems a colossally pointless task.

And above all, I’m not even sure it’s fun anymore.

So, this might just be the end of this journey.  I’ve got the signal flare in hand and am pondering summoning the chopper to airlift me out of this jungle.  I admit I haven’t decided yet but I’m putting it out there in case anyone has anything to say.

And just in case, Sam, thanks so much for the support and promotion which you donated entirely without solicitation.  You know you can never undo what you did, but there’s still plenty of room to do good in this world.

Allied Capital’s headquarters is just a few blocks from the White House.  That’s about the most easily gleanable fact about that company, whose overall workings mystify me as much as they do Mitchell, who kisses off his description of the company by saying it “shares certain financial characteristics with NovaStar”.  Frighteningly, it appears that Mitchell considers that a POSITIVE of sorts.

But judge for yourself.  Allied’s self-description reads, in part:

Allied Capital Corporation (ACC) is a closed-end, non-diversified management investment company that operates as a business development company. The Company’s investment objective is to achieve current income and capital gains. The Company is engaged in private equity business. ACC primarily invests in debt and equity securities of private companies in a variety of industries.

Much as is the case with certain presidents-elect, you can read into that just about anything you care to.  Is it a REIT?  A start-up incubator?  A hedge fund?  It could arguably be any or all of those things and more.  I don’t know and clearly neither does Mitchell, so I guess we’ll just leave that aside and press ahead.

Mitchell opens the section with one of those bizarre stories of the type that is routine for him, involving some financial bigwig, in this case Michael Milkin, aka “The Junk Bond King” as well as the man most strongly hinted to be Patrick Byrne’s infamous Sith Lord, back when Byrne was sticking to the story that the Sith Lord was a single, known individual.  And as per the usual tale, Milkin is portrayed as indulging in comic-book villainry, striding right up to his victims and informing them of exactly what he is doing.

In this case it apparently involves gaining control of Allied via various intermediaries, buying up stock but never having to file an ownership notice with the SEC because the stock is actually in the name of trusted allies.  And while that’s not legal, it’s hard to see what this has to do with the supposed goal of destroying companies through excessive selling, as opposed to excessive buying, as Milken is said to have done.

But anyway, Milken, the tale continues, engaged in very intrusive investigations of Allied, apparently trying really hard to figure out exactly what he’s buying himself.  Then, Mitchell says, suddenly Milken halts his investigation and a few months later short-sellers come out of the woodwork and are all over Allied.

Now, the obvious conclusion here is that Milken found something he didn’t like one bit and shared it, presumably after getting out of the way.  But Mitchell, as ever, has little regard for what the new analysis had to say, dismissing it out of hand as a bunch of “hatchet jobs” and apparently not even listening to his own story about how the company had just undergone a very fine-toothed examination, making the conclusion that something was wrong very plausible, if not outright obvious.

But no, Mitchell seems to just sulk over the sudden disrespect Allied endures from 2004 onwards, effectively mourning that another perfectly good company was being taken down by the dastardly power of the expression of negative opinion.

This story can be charitably chalked up as a bit of bad luck for Mitchell, as, even at the time of Deep Capture’s publication, the bullish and bearish sides on Allied were still basically in a stalemate, with the dividends continuing but the stock basically going nowhere.  But not long after Deep Capture’s publication, things quickly began to fall apart for Allied.

First came a secondary stock offering by Allied in May, which begged the question, why is a company paying such a big dividend if they need to raise money through selling stock?  The market did not receive the offering well, cutting the price nearly in half over the next few months.  Then Allied announced a 17% reduction in workforce.  But again, the dividend remained largely untouched.

Finally, on September 30th, calamity.  Ciena Captial, a unit of Allied, filed for bankruptcy.  Allied, in order to try to stabilize, had to sell off its interest in a company called Norwesco.  Finally, just this past week, Allied reported a gigantic loss for the third quarter of 2008.

And while the dividend was retained for one more quarter, Allied finally confessed that maintenance of it going forward was not a certainty.

Wall Street ceased to be amused, and Allied’s stock, which had hovered at $30 for years, and was still around $20 at the time of the secondary, crumbled to under $3.

One logical conclusion from this is that the short-sellers were vindicated in the end.  Mitchell, however, would very much like you to believe that the incessant drumbeat of negativity became a self-fulfilling prophecy.

Oh, and phantom stock.  Can’t forget the phantom stock; after all, this has to tie in to Mitchell’s alleged theme somehow.  In this case, 3.5 million shares worth, which the SEC for some reason went to all the trouble to calculate for Mitchell and company, yet stopped right there and didn’t act at all curious about.  That’s Mitchell’s story anyway.

As for the shortsellers side of the story, I must beg lack of qualification to discuss any of the details.  Instead I’ll refer the reader to a book published by one of the most prominent shortsellers of Allied, David Einhorn. Even though it was in fact published well before the most recent events, perhaps it might still be worth reading for the retrospective view.

Next week’s section, if I get to it, appears to be a summarization of sorts.  Ciao.

In Other Election News… it looks like Overstock won’t be relocating to South Dakota after all.  I’m not sure if that’s good news or bad for Utahans.

A big part, probably the biggest, of what turned the 2008 election in the US was basically the same thing that gave the US its previous Democrat president in 1992; in the words of that campaign, “It’s the Economy, Stupid”.

And two of the biggest factor in that were the ballooning of oil and fuel prices (which seems to have passed almost as inexplicably as it occurred; I had the pleasure of filling up for $1.99 a gallon on Election Day), and what they call the “mortgage meltdown”, and the turmoil that’s wrought in the financial sector.

And that brings us to an obscure player in the mortgage boom and bust of the 2000’s, a little Kansas City company called NovaStar Financial.  It first came into the spotlight, as Mitchell states, in April 2004, though Mitchell seems totally baffled as to exactly why.  In fact, the trigger seems to have been issues involving NovaStar obtaining proper licensing in several states, which led to an informal SEC inquiry.  Despite what you may have heard about the mortgage industry being an unregulated free-for-all back then, in fact these regulatory issues had significant consequences for NovaStar, in that their insurer, PMI, was refusing to pay claims on defaulted mortgages that didn’t have all the regulatory hoops jumped through cleanly.

This led to a lawsuit against PMI later in 2004 which was settled in 2005, but apparently NovaStar was by no means unique when it came to mortgage lenders that cut corner, but merely in the one that came out and publicly blamed their problems on outside forces.

In a way, it was the first sign of trouble ahead for the subprime mortgage industry, an augur of things that would prove world-shaping before they were done.

Or, you can ignore all that as Mitchell does and lay it out this way: Rocker was shorting NovaStar in 2003 and their lapdog Herb Greenberg got his lapdogs in the SEC to stir up trouble for NovaStar and take down their stock.

Mitchell has a strong tendency to avoid making concrete statements of fact throughout Deep Capture, but apparently it wasn’t completely out of excessive carefulness, because now he lays down the whopper that “NovaStar continued to report strong profits well into 2007”.  Unless you take that to mean “for nearly two months into 2007, NovaStar was considered by most to be strongly profitable”, that’s quite simply not true, as many on Wall Street were shocked by an unexpected loss in NovaStar’s 4th quarter results for 2006.  This in fact was the beginning of what would prove a very swift end for NovaStar, as in short order the giant dividend which had attracted investors was no more, and in August 2007 they abruptly stopped accepting new business and divested existing business elsewhere.

Of course, Mitchell once again ignores all that, deciding shares of stock not being delivered was far more important than mortgage payments not being delivered.  He does concede, in one of his rare moments of understatement, that subprime mortgages had become “risky business” at the time Deep Capture was published, and does offhandedly refer to NovaStar’s final demise by way of whining about Herb Greenberg gloating over it.

And in all of this we haven’t even touched on the “nfi-info” website (which no longer exists; the link is to the Wayback Machine archive of it) that was run by none other than the Easter Bunny himself, and had been dedicated to the greatness that was NovaStar and the travesty that it was finding itself under attack.  And of course all those stock delivery failures, which, despite what Mitchell might want you to believe, had absolutely nothing to do the collapse of the company.

Next week, another victim steps forward.  At least this one isn’t totally dead yet, though it’s made some very adverse headlines of late.

So Byrne et al got what they wanted, and yet look what’s happened to the markets.  Not saying there’s any kind of causal relationship there or anything, but it’s really hard to see how it helped.

Our first new guest in Deep Capture this week is one David Rocker, who is a highly successful hedge fund manager, or at least who was highly successful until the Lehman Brothers bankruptcy tied up what seems like half the capital on Wall Street.  Few portrayals of the man as a person are terribly positive, though that’s not a surprise when you make as many enemies as the man has.  Of which Byrne, Mitchell and the rest of the Deep Capture gang are just a small segment.

Rocker is unlike most hedge fund managers in that he allows himself to be quoted by journalists, notably Jim Cramer and Herb Greenberg, thus making his opinions public.  His voice is usually that of the bearish case in a given stock, which, as we have seen, the Deep Capture very gang strongly object to being heard.

Mitchell labels Rocker’s reports and comments “often bogus”, but rather than cite any examples, Mitchell decides it enough to smear them as being largely based on the research of Gradient Analytics.  That’s the firm that was subpeonaed by the SEC in 2006, then sued by Overstock… then cleared by the SEC and finally allowed to exit Overstock’s lawsuit with a brief and narrow retraction — if it actually amounted to a retraction at all.

Oops.  Now that Gradient is no longer one of the “bad guys” Mitchell’s whole basis for impugning Rocker’s commentaries just blows away in the wind.  Should’ve gone with some examples instead, Mark!

Mitchell goes on to portray Rocker as “tight with the SEC”, to the point, Mitchell claims, that they would open an investigation into a company simply on his say-so.  “As was Elgindy,” Mitchell hastily adds, lest the reader wonder what exactly is a bad thing about having the implicit trust of the cops.  So noted, in Mark Mitchell’s view of the markets, that there’s no surer sign of being crooked, than having the trust of the cops.

Mitchell does concede that some companies thus targeted were in fact found to be fraudulent.  But others, Mitchell says, were instead proven to be “beyond reproach”.  (Someone needs to introduce Mr. Mitchell to the concept of “middle ground”.)  But, as Mitchell laments, by the time exoneration and deification came through, it was too late and the businesses had been destroyed by the specter of having been under SEC investigation.

I hate to keep harping on this, but once again, an example of a company thus exonerated but nevertheless driven to bankruptcy by nothing more than being under the weight of an investigation, would not have been out of place here.

But no time for that, because it’s time to switch subjects, and once again do so in mid-paragraph!  (Seriously, the folks at CJR have to be truly embarrassed by this point.)  Our next guest is a name — two names actually — heard all too often during the meltdown of the dot-com bubble, ladies and gentlemen, let’s welcome Milberg Weiss!

Milberg Weiss — today known simply as Milberg — is a law firm specializing in class-action lawsuits.  And frankly I’m not even sure any elaboration on that is necessary as anyone who was in for the downside of the market in the early 2000’s probably has a pretty good idea how that works.  You lose thousands in the market, then years later, you get a check for twenty bucks, and that gets called justice.

As you might have gathered from my tone just now, I’m not a fan.

So for once Mitchell and I might at first blush appear to be on the same page.  But Mitchell, never one to do anything unless he can overdo it, isn’t satisfied with the giant fees Milberg pulled down on these class-action suits, as a motivation for their actions.  No. he has to go one further and say Milberg selected its lawsuit targets at the behest of the shadowy short sellers.  Because after all, why be satisfied with straightforward greed when you can pull a full-blown conspiracy into the picture?

Let’s face it, Milberg was the ultimate vulture of the early 2000’s.  You couldn’t just ignore them.  If they still wielded the power today they did seven years ago, they’d be all over Overstock over this restatement business, if they hadn’t been already.  So the notion that Gradient would have a file on them and their actions?  Not a surprise and not in and of itself particularly suspicious.  Of course if Mitchell could give us some insight into the actual contents of… no?  Well, there you have it once again, another Mitchell special, heavy on innuendo, feathery light when it comes to facts.  I believe in some sectors of journalism they call that a “hit piece”.

To be fair to Mitchell, the quiet settlement between Gradient and Overstock was not one that many saw coming, so his focus on Gradient, while a little embarrassing in retrospect, is nonetheless at least somewhat understandable.

That is not so much the case for the topic of next week’s section.  You know all that fuss I’ve been making over how Mitchell rarely if ever provides examples of victims, to back up his claims?  Next week, he finally gets around to one.  But there’s a small problem.

Oh dear oh dear oh dear

This week’s section is another short one mostly occupied by Mitchell transcribing the words of America’s favorite bipolar financial gnome, Jim Cramer.  Mitchell does a pretty half-assed job of setting it up, so allow me.  It was December 22, 2006, and Cramer — prepare to be shocked — is on a rant.  In fact he’s complaining about how easy it is to plant stories, positive or negative as the case may be, with “bozo reporters” and drive stocks any which way.  Or just possibly, as Mitchell suggests, advocating it.  Or both.  One can never be sure with Cramer.

Anyway, fast forward to March 2007 and someone posts the video — which despite Mitchell’s “semi-private” (whatever that means) labelling was in fact quite publicly available — on YouTube.

The press covered it rather extensively in that moment in time as Cramer went public to explain himself.  And then the whole story got dropped in the recycling bin, where Mitchell fished it out.

But hey, why am I talking about it when I can harness the power of these here Intertubes and just show you what this is all about?  Here you go:

Next week: We enter new territory, into parts of Deep Capture to which time, even the relatively few months that have passed, has been less than kind.

(So, Gradient is off the enemies list now?  Does this mean Mitchell will be redacting all the nasty things he said about them?  For his part, of course, Byrne is naturally chalking this up as a win, but given the lengths to which Gradient tried to make this all go away, it’s hard to think they’re not happy.  Furthermore, Joe Nocera had a very interesting article suggesting that Gradient’s statement was something of a non-retraction retraction.)

Mitchell picks up from last time by talking about information the “mole” on Anthony Elgindy’s chat room gave him.  (I should point out that the chat room shut down sometime in 2002, and Mitchell only began work on this piece in 2005, so whoever this fellow was, he had to have been peddling his story for some time before anyone bit on it.)  He reiterates how the chatters gushed over the work of certain journalists, and mused whether they were “merely paying off journalists”, or instead something “beyond normal”.  Because apparently Mitchell considers paying off journalists to be within the bounds of “normal”.

Mitchell then asserts that the reporters should have disregarded any information sent to them by anyone from Elgindy’s group on the basis that they shorted without a borrow in Canadian brokerages, thus continuing the overarching theme of Mitchell’s work, that being a short-seller should cause you to forfeit speech rights.  I might also add that, as Mitchell himself has already noted, there was nothing whatsoever illegal about this tactic.  Furthermore, in many cases, especially involving stocks listed not listed on the major exchanges but rather on the OTC bulletin board, this was the only method by which establishing a short position was even possible.  So just in case anyone’s wondering what an permanent, exchange-wide ban on short-selling would look like… there you go.

Back to Mitchell, who introduces his next subject, a “former SEC official”, who is — surprise! — anonymous.  The suggestion is basically made that the SEC, at the beck and call of Elgindy’s group, opened investigations into certain companies with the sole and direct intent of damaging those companies, noting that actual charges were very seldom filed as a result of these investigations.

Even worse, the anonymous SEC guy goes on to say “these were good companies”, many in the pharmaceutical space, and that the SEC investigations, quote, “stopped cures”.  And of course as former SEC official he is obviously an authority on the potential of development-stage pharmaceuticals.

But okay, these are pretty damning charges, so how about an example or two so the reader can judge for themselves? What’s that, Mark?  No examples, just unspecific innuendo?  Well okay then.  Non-specific accusations made by an anonymous individual.  Pulitzer-quality journalism to be sure.

At any rate, Elgindy’s imprisonment did not stop short-sellers from selling short.  I think that’s Mitchell’s next point, anyway.  Oh, and the companies they short sell are all “innocent”.  Of course.  I’m sure the guys at Lehman and Bear Stearns and all have nothing to worry about.

But never mind that, let’s shift in mid-paragraph to the tale of one John Fiero, who apparently fell afoul of NASD (now FINRA, and, mind you, not SEC) regulations regarding short-selling, and was fined $1 million.  Heavy stuff, seemingly, yet there’s a funny thing about those NASD fines: you can simply resign from the group and avoid paying them.  And that is precisely what Fiero did, yet Mitchell simply seems to scratch his head and not understand how the fine goes unpaid to this day.

Separately, Mitchell quotes someone stating that Fiero had been supplied with an office and “trading computers” by that same NASD body.  That would admittedly be all kinds of mixed-up if it happened after the $1 million fine had been levied but nowhere does Mitchell assert that.

Finally Mitchell returns to the subject of Dan Loeb, aka Mr. Pink.  But frankly it’s really hard to understand what he actually has to do with anything else in this piece, or what Mitchell’s point is in even mentioning him, other than to get a quote about “war” on an unrelated issue, to segue into a summation that it’s “war” between Overstock and short-sellers.  Which we kind of already knew.

Next week: Cramer again, and this time there’s video!

Irony defined: As the markets burned last week, short-selling hedge funds, which you would think would be prospering, if not outright driving the push down, are in some cases actually suffering badly themselves. I’m sure that comes as a delight to some, though it begs the question… if even they aren’t benefiting from this, then who is?

It was, to put it mildly, not a proud moment for Anthony Elgindy. Ordered to remain in New York for legal proceedings, he opted nonetheless to leave the area under an assumed identity. His side of the story is that he was desperate to see his family, who live in San Diego. Prosecutors, echoed by Mitchell in this week’s section, claim it was an attempt to flee the country.

Elgindy (whose birthname, Imr Abrahim Elgindy, seems to be cited for no other purpose than to provoke an anti-Muslim reaction) is, again putting it mildly, a very colorful character. For several years he held court on a stock message board called Silicon Investor, making bold market calls — most of them on the bearish side — and exhibiting a very keen sense of how the stock market, and in particular how stock promotions, particularly those of the “pump and dump” variety, work.

Unfortunately, one thing Elgindy lacks a keen sense of is how to stay out of legal trouble. From an incident involving a company called Saf-T-Lock, wherein he “got religion” in mid-course only to wind up as the fall guy, to an insurance dispute that led to a conviction for fraud, to his most recent convictions for which he remains incarcerated pending appeal, Elgindy most definitely has the proverbial “feet of clay” that make him a very difficult person to defend, even when the accusations become demonstrably unfair, as they do in Mitchell’s piece this week.

Most egregious among these are Mitchell’s attempts to tie Elgindy in to the attacks of 9/11. It is true that Elgindy did a partial liquidation of an account on the day before, but it was never shown that this was anything more than a coincidence of timing; that is to say nothing of why he would only do a partial liquidation if he had knowledge of what was coming the next day.

The quote Mitchell prints about Elgindy claiming to have expected a 3000-point one-day drop in the Dow does not appear anywhere else in a Google search and as such has the air of being completely manufactured. And finally, Mitchell’s portrayal of why Elgindy was never charged with anything 9/11-related very much downplays the facts: in reality, the prosecutor attempted to invoke 9/11 during the actual trial, and received a severe rebuke from the judge when he had to admit he had nothing to back up the insinuation.

At any rate, not satisfied with having managed to slander a convicted felon (ponder that for a moment), Mitchell resumes his stylistic foibles by veering off course and into the story of a Chicago boxer named Gary “Pugs” Dobry. Dobry is something of a footnote in the whole short-selling story these days, as the message board he frequented, Raging Bull, has gone through several changes in ownership and had its message board database wiped, but those who had the opportunity to see him in action would most likely agree that he made the subject of the post two weeks ago appear competent and restrained in comparison.

Dobry is portrayed by Mitchell as being “obsessed with Elgindy” but in fact his obsessions ran far, far deeper. Having been a heavy backer of a company called Amazon Natural Treasures, which in the end proved to be a total fraud, Dobry lashed out at anyone and everyone who had tried to warn him, and even in one case an unfortunate woman who merely had the same name as one of his targets. This culminated in 2002 when Dobry convinced a lawyer and a judge to subpoena not just the identities but also the credit card information(!!) of 41 aliases on the Silicon Investor message board. It was the successful quashing of this subpoena, and the sanctions that followed, that ended Dobry’s crusade, not some apocryphal garden-shears-through-the-window “message” that Mitchell cites, which sounds more like a bad pun on “hedge” funds. Whatever became of the old “horse’s head in the bed” routine anyway?

Next Mitchell moves into intrigue mode, as he relates the tale of an anonymous “business owner” who says his business was destroyed by short sellers and has ever since devoted himself to attacking them. (That description notwithstanding, this person is highly unlikely to be Dick Fuld of Lehman Brothers.) That person, says Mitchell, has supposedly turned over screenshots of all sorts of activity on a private chat room run by Elgindy, “stored somewhere safe” according to Mitchell, who apparently has no qualms with extortionate suggestion when he perceives it to be to his benefit.

By way of some sort of preview of coming attractions, Mitchell says the transcripts contain numerous mentions of Jim Cramer, Herb Greenberg, and other writers for Because, apparently, it’s very suspicious in a stock-oriented chat room to mention journalists who, at the time, each wrote about half a dozen brief articles about stocks every day.

Mitchell cites one quote appreciative of Herb Greenberg’s writings, by way of, I guess, proving Herb must be dirty or something. Ironically, while lives on, Herb himself has recently moved into the financial equivalent of private practice, meaning that it’s conceivable that the speaker of the quote could have, in fact, gone through with his plans to “hire Herb for himself”.

Another pulled quote cheered a journalist named Dave Evans giving a “free” heads-up about a stock symboled SPBR. Again, lacking context there’s no way to know if this was private communication or a publicly available article. SPBR, incidentally, was the symbol for a company called Spectrum Brands Corp., one of an all-too-large number of tiny firms that tried to make a quick buck with a slapped-together counter-terrorism “solution” in the wake of the 9/11 attacks. (Said company should not be — although may well have been named into order to be — confused with Spectrum Brands Inc., marketer of Rayovac batteries and Remington shavers.)

Finally, Mitchell mentions Dan Loeb, who is believed to have gone by the alias “Mr. Pink” on Silicon Investor, and whose primary crime appears to be having an affinity for Quentin Tarantino films.

At this point even Mitchell seems to realize how far he has gotten off the track, and puts the section to an abrupt halt, with next week’s section beginning anew on the story of Anthony Elgindy.