Saturday, April 21, 2007

The High Cost of Kool Aid


The poster children of the naked shorting con men are dropping like flies. The latest is a pissant little delisted stock called CMKM Diamonds.

This "company," which has no assets to speak of, is the subject of grotesque speculation that somehow massive "naked short selling" has destroyed an otherwise delightful little diamond company, and that shareholders are owed immense damages "someday." Not by the people who ran the company -- management is always blameless in naked shorting mythology -- but by the dark forces that have driven down its shares.

It is a textbook example of how naked shorting con men have deluded desperate microcap stock shareholders. A few CMKM shareholders bought in to these wacko conspiracy theories and conducted demonstrations on Times Square and in lower Manhattan. They've authored Internet rants and SEC comment letters that read as if they were written by Cho Seung-Hui, and generally made asses of themselves.

The SEC seems to feel that the problem at CMKM is with management, not real or imaginary short-sellers. It halted trading in the company two years ago, and has launched an investigation of the company. The latter was disclosed by a Wells Notice that has come as a surprise to the company's new management, since apparently the old CEO just plumb forgot to tell 'em. I kid you not.

A press release yesterday says that

As of March 29th 2007, the Company had 3 pending lawsuits, a Wells Notice from the SEC that was supposed to have been answered by March 9, 2007 (of which current management was totally unaware, until an official at the SEC contacted them on 4-10-07), and ongoing investigations by at least four government agencies. In addition there is documentation showing the forfeiture of all claims and mineral rights, no corporate records for the past 4 1/2 years of business and taxes that have never been filed. The only tangible asset is a 45 million share certificate of Entourage Mining stock.
Amazingly, some investors are still wasting time and energy expecting this dead dog to arise from its grave. To its credit, there is nothing in the latest missive from management that pushes the discredited "naked shorting" baloney.

But the naked shorting con men are continuing to promote the idea that CMKM is a victim of nefarious forces, and not its former management. Overstock.com CEO Patrick Byrne is the folk hero of these loons, and his loony presentation on the imaginary "stock counterfeiting" conspiracy is a mainstay of the naked shorting con men.

Byrne's latest rant on the subject, a childish press release designed to divert attention from the company's quarterly red-ink announcement, was discussed in this blog yesterday.

The Baloney Brigade marches on, but its fraudulent character is becoming increasingly obvious. SEC Chairman Christopher Cox should stop pandering to these idiots and direct his staff to move on to more pressing issues.

© 2007 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site, gary-weiss.com.

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