Sharesleuth Hones in on a Naked Shorting Gasbag

Pitt is partners with a barred broker

Interesting article in Sharesleuth today, describing a cellular company's ties with a variety of shady characters--including a barred broker who has built a business catering to companies that use "naked short selling" to divert attention from their own wrongdoing.

The company at issue is called Lenco Mobile, and the site describes how the company is hooked up with a "recidivist SEC offender" named Michael Crow, and also is tied in with an odious character named Thomas C. Ronk.

Ronk is a regular on the naked shorting conspiracy carnival circuit:

Ronk operates several investment web sites, including BuyIns.net, which purport to identify companies whose stocks have been targeted by illegal "naked shorting'' and are poised for price jumps.

He also is partners with former SEC Chairman Harvey L. Pitt in RegSho.com, a site created to help short sellers locate shares to borrow so that they can remain in compliance with market rules.

Dealbreaker had an item a while back on Pitt's involvement in that creepy outfit, and how it constituted a conflict of interest. Pitt, arguably the worst SEC chairman in recent history, resigned in disgrace in 2002 after doing such a bad job that he just couldn't go on.

It's not news that Ronk has a regulatory history a mile long, or that he is in the business of helping crappy penny stock companies lure investors--as I described in this item in 2007--but Sharesleuth provides an interesting description of Ronk's pedigree.

Ronk was a stock broker in Southern California before running afoul of regulators.

In 1999, he was fined $50,000 and suspended for 30 days by the NASD. Without admitting or denying the allegations against him, Ronk consented to the entry of findings that he participated in private securities transactions without providing prior written notification to his firm, describing the proposed deals or his role in them.

Ronk's securities registration was later revoked for failure to pay the fine.

Ronk now is proprietor of several web sites, including BuyIns.net and SqueezeTrigger.com, that purport to identify stocks that have been the subject of heavy shorting and are poised to rise in price as traders cover their positions.

Ronk has been one of the most vocal proponents of a theory that a shadowy network of hedge funds and other investors have been driving down the stock prices of U.S. companies through so-called "naked shorting'' of their shares.

Two of the companies that complained most loudly about the issue - Universal Express Inc. and Pegasus Wireless Corp. - later became the subject of SEC cases alleging that they improperly dumped vast amounts of stock on the market, undercutting their own share prices.

True, but Ronk is even more closely tied in to stock scams than that. His Buyins.net suckers in hapless small investors looking for "short squeezes" in crappy penny stocks, including the Utah pump-and-dump Cyberkey Solutions, whose CEO, James E. Plant, was indicted for lying to the SEC about a pump and dump scheme involving his company. He pleaded guilty and was sentenced to 97 months in prison for promoting his bogus "homeland security" company, witness tampering and obstructing the SEC probe. (What's interesting about the latter charge is that he obstructed the SEC investigation far less blatantly than some other people I know.)

In this 2006 press release from Cyberkey, the now-imprisoned Plant uses Buyins.net "short squeeze" data in an effort to lure in more suckers. It's yet another indication of how the naked shorting conspiracy types provide a ready-made excuse for stock manipulators, or (as in the case of CEOs like Richard Altomare of Universal Express and Patrick Byrne of Overstock.com) are themselves cooking the books or otherwise ripping off shareholders.

Now, the one fly in the ointment here is that, as I've pointed out previously, Sharesleuth is financed by trading profits from shorting stocks mentioned in its articles. Such arrangements cross ethical boundaries. However, according to a disclosure in the article, "No one associated with Sharesleuth has any investment position, short or long, in Lenco Mobile."

Great. So why not make that a rule? My suggestion to Mark Cuban, who owns Sharesleuth, is that he drop this "profiting from shorting" stuff and figure out another way of financing the site. More frequent items would be nice, and, of course, exposing the naked shorting crooks on a regular basis would certainly put his website on the side of the angels.

Cuban is involved in an insider trading case (dismissed but still being pushed by the SEC) that is increasingly appearing to be a waste of SEC resources. If he removes the "legal insider trading" aspect from Sharesleuth -- and continues to crank out good stories like this one -- he's going to get a lot more public support.

UPDATE: A reader brings to my attention that Ronk used to work for the L.T. Lawrence chop house, one of the most notorious fraud factories of the 1990s, belatedly shuttered by the NASD in 2000. Lawrence was one of the numerous employers of Louis Pasciuto, the subject of my book Born to Steal.

It's not clear from the filings whether Cyberkey paid Ronk for its "research" (nondisclosure, of course, would be spitting on the sidewalk compared to the companies other crimes). Overstock.com paid him $18,910 in 2007, and other crummy little companies also pay him handsome "data fees."

© 2010 Gary Weiss. All rights reserved.

Today's Comic Relief: Harvey Pitt on the SEC

A reader (or was it a publicist?) sent me the following link, showing Bloomberg TV interviewing the last person you'd seek for advice on how to run the SEC: Harvey Pitt.

Nuff said. But I really wonder: does this person really believe that anybody, other than the naked shorting conspiracy theorists who have bought his services, take anything he says seriously after the mess that he made at the SEC a few years back?

© 2009 Gary Weiss. All rights reserved.

More Glowing Reviews for the SEC's Naked Shorting Publicity Stunt

The praise is coming in thick and strong for the SEC's naked shorting publicity stunt. Not.

The Economist : "The SEC’s action was not only pointless; it may have had a perverse impact. ,. . The SEC has promised a post mortem of its experiment. At this stage the conclusion looks pretty clear: the regulator picked the wrong target."

Dow Jones News Service: "An emergency order that temporarily restricted short sales in the shares of Fannie Mae (FNM), Freddie Mac (FRE) and 17 other financial companies raised borrowing costs significantly and increased volatility in the stock-loan market, a new study concluded." This is in addition to a study by a European economist released the other day.

The response to the near-unanimous thumbs-down judgment has been flailing from conspiracy theorists, embodied by the wailing at the Patrick Byrne-financed Deep Capture website. There, the oddball journalist-turned-shill Mark Mitchell recently launched a vicious attack on Carol Remond, an award-winning investigative reporter and scam-buster. Remond hasn't written much about naked shorting, but she's been critical of Byrne and has exposed scams, which put her in the sights of this washed-up ex-CJR editor.

Last but not least, in the realm of comic relief, comes word that Harvey Pitt, the worst SEC chairman in recent history, is trying to cash in on the naked shorting hysteria with something called RegSHO.com. Pitt has teamed up with a former boiler room employee named Tom Ronk, who was banned from the securities industry in 1999 for not paying a 50K fine. (Here's a link to his FINRA record.)

Pitt was so horrible as SEC chairman, so downright tin-eared and clueless, that even the most far-right Republicans despised him. Time magazine opined at the time: "Pitt is running out of admirers in Washington, with the possible exception of folks at the Mine Safety and Health Administration. He's the only one in the Capital who gets into deeper holes than they do."

I'd say that Ronk and Pitt make for a terrific fit. Hey, that even rhymes!

© 2008 Gary Weiss. All rights reserved.