A@P; Amr &quot;Anthony&quot; Elgindy Discussion; Anthony@Pacific

Top 203. Nov 2, 2005 2:43 PM

» Kirk - 11/2/05

From: Anthony@Pacific 11/2/2005 11:40:15 AM
http://www.siliconinvestor.com/readmsg.a...

The first of a few messages posted on Anthony's behalf and at his request. As usual, these are his words as conveyed to me.

Bob Zumbrunnen aka SI Bob

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Greetings folks,

This document will deal with a very specific set of charges and counts that I recently defended. This document is for the general public but will be of the most significance to all those who spent any time on my private site and those who followed me here on SI. The evidence at trial showed that I sent out over 3,200 “official trade calls” via Email Broadcast to members of the private site. I also made countless thousands of chat calls. I also made thousands of calls here on SI.

Following my arrest in May 2002, The Prosecutor added 17 additional counts of securities and wire fraud, alleging that I “traded against my own advice” and that I was “front running” my own site members. These 17 counts were the insult to injury portion of their case in chief. These 17 counts were some of the most significant to me of all the allegations. Many of the site members were very dear to me, some I considered family and some I had a great deal of respect for. I had always believed that in order for me to be successful, for trying to drag short selling out of the shadows, those who followed and watched had to succeed with me.

These 17 counts represent every instance of front running and trading against advice they could find. They searched and picked through over 5,000 trading calls, tens of thousands of my trades, and millions upon millions of lines of text in chat. You will need to keep a few things in mind as you review all this. You will see the actual chat excerpts and selected trades the Prosecutor and the FBI agents in this case made and then numbered at the end of the trial.

Most significantly when you see a “time” next to a trade and transaction, those “trade times” are intended to appear as the actual execution time. They are NOT!
The Govt. Employee who compiled and checked these snippets testified that he was instructed to use only the earliest time visible on each trade ticket. Since I placed my trades by phone, my trade tickets had multiple stamps. After placing an order I’d get a call back reporting my fill. This some times took seconds, minutes, or hours depending on whether I had placed a limit or market order.
In Exhibit D 10536 we presented what site members were told to expect about calls:

CHAT LOG Nov 14, 2000

[21:06] rhansen >> Broadcast calls will not only sound the gong sound but also go to your email and / or pager
[21:06] rhansen >> chat calls are simply posted in chat because they are risky or very short term and are applicable only to those in chat
[21:08] rhansen >> You have to remember, a call whether broadcast or not is just a trader here saying that he or she is making a trade
[21:09] rhansen >> If you follow that trader a lot then you might to choose to make the same trade, but that is completely up to you
[21:09] rhansen >> they are not “ telling” you what to do, simply saying what they are doing
[21:10] rhansen >> The users are listed at the right, with the blue users at the top
[21:06] anthony >> and in some cases,, they are telling you what they have just done

This chat clearly explains that all calls, official or not are NOT “directives” but rather suggestions based upon a person’s beliefs and expectations.

Before we move on I’d like to share with you the definition of “front running” the Government of the United States of America offered to the jury. I direct your attention to page 4,548 of the Trial record at line1, and on page 4,549 at line 22. The government employee testified that front running is any “ trading before giving information to others.” He testified “that is what all SEC examiners use.” I will simply state for the record that this testimony is false, misleading and unforgivable.

You are about to see, for the 1st time ever, each and every single instance of “front running” and “trading against my advice” they claim I committed. Out of over 380,000 Internet statements and calls made by me they compiled a total of 35 instances of securities and wire fraud and they then spread them out over 17 counts, in Counts 16 to 32 of the superceding indictment.

You will immediately notice that they never once disclose my execution price, the chat before or after, any news before or after, and they omit many of the trades before, after and in between their selected snippets. The words and trades were offered to the jury in a vacuum.

In count 16, for example, you see that I’m charged with “front running” on JUNM. This is a felony securities fraud count punishable by 5 years in jail. They claim that on 8/24/01 at 3:03 pm I sold 1500 JUNM and then at 3:04 pm, one minute later, I sent out an “official call” via email on JUNM. The prosecutor is asking the jury to find me guilty because of a 60 second delay in one out of over 3,200 trading calls made by me.

Is this what you expected to see when you had heard they had added charges alleging that in addition to all the other stuff I had also harmed my own members?

In the very next count, No 17, we see that on 6/26/01 at 4:02 pm I release a report on Insidetruth.com about SLPH. Then on 6/28/01, 2 days later, at 11:04 & 11:11 am, I reduce an existing short position in SLPH by 2,000 shares. None of the trades, news, chat or price action between 6/26 and 6/28 are ever mentioned or offered. It doesn’t matter that my site and the world had been told I’d be releasing a SLPH report days earlier. It doesn’t matter that SLPH tried to stop the report by suing me and it certainly doesn’t matter that the report was 100% truthful and accurate as it exposed SLPH’s fraud.

The reason reality is not offered and doesn’t matter is because reality is exculpatory. It helps me and the only UNCHALLENGED fabricated twisted fiction presented in a vacuum helps them. Going back to Count No 16, we see that 60 seconds is what separates me from potentially 5 years in jail. My execution in JUNM was at 3.90, the trade call was made at 3.90, no one who got the call was hurt nor did I benefit at anyone’s expense.

The prosecutor was forced to scrape and scrounge, even splitting multiple hairs, as he madly searched everywhere for anything that he could pile on. These charges have the exact same flavor as the first 15. As you look through you will see that anyone who relied on any of my words in chat or email would have profited and benefited. My position is and has been that the jury was prejudiced and misled. They simply didn’t get it. This jury knew little about the stock market, nothing about bulletin board stocks and nothing about short selling; after this trial, I would argue they know even less.

-- posted by Kirk

Top 204. Nov 2, 2005 2:50 PM

» Kirk - 11/2/05 Part 2

.
Too hard to read here. See original here
http://www.siliconinvestor.com/readmsg.a...

-- posted by Kirk

Top 205. Nov 2, 2005 2:51 PM

» Kirk - 11/2/05 Part 3

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from http://www.siliconinvestor.com/readmsg.a...

To: Anthony@Pacific who wrote (93095) 11/2/2005 12:15:04 PM
From: Anthony@Pacific Read Replies (1) of 93105

3rd document, again Anthony's own words posted on his behalf.

Bob Zumbrunnen aka SI Bob

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Greetings to All,

As previously promised, there is now an updated version of my trial summary. This may not be the last addition, for this is a document that will grow and expand as the trial is examined in more depth.

I hope this post once again finds you happy and well. Before I get started, let me first touch upon a few things by way of explanation for those who may have no idea where this is coming from.

I am a short seller, which means I make money when stock prices drop. It is NOT the opposite of going long; that is woefully simplistic. Short sellers historically have been poorly understood and widely despised by “mainstream” Wall Street, often seen as “messengers of doom and gloom.” There exists a prevalent, mistaken belief that short sellers somehow destroy companies. In fact, nothing could be further from the truth.

Short sellers provide liquidity and a check on exuberance and hype pumped out minute after minute by questionable companies. Short sellers can only thrive when they uncover illegal shenanigans, fabricated filings, or other general deceptions in the marketplace.

Unfortunately, like abortion, short selling is completely legal yet it is an easy sell to the uninformed lay person as being “un-American”, “evil” or “wrong.” There is very good reason why one doesn’t find a large opposing bronze BEAR on the street across from the New York Stock Exchange, and only the BULL. Had they ever put up this symbol of the mighty “downtick”, it would probably have been blown up every other day. In reality, short sellers are behind much of the greatest research on Wall Street.

My name is Anthony Elgindy, aka AP, A&P, Anthony@Pacific. I started on the internet right here on Silicon Investor 7 years ago, when I started the “Dear Anthony” thread. I later started a private stock discussion site, anthonypacific.com, and a free site, Insidetruth.com that featured stock scams that I thought were outrageous and interesting enough to pick apart for public scrutiny as well as my own entertainment.

I started my career as a professional short seller back in 1995 when I founded Key West Securities in the tiny town of Hurst, Texas. I was harsh, abrasive, and apparently entertaining to some. It wasn’t long before I started popping up in magazines and on TV. In 1997 I appeared on ABC’s 20/20 with Brian Ross and Barbara Walters. I criticized the NASD for looking the other way and allowing frauds and scams to flourish on the OTC markets it oversaw. For years and years I exposed hundreds and hundreds of scams, and I made millions of dollars doing it. The scammers, con-men, promoters and snake-oil salesmen behind these deals moaned and groaned, cried and complained about my tactics, my words and anything I did. I was accused of everything imaginable, from helping Osama Bin Laden buy cars, to threatening to kill Alan Greenspan and even trading ahead of the 1st WTC bombing here in NY. I have been accused of paying off SEC attorneys, message board posters, reporters, and most recently FBI agents. Previously those complaints had always fallen on deaf ears. The FBI and SEC paid little attention to the woes and grievances of people who wanted to be allowed to fleece small investors unmolested. This all was about to change.

On September 11, 2001, two airplanes slammed into the WTC towers, and when those buildings collapsed, for the first time ever, my nationality mattered. Suddenly, scammers had a voice, con-men had an audience, and dishonest insiders could taste relief. These complaints, previously ignored, quickly found their way to an extremely aggressive Assistant US Attorney named Ken Breen, who worked on a terrorist task force in Washington, D.C. when he moved to NY; he brought these “complaints” and so called “evidence” and presented them to a grand jury sitting in the Eastern District of New York, a district in which my contacts were virtually zero. Mr. Breen had an innate dislike and philosophical bias against short sellers in general. In fact many of the witnesses he called at my trial shared his dislike for short selling and short sellers in general.

Some time in the next 60 days a notice of appeal will be filed. The scope of the appellate issues will be far reaching, covering in more detail and with more specificity many more issues than can possibly be mentioned here.

I am currently being held in NY, a fact that should briefly be addressed. My professional trading activities were all centered in California, as were my bank accounts, computers, most relevant documents, and the majority of my site members, yet criminal charges were brought against me in Brooklyn, NY.

It is hard to conceive of a criminal prosecution that was more removed from the Eastern District of New York than this one. Virtually every single trade in every single security occurred in Canada, California or elsewhere, via telephone from my office at Pacific Equity’s training center or my home in San Diego. Further, the alleged "nerve center" of the charged RICO enterprise was not located in the Eastern District of New York, but rather in San Diego, California, where anthonypacific.com, my private website was based, and where the bank of twelve computers seized by the government, was taken.

I was arrested at my office in Encinitas, California, located in the Southern District of California, a district in which more than 200 Assistant US Attorneys serve. Yet Mr. Breen personally appeared at the initial appearance before the Magistrate, flying across the country for what should have been a routine bail hearing for an American citizen. Why was that done? It was done to enable him to make the following comment that set the tone for this entire prosecution: "Perhaps Mr. Elgindy had pre-knowledge of Sept. 11, and rather than report it he attempted to profit from it.”

For months the FBI had held steadfast to the contention that they had not found anyone or any agency that had any pre knowledge of Sept 11th. But suddenly, amazingly, and maliciously without a single shred of evidence to support and mountains of evidence to refute, Mr. Breen accused me, Anthony Elgindy, an American who attended USC, played football, wrestled, and graduated an Illinois State Scholar, of being the one person on the planet who knew about Sept 11th!!

Why was this case brought to trial in New York, when I traded and lived in California, my servers were in Florida and my broker was in Canada? There was only one obvious reason. There could be no better place for the government to try and convict an Arab American who “may” have known about 9-11 than in a jurisdiction next to ground zero. From that day until the verdicts were read, the dark cloud of 9-11 tainted every single aspect of this case. Not only did they successfully saturate the trial with 9/11, but even the 20th hijacker, Zacarias Massaoui made a completely irrelevant, prejudicial and gratuitous appearance on the very last day, through the very last witness in my trial.
The words “terror” and “9-11” are mentioned over 350 times throughout the 37 day trial.

An impartial jury is an essential component of a criminal defendant’s fair trial, and, by exposing possibly biases on the part of jurors, voir dire serves to protect each and every defendant’s right to an impartial jury. Despite that, not once before or after the jury was empanelled, was anyone permitted to ask A SINGLE QUESTION of any juror about their feelings or possible involvement in 9-11 and/or its aftermath. For all we knew, all 12 jurors plus 6 alternates had breakfast together in the twin towers that morning. For all we know, each of them lost a loved one when they later collapsed. We don’t know. What we do know is that we WILL NEVER KNOW any of these things from any of those jurors.

I was convicted by this NY jury of various securities related charges under a “RICO” indictment. In my case, the government prosecutors loosely connected a number of defendants to each other under the umbrella of RICO, a very powerful and frightening tool that was used to transform me from a well known, credible, partly comical and partly offensive hyperbole ranting trader into an enemy of the United States overnight. By utilizing RICO, the prosecutors were able to intimidate and frighten literally hundreds of witnesses, thereby ensuring that their fictitious allegations would be presented to a jury virtually unchallenged. This is the first time since May, 2002, that anyone has discussed any aspect of this case IN DEPTH publicly; not surprisingly it’s ME who is doing it now.

What you are about to read is an accurate, factual and painfully conservative summary of certain issues that relate to the prosecution of the case now known as U.S. v. Anthony Elgindy. It has taken me over five months to complete this document. This document is going to be a “virtually live” document. Periodically additions or changes will be made that are deemed to be relevant, material or helpful. This new version will be posted right here. All of these documents shall remain locked in space and time in the event one chooses to compare the most recent version with older ones. Let me be clear that these are my words, case citations and research, and the facts are backed by the trial record, admitted exhibits and produced discovery.

The only story you were probably told or have read was that I corrupted an FBI agent and used him to get confidential information that I then used for trading, or that I extorted cheap shares from vulnerable con-men/CEO’s. You also were likely told that I somehow controlled the relay of negative information, in part through my website, in such a way that flooded the market with exaggerated negative sentiment in order to manipulate shares of bulletin board stocks downward. It is very possible that you were among the thousands of people with whom I interacted publicly, here on Silicon Investor or on InsideTruth.com. It is also possible that you were one of the 438 people who came and went on my old private trading site. I have much to say to those who interacted with me, those who believed in me, and those who relied on me. This is the beginning of what I have to say.

This case involved 6 stocks originally, but was later expanded to cover 41 unique stocks, thus forcing us to effectively defend 41 “mini-trials” within a trial. Factor in different defendants, a hedge fund or two, and the parameters become obscene. I was also charged with “extorting” 2 CEO’s of small scam companies for reasons that no one has ever offered. During the trial the government only managed to introduce “evidence” for 19 of the 41. Of these 19, I was convicted of inside trading in only 4 of them. My calculated gains resulting from “inside trading” in these four add up to a little over $41,000.00. If one calculates the gains on all 19 mentioned but not proven to the jury, the amount tops out at approximately $160,000.00.

Among the players in this saga are Robert Hansen, “rhansen”, who was my website administrator and friend, Derrick Cleveland, a subscriber whose best friend was also an FBI agent, both of whom are from Oklahoma. Other players include Don Kent Terrell, aka “Quack” a subscriber from Minnesota whose connection with me is confined to the walls of my chat room, and Jonathan Daws, another subscriber, who managed a hedge fund, and also ran a secret chat room called “RC Chat” (retired chat).

There are two FBI agents charged in this case, Special Agent Jeff Royer and his girlfriend Lynn Wingate. I do not know Ms. Wingate, nor am I familiar with her role, so I will address Mr. Royer.

Derrick Cleveland we learned prior to trial had been a convicted drug trafficker, who had been sentenced to 10 years for trafficking in cocaine. We also learned that he had an extensive criminal background. Prior to watching me on TV, reading about me in the Wall Street Journal, or in WIRED magazine, Cleveland worked at a small day-trading outfit in Oklahoma, struggling to make a living as a day trader. Royer was a relatively green agent who was working white collar crime.

One day Royer walks into Cleveland’s office and discloses that he is investigating a “pump and dump” scheme being run by some unsavory characters. Cleveland seizes this opportunity to pass himself off as someone who is knowledgeable about the markets. Unfortunately for Royer, Cleveland knew less about the markets than Royer did about being an agent. Before long Cleveland, the former cocaine dealer, had become a paid informant for the FBI

Cleveland’s first move amazingly is to get Royer to “give him” information about the “pump and dumps”, not because he wanted to help expose them, but because he wanted to sneak in and buy them. Royer obliges, and immediately galvanizes forever their unholy alliance. Not surprisingly, Cleveland immediately manages to lose $25,000.00 that wasn’t even his to lose. It didn’t take long before other shenanigans and dealings in yet another stock surfaced between Cleveland and Royer. This time the FBI took action, and pulled Royer off white collar fraud in Oklahoma completely, and sends him to work “Indian Crimes” on an Indian Reservation near Gallup, New Mexico.

Royer is now obligated to Cleveland, and Cleveland never lets him forget it. During the trial, Cleveland testified that he had a “routine” to get information from Royer and Royer always obliged. In one of many interviews between Cleveland and AUSA Breen, Cleveland describes these routines as being “part of just another day in the life of Derrick and Jeff”. Having failed to make money on the long side with his best friend, and having Royer pulled off white collar crime was a setback. Unfortunately for me, Cleveland read news articles about me. He watched my 20/20 interview, and became fascinated with what I did. When he read in WIRED magazine that I had a private site, he set out to join, most likely with the goal of using his best friend Royer on the short side.

Throughout the trial, the prosecution called witness after witness, who testified how much they respected, admired and trusted Royer. Simply “being an FBI agent” carried with it enough prestige to impress most people around him. The mere fact that one could claim to have a friend or colleague who was an FBI agent created certain awe in people, and that awe was something heavily relied upon by the FBI. Officer Mitchell, a police officer from New Mexico, testified that Royer was his close friend. He looked up to S/A Royer, trusting him implicitly. Former romantic interests testified that they were impressed and trusted him. They all spoke about the air of authority and confidence he presented. Even after S/A Royer left the FBI, SEC attorney Doug Gordimer testified that he maintained a close relationship to Royer and never believed or suspected that anything was wrong.

Officer Mitchell testified that after Royer left the FBI, he also believed Royer was acting honorably and continued to trust Royer’s motives and actions. When S/A Royer asked Mitchell to do a criminal background search on a subject after leaving the FBI, he did it. Royer explained that he was in need of this information to follow up on some “unfinished business”, and Officer Mitchell believed him.

All of these witnesses who took the stand described their full faith and trust in S/A Royer during and after his tenure with the FBI. Many of these witnesses were trained and experienced veterans of law enforcement, who were diligent and proficient in detecting deception and identifying liars, yet every single one of them testified about their shock upon hearing of Royer’s arrest.

Royer testified in his defense. He testified that indeed I never asked or solicited any information from him. He testified that he did searches at Cleveland’s request, or as a result of his own curiosity in connection with a “legal purpose” that only he knew. He lashed out angrily and defensively about his actions and his role. He clearly did not like being questioned, and his arrogance was obvious to everyone in the courtroom. “He was the FBI”, and nobody should ever forget it. His testimony was truly a spectacle to behold, and I thought finally the jury will get to see how this man behaves, and what presence he exudes around others.

Extremely experienced officers and agents believed this man. Everyone trusted this man. If trained, professional and veteran FBI agents, SEC attorneys and police officers believed in him when he was with the FBI and continued to do so after he left the FBI, how can I be held to a different standard? How was I better equipped to know he was “no good?” If anything, I was more easily impressed, more flattered and more trusting. I was honored that an agent of the world’s top law enforcement agency, the FBI, saw value in what I did. For their argument to be valid, it would have been necessary that I was a better judge of character than all of the experts.

This case is ALL about searches, specifically the searches done by S/A Royer. An FBI Agent, like Jeff Royer, cannot simply run a search in the FBI databases if he is curious about something or someone. We learned at trial that there are specific rules and steps an agent must follow.

First there must be a legitimate suspicion or belief that there is some kind of illegal activity taking place, or some other legitimate reason for the search. In addition, the agent is required to specify what his suspicions are. To facilitate this, each FBI office has various “codes” that are assigned. There are obviously multiple purposes for this, the most obvious being the ability to allow agents world wide to know who, what and why a fellow agent is looking at a subject. We also learned that the codes, once used, are never erased, and remain in the system forever. Not surprisingly we learned that the Gallup office of the FBI didn’t have a code for “pump and dump” or “cooking the books.” When Royer ran a search on me or someone he was curious about, he used codes like “198F”. This is a code used for someone who is sexually abusing a child on an Indian Reservation, or he used a code for the suspected robbery of an ATM machine. Nice, huh?

Agent Royer conducted over 1500 illegal searches during his 5 year tenure with the FBI. EACH of these searches is a felony, punishable by 10 years in prison. Agent Royer potentially faces 15,000 years in prison for these searches, however he was never charged for those crimes. Why? Because I had nothing to do with them. Because, all together, these searches paint a much different picture than the one the prosecutor needed. These searches show that Royer considered the FBI computers to be his own personal “super-google” machines. They show that it was really Royer himself and his friend Cleveland who wanted or needed these searches done. Mr. Breen wasn’t interested in all of these searches, he was only after the few dozen searches performed by Cleveland and Royer that he could forcibly link and later attribute to me through Cleveland.

Cleveland knew that there was absolutely no proof that I ever asked to have any searches done, EVER. He had to admit that the searches were always initiated by either himself or Royer. Cleveland testified that he was the one who decided which stocks among the thousands discussed on my site, should be checked by Special Agent Royer.
If this trial proved anything at all, it was that Jeff Royer was indeed a rogue and possibly corrupt agent. The corrupt relationship, if in fact there was one, existed between Derrick Cleveland and Jeff Royer.

The government initially alleged that payments in excess of $30,000.00 were made by me through Derrick Cleveland, for the purpose of corruptly inducing Royer to give me confidential FBI information. This theory was later abandoned when the government was unable to document a single red cent passing from me to Royer or anyone else for information. Unable to support their initial allegations that money was exchanged for information, the prosecution theory then morphed into allegations that the corrupt inducement was a “lucrative job offer.”

Agent Royer had been interested in working for me, and we did have serious discussions about that, but he wanted to live in Denver, near his children; I on the other hand, had little interest in an out of state employee. Discussions about possible employment therefore were not actively pursued, and Jeff Royer was never hired. He remained unemployed for the entire five months from his resignation from the FBI until the day he was arrested.

The evidence presented at trial showed that for years and years, long before the existence of my websites, or any relationship with Royer, Cleveland or other characters in this saga, I already had developed relationships with numerous government regulators and Law Enforcement officials as part of my work as a short-seller and investigative analyst.

This case alleged, as did Cleveland, “Quack” and “rhansen”, that my “illegal enterprise” began the day I retuned from jail following a four month sentence for a false insurance claim I filed 7 years earlier. I served the four month sentence in 2000, and wrote almost daily about my experiences there. At that point I had hundreds of site members. I had believed and expressed that those four months were the worst of my life, and I vowed to never do anything to jeopardize my liberty again. Between 1993 and 2000 I had became an extremely successful short seller who had amassed millions of dollars in wealth. I was on T.V., in magazines, and the subject of three books. Things couldn’t have been better. There is no denying that the publicity about the four month sentence was embarrassing and humiliating. Here was the self described fraud buster being jailed for fraud himself. With the support of hundreds if not thousands of internet supporters, I served my sentence and sought closure to what had been the worst struggle of my life. Little did I know what lay ahead.

Upon returning home I was placed on probation for three years. For a new felon, dealing with law enforcement is subject to court approval. Any contact with other convicted felons is completely prohibited. Because my business as a short seller put me in touch with both felons and law enforcement, I repeatedly sought and obtained explicit permission to deal with both felons and law enforcement officials. A condition of that permission was that I disclose those contacts to my probation officer on a monthly basis. To this day, both of my former probation officers, Mr. Reidling and Ms. Bryant have refused all requests asking them to “violate” me by the powers that be in New York. My probation, believe it or not, is now satisfactorily completed, thanks to these honest and brave law enforcement officers.

The evidence showed that my dealings with law enforcement prior to the four months in jail continued after my release, changed only by the additional requirement that the contacts be reported to a probation officer. Initially my relationship with Special Agent Royer was no different than the relationships I had with the numerous other representatives of law enforcement and regulatory agencies with which I spoke often. Our relationship changed when Special Agent Royer expressed to me his desire to transition from law enforcement to trading. He believed that I was best suited to teach both himself and his best friend, Derrick Cleveland, how to trade.

Skipping forward, I was convicted of possessing information regarding an investigation into Sea view (SEVU), and disseminating that information to my site members. What was NOT made clear however, was that it was MY OWN SITE that generated the information that led to the investigation. The chat logs from my site are full of examples of the work the site members did on this investigation. We called purveyors, retailers, suppliers, even the company itself, all in an effort to investigate the company’s claims which we believed to be false. This sort of due diligence is exactly what the SEC directs the public to do before investing in a company. It was ME, not Special Agent Royer, who interviewed an employee, Ken Cook, regarding the fraud in the company. It was ME who directed him to the FBI office in Clearwater, Florida. Ken Cook was then interviewed by Special Agent Charlotte Brazeil and Special Agent Neil Palenzuela in the Clearwater FBI office. I was fully debriefed by them as well, and reported my debriefing to my probation officer, along with their contact information.

It was during this initial period of research and due diligence conducted by us that our trading positions were taken. In FBI Special Agent Charlotte Brazeil’s first interview after my arrest, she stated under oath that the three investigations into SEVU by the FBI and SEC were initiated by the information generated on my website and the information that was obtained from Ken Cook. I began those investigations. Prior to my reports and investigative work, there was NO active investigation into SEVU by any law enforcement or regulatory agency for any reason. At trial, however, Agent Brazeil never testified.

It was not until January 12, 2001 that Special Agent Royer told me that there were three investigations into SEVU. I then told the site members what he told me, verbatim, and then documented it in my notebook and sent it to my US probation officer. This investigation was MINE, all mine. I started it, and I provided all the information to the FBI. At trial, Special Agent Neil Palenzuela, Brazeil’s partner testified that he had no recollection of who started the investigation, although he did remember Ken Cook. He also testified that those investigations terminated when the CEO of SEVU died.

Like anyone else in my shoes might have done, when told that my work had been fruitful, I proudly communicated that praise to those who worked on the investigation with me. No one on my site needed, relied on, or used FBI information to make trading decisions. Just like the hundreds of equally corrupt companies we shorted before and after SEVU, we knew the company was corrupt, therefore we knew the stock price was doomed.

Much like a neighborhood watch group, we reported corrupt and dirty companies weekly to numerous regulatory and law enforcement agencies. Those reports, however, resulted in action only a fraction of the time, and we never relied on regulatory action to make a trade. The confirmation of an FBI investigation was provided long after we had initiated our positions in SEVU. There was no testimony that I relied on that FBI information to place a trade, because there were no such trade. My next SEVU trade was not until January 29, 2001, some 17 days after I received the information.

In both the initial and superseding indictments, the prosecution repeatedly references this specific chat excerpt. On January 12, 2001, I identified in the chat room the three investigations into SEVU, and I made the comment “Hansen, erase the logs.” I said this as I stated in the chat room later, because I didn’t want to jeopardize an ongoing FBI investigation by having anyone posting this information on public message boards. Unfortunately it was already too late, since Ken Cook had made that information public 5 days earlier. In post # 17,549, long since deleted, and 5 days before January 12, after being debriefed by the FBI, Ken Cook announced that both the SEC and the FBI were investigating SEVU. Mr. Cook made this post on a public SEVU message board located at Raging Bull.com, a popular public site for stock traders to exchange information and opinions. His post was noticed immediately by site members and the following exchange occurred on

January 7, 2001:

[12:52] DMG >> Is KCPoisenArrow, Ken Cook? Look at the last bullet item! Who is putting this out?
http://www.ragingbull.altavista.com/mboa...
[12:52] stirlingmoss >> he denied being Ken Cook in an earlier post, but who
knows
[12:53] DMG >> "ONGOING FBI SEC CRIMINAL INVESTIGATION.

When I remembered that Ken Cook had already made that public disclosure, I decided not to erase the chat logs-nor were they EVER erased-since we realized the information had already been made public in a public forum frequented by both SEVU shareholders and management. The jury was never told that the chat was not deleted. Robert Hansen incorrectly testified that he deleted this chat when in fact he had not done so. The prosecutors solicited this testimony, and then embraced it instead of correcting it.

There were ongoing jokes about erasing the logs, mostly done during fights, when off color jokes were made, or when someone was posting inappropriate adult site links, not confidential regulatory information. On January 12, 2001, I posted the following in my chat room:

[16:44] AnthonyPacific >> 4 the 3 investigations are wire fraud, mkt
manipulation, and mail fraud officially by the FBI SEC is dong a title 15
investigation..and none of this can leave or go public..if you do you willbe
pros
[16:44] AnthonyPacific >> 4 thats a fact direct;ly from the FBI
[16:44] AnthonyPacific >> 4 erase the log Hansen

[16:45] AnthonyPacific >> 4 i dont think we will get anymore info again thast all we get
[16:45] Salogan >> no more info from FBI Tony?
[16:46] AnthonyPacific >> 4 sal i think we have gotten our fair share salogen
and this is out of courtesy for all the hard work
[16:47] AnthonyPacific >> 4 i think we did good
[16:47] AnthonyPacific >> 4 if anyone even mentions FBI on a message board I
think you will get in a woreld of trouble
[16:48] AnthonyPacific >> 4 ok folks?
[16:48] AnthonyPacific >> 4 Bye everyone
[16:49] Kris >> i thoght FBI was already mention on boards
[16:49] Kris >> i think ken cook menitoned them didn't he?
[16:51] AnthonyPacific >> 4 well from today on

The chat text following the now famous line “erase the log Hansen” has never before been made public, and obviously portrays a different picture than what the prosecutors have led everyone to believe.

Of the 1100 chat logs in this case, the prosecution was unable to find any chat log deletions even remotely associated with the SEC or FBI with the exception of a few hours on January 2, 2001, the same day Special Agent Royer accessed the FBI computers for a search on SEVU’s CEO, Richard McBride. Despite having retrieved the deleted logs during their investigation, the prosecution never introduced them into evidence. WHY? Because it was not Anthony Elgindy who asked that the logs be deleted, and the real reason they were deleted was to prevent the SEVU CEO from covering up or destroying his fraud, something he attempted to do when he staged a “break-in” at his headquarters, reporting that his mainframes and important documents were stolen. The deleted text was exculpatory.

I clearly had no belief that the receipt of this information was wrong. The stock had already experienced the majority of its decline, my coverage was over, and I didn’t make an additional trade for over 2 weeks. IF this belief was wrong, it was the fault of the FBI who should have known better. I was not charged with knowing what the FBI can and can’t disclose to me. Further, anyone who knows anything about shorting stocks knows that an “investigation” is meaningless information when making trading decisions-something that was frequently discussed among traders on the site.

Unfortunately the average American investor doesn’t understand that when the SEC, for example, informs a company or person that they are conducting a “formal non-public investigation”, that company is REQUIRED to publicly disclose that “non-public” information. The government’s star witness, Derrick Cleveland, testified that “this kind of information is the best in the world.” I knew differently.

Therefore there was no effort to attempt to capitalize on and use “inside information” because the flow of information on SEVU began with me and my site members. My short position began on Oct. 9, 2000 when the stock was $10 a share. By the time there was any information disclosed about an FBI investigation, the stock had traded around $3 a share. No one was entering positions at that point, and when asked if I was taking a position, I stated NO.

Further, the very information that was supposed to be so circumspect regarding an investigation was posted on the investment chat site “Raging Bull” 5 days prior to anything I posted on my website. Thus the question to be asked is what IS “public” information? Had the information that SEVU was garbage been effectively disseminated in a manner sufficient to ensure its availability to the investing public? Had the market ‘absorbed’ the disclosed information? It seems a stock going from $10 to $3 indicates that the investing public absorbed it quite well.

The testimony and evidence overwhelmingly shows that the motivation and purpose in providing this information to governmental agencies was to expose a fraudulent company, or ideally to cause them to be shut down while profiting at their expense.

We introduced evidence and testimony going back to 1995 showing my interactions, on tape and in writing, with lawyers and agents of regulatory agencies regarding fraudulent companies, many of which I was openly shorting at the time. For example, in 1997 in a stock called Quigley, “QGLY”, a company selling cold lozenges, I was contacted by SEC attorney Jonathan Levy and FBI Agent Mike Gaeta. Both were aware that I knew of their investigations into QGLY, both knew I was short, and both testified that no one else in the public would or could have known what I knew. I knew that the FBI was looking into Quigley for possible ties to organized crime. I learned that from FBI agent Mike Gaeta himself. John and Mary Six-Pack didn’t know what I knew, but they could have if they did the work I did.

The testimony showed that frequently when I spoke with regulatory agency representatives they often disclosed SEC or FBI interest in specific companies, acknowledging that the public did not know about that interest, while at the same time acknowledging my short position in the very companies they admitted to investigating. When these conversations occur on a regular basis, am I not to presume that the agent knows what he can and cannot disclose to me? Would any reasonable person have assumed otherwise?

When I initiate an investigation that is beneficial to the investing public by exposing a fraud, I obviously possess an informational advantage as a result of my due diligence and hard work. However, under the misappropriation theory of insider trading with which I was charged, a person violates the law when he misappropriates material nonpublic information in breach of a fiduciary duty or similar relationship of trust and confidence and uses that information in a securities transaction.

Agent Royer’s fraud was consummated, not when he gained the confidential information, but when, without disclosure to the FBI, he or his tippee used the information to purchase or sell securities. The securities transaction and the breach of duty thus coincide. The government was required to prove that I knew Special Agent Royer was sharing material, confidential, non-public information in violation of his fiduciary duty to the FBI, and that I traded on that information. Yet there was NO EVIDENCE that this was the case. On the contrary, if I had known that what Special Agent Royer said or did was wrong, would I have openly repeated it to my site members, and more importantly, would I have reported that information to my probation officer? My site had between 150-200 people logged on at any given time during market hours, yet not a single one ever spoke up and said “Hey, what’s going on here?” No one ever filed a complaint with anyone. The words “FBI” and “SEC” appear over 4000 times in chat and there was ONE deletion, eventually recovered. I am simply confused as to what I could have done differently.

I was interviewed by Agent Brazeil, and completely debriefed on SEVU. I introduced her to Ken Cook, the product manager at SEVU, and I introduced her to the beginning of this investigation. I dealt with 12 different Law Enforcement agents/officers regarding SEVU. Nothing illustrates the jury’s confusion and prejudicial aim towards conviction better than comparing all this evidence in SEVU and another stock Sulphco (SLPH).

I wrote reports on Insidetruth.com covering both SEVU and SLPH. Both reports were 100% truthful and accurate. In each company, an employee who read the reports came forward and contacted me. For SEVU it was Ken Cook, for SLPH it was Todd Orme I interviewed both of them at length. I then directed each one to their local FBI office, NOT to Agent Royer, but to their local FBI agents. I also put each employee in contact with an SEC attorney. For SEVU it was Andrew Snowdon, for SLPH it was Brent Baker. I disclosed my contacts with the FBI and SEC in both SEVU and SLPH to my US probation officer. Royer played no role whatsoever in any of the investigations I generated in SEVU or SLPH. Special Agent Royer ran thee (3) searches in SEVU and eight (8) in SLPH. I started both the FBI and SEC investigations into both SEVU and SLPH. Clicking on SLPH provides a graphic illustration of the lengths the prosecution went to “manipulate” the evidence. Everything on the bottom of the page is what the prosecution offered as their “evidence”; everything at the top is what the prosecution LEFT OUT, and we had to fill in. I now stand convicted of knowing about the very investigations I began in SEVU, yet acquitted of the investigations I began in SLPH. Once again I am exceedingly frustrated because I don’t know what I could have done differently. How did we win SLPH and lose SEVU? Something is very wrong with this picture.

Next I would like to address the allegations of manipulation through group trading, staged release of information, dissemination of negative information and front running. To make out a claim of market manipulation, the government must present evidence that I intended to engage in some type of deceptive behavior in conjunction with my short selling that either injected inaccurate information into the marketplace or created artificial demand for the securities. The word intent is used in excess of 90 times in the instructions to the jury. To prove fraudulent intent, the government was required to prove that I intentionally devised or participated in a scheme with knowledge of the scheme's fraudulent nature and with the intent that the scheme's illicit objectives be achieved. They simply did not present that evidence, because it does not exist.

The prosecution had the task of getting 12 people to look and see what over 400 plus other people never saw, day in and day out, for years. They didn’t have the luxury of months or years to learn how the site worked, but rather had to figure it out within a few weeks. Knowing they could never prove intent, they substituted character assassination. They also set out to “demonize” short selling. They painted the picture that all short sellers are bad, and horrible sources of information. They introduced prejudicial, unfounded and ludicrous allegations of suspected activities relating to September 11. They introduced a blown-up photograph of me with an FBI business card on my forehead. They were so excited when they blew up the image of the fake ID they practically danced with it in front of the jury. Assistant US Attorney Seth Levine pranced back and forth so often in front of the jury and in such a bubbly state that he reminded me of the ring girls at a WWF wrestling match. I wanted to reach out and give his floppy man-boobs a good twist.

Nevertheless, the assault on my character was relentless. Every possible opportunity to chip at me, to tear me down, was seized. The message they wanted to send was that no one could possibly get information of value from me, because I was simply ME.

SEC attorneys who previously had sought information about stocks I was investigating and shorting could no longer recognize or remember emails they sent to me. SEC attorneys with whom I had worked in the past and who had patted me on the back no longer could recognize my work. The countless hours of work and research put into each Insidetruth.com report were summarily dismissed. It became clear that a pattern was developing. Insidetruth.com reports became “radio-active”, most couldn’t recall ever reading them or why they sent the reports to other SEC attorneys.

They were not entirely successful. A few SEC attorney’s did tell the “whole” truth, sometimes reluctantly, but they still refused to adopt the prosecutors theme for any SEC attorneys called to testify by either side. SEC Branch Chief Doug Gortimer testified that he visited Insidetruth.com up to “24” times. He testified that at times he started SEC investigations directly from information he found on Insidetruth.com. SEC attorney Tom Etter testified that another SEC attorney Bob Terceror, had indeed told him I was a guy with a checkered past but was now doing “useful work” and I was a “crusader for propriety in the marketplace,” and I had helped the SEC’s L.A. office. Even this tiny victory for us was attacked when AUSA Breen stood up and asked “wasn’t Mr. Terceror being sarcastic.” The response to that question? NO, Mr. Terceror was NOT being sarcastic. Who needs “intent” when you can sling mud?

The government alleges that my website members sometimes coordinated to sell their shares all at once to pressure stock prices downward. I would point out that it is completely legal for a large group of people to buy or sell a stock at the same time. However by simply making these allegations, the prosecution was somehow able to invent a brand new crime during the trial. They called it “group trading,” defined by their witness as “Trading where everybody is trading in the same direction, same stock, with the same results of stock going down.” To support their allegations of criminal activity, they cite my own words in chat where I am describing my understanding of “collusion”. Collusion involves non-bona fide buy or sell orders placed by more than two people with the sole intent of creating a false market picture. There were never any such trades by anyone, nor is anyone alleged to have ever entered any fake orders. Groups of people are legally permitted to buy or sell a stock, and there is no such law that states otherwise. Even if they acquire a large position and the effect of that position is to depress the stock price, it does not constitute manipulative or deceptive activity. The truth is that short selling-even massive short selling-does not create a false impression of supply and demand in the marketplace because there necessarily are other parties betting against these positions. That short selling may depress share prices, which in turn enables traders to buy more shares for less money, is not evidence of unlawful market manipulation, or fraudulent intent, but rather is a natural consequence of a lawful and carefully regulated trading practice, namely short selling. GFL Advantage Fund, Ltd. v. Colkitt, 272 F. 3rd 189, 2001. “Short selling is simply not unlawful, even in large quantities and even if the trading does negatively affect the purchase price," as long as "the trading volume and price reflect supply and demand based on accurate market information." In re Olympia Brewing Co. Securities Litigation, 613 F.Supp. 1286. This is true even if more shares are sold short than physically exist. Sullivan & Long Inc. v. Scattered Corp., 47 F. 3rd 857, C.A. 7 (Ill.), 1995.

When it comes to short selling in general, the SEC itself acknowledges that "short selling provides the market with at least two important benefits: market liquidity and pricing efficiency." The SEC explains these benefits further saying that "Market liquidity is generally provided through short selling.”Market participants who believe a stock is overvalued may engage in short sales in an attempt to profit from a perceived divergence of prices from true economic values. Such short sellers add to stock pricing efficiency because their transactions inform the market of their evaluation of future stock price performance. This evaluation is reflected in the resulting market price of the security."

When you are in a chat room with 10, 20, 50 or 200 people, and you are all looking for trading ideas, long or short, and one of them bumps into a juicy looking, ripe scam that seems to be in the middle of a yet un-exposed pump and dump, it is not surprising to see the stock drop or even collapse when people begin to sell the stock. Insiders and pump and dumpers hate when anyone joins them in selling their stock. This stock movement is no different than the more commonly seen gap ups in a stock’s price after good news. One only need to watch any financial channel during a “buy, sell or hold” segment to see a massive change in a stock’s price as some analyst says it’s a great buy or an over-valued company while thousands of loyal viewers push the buy or sell button simultaneously.

I did nothing but tell the truth, or what I believed to be the truth; there was no testimony to the contrary. If information is truthful, how can it possibly be manipulative?

What we were doing was in effect promoting efficiency in the securities market by researching and exposing fraudulent companies, and profiting from that legitimate information advantage-an advantage created through our own hard work and due diligence.

The effect of trading on an information advantage is to penalize ignorance, and to bring market values into closer, quicker conformity with economic reality. Legitimate traders and analysts should be able to profit from their diligence without having to speculate as to the risk of a criminal penalty, or whether they will violate a duty by trading while in possession of public information. If a company is a fraud and a scam, having no value other than its own puffery, how can one exaggerate that fact? They have no legitimate earnings, and their value consists of nothing more than their creative ability to fabricate and publish fraudulent press releases. No trader, broker, analyst, fund manager or investor owes any obligation to the public, any group or agency to disclose their research, findings opinions or most of all their trading positions. The resulting selling pressure exerted on any stock is completely legitimate so long as every one of the buy and sell orders are legitimate, bona fide orders that are placed by investors who actually intend to buy or sell the security. Quite contrary to the narrow minded views of the prosecutors in this case, to suppress well researched actions of short sellers would allow these fraudulent, scam companies to induce even more innocent victims into their web, only to sooner or later be fleeced of all their investment dollars. That is what ultimately erodes investor confidence in the marketplace causing them to choose other investments, which would hurt the liquidity of the exchanges, the liquidity of the marketplace, and eventually the capital structure of our country.

The front running allegations and convictions were especially incredible. Interestingly the prosecution never once in the indictment or in the trial disclosed my execution price, not even when it is directly related to my conviction, such as in the front running conviction for INIV. For example, I was convicted of front running for the following situation: I entered an order to short three thousand shares of INIV at 12:44 PM, at a price of $4.45. Within minutes I got a call with a trade report, confirming a sale of 3000 shares at $4.45. I then called it a short on the site at 12:50 PM. In chat I tell my site members that I had shorted 3,000 shares a few minutes earlier. You can see for yourselves, no one placed a short sale immediately after my call; the next trade in INIV was done 8 minutes later.

CHAT: 8/17/01

[12:50] anthony >> INIV<--short 15-20% @ 4.45>
[12:51] anthony >> INIV located in CHINA
[12:51] anthony >> caujseway bay, people s republic of china
[12:51] anthony >> phone 852-4329
[12:51] anthony >> PROP job
[12:51] anthony >> used to be ISOF
[12:54] anthony >> INIV already split
[12:54] anthony >> this ois the post split price
[12:54] doorman >> INIV volume hasn't moved since call? I'm showing 21600
[12:55] anthony >> i sold the 3 seconbds before the call
[12:55] anthony >> 3K
[12:58] anthony >> i waited for INVI to get high then called it
[12:58] chris431 >> 20k print 4.35 iniv
[12:59] anthony >> good let em choke
[12:59] anthony >> pete how many out on this pig.
[12:59] anthony >> anyone want to guess whose 20 that is
[13:01] ebrahim >> wow .. they filled me at 4.35 ;)
[13:01] anthony >> iniv is crooked

There was NO evidence presented that anyone was harmed by this or ANY OTHER trade that was alleged to be front running, or trading against the site. There were no site members to present testimony of harm because there was NO HARM. My pattern and practice was to trade what I said I was trading, Each time I said I shorted a certain stock at a certain price that’s what I did. The government presented no evidence to the contrary because such evidence did not exist. We presented chat from one of the dozens of site trading classes discussing what one could expect on trading calls.

[21:06] rhansen >> You will see two types of calls here
[21:06] rhansen >> Broadcast and Chat
[21:06] WhoLovesYa >> good calls and bad calls
[21:06] maximus >> and long and short
[21:06] rhansen >> Broadcast calls will not only sound the gong sound but also
go to your email and / or pager
[21:07] rhansen >> Chat calls are simply posted in chat because they are risky
or very short term and are only applicable to people in chat
[21:08] rhansen >> You have to remember, a call wether broadcast or not is just
a trader here saying that he or she is making a trade
[21:09] rhansen >> If you follow that trader a lot then you might chose to make
the same trade, but that is completely up to you
[21:09] rhansen >> They are not "telling" you what to do, simply saying what
they are doing
[21:10] anthony >> and in some cases, they are telling you what they have just done

Amazingly I was convicted of fraud through the act of front running my site members by selling INIV at $4.45 at 12:44 PM, then suggesting INIV was a good short at $4.45 a few minutes later. In chat we see a member at 12:58 referencing a 20,000 share print on INIV at $4.45, then 11 minutes after the short call at $4.45, another member is filled at $4.45. Anyone who knows trading must be shaking his/her head in disbelief. The jury simply did not get it.

Can we for a moment examine what front running actually is? As defined by the SEC itself, front-running occurs when a licensed broker executes a proprietary trade while in possession of unexecuted customer orders for the same security to the detriment of his customer. Was I a licensed broker? Absolutely not. Was there a scintilla of evidence of harm to ANYONE as a result of my trades? No, there was not. Further, the “directives” or “advice” which is how the government mistakenly characterize my opinions and beliefs on the site, were all at specific prices at which I believed a good short position should be executed. There was not a single example presented by the government that I encouraged or suggested that someone sell at a price less favorable than my very own execution. Yet I stand convicted of front running and trading against my own advice?

Another incredible example of the injustice of this case is the conviction for trading in VLPI in count 32. VLPI you may recall is the company that attempted to profit from the post 9-11 turmoil surrounding the ANTHRAX scare by claiming they were about to unveil a home test kit for Anthrax. This kit was to be sold at Ace Hardware among other locations. That was all false of course. But this didn’t keep the stock from moving from a few cents a share to almost $3.00 a share on 10’s of millions of shares.

This was the only chronology presented by the prosecution:

B/C means a Global site wide and email broadcast, meaning an official broadcast trading call sent by
email to every single site member and to live chat simultaneously.

10/23/01@ 9:17am Elgindy shorts VLPI
10/23/01@11:44am B/C VLPIàshort @1.80-200(add)
10/24/01 Elgindy covers VLPI

The chronology of VLPI calls and my trading calls are as follows:

10/15/01 @ 13:10 Elgindy shorts VLPI @ .88
10/15/01 @ 13:17 B/C VLPIàshort 20% @ .88-.90 (scam, exploits attacks)

10/16/01 @ 11:45 B/C VLPI cover @ .60-.62 (gain of 33%)
10/16/01 @ 11:48 Elgindy covers VLPI @ .60

10/17/01 @ 2:07 pm B/C VLPIàshort 20% @ 1.26-1.30 (second pass)
10/17/01 @ 2:08 pm Elgindy shorts VLPI @ 1.25
10/17/01 @ 1:45 pm Email B/C VLPI-à is a 100% position candidate

10/18/01 @ 12:55am*( In the middle of the night) VLPIà making illegal claims
10/18/01 @ 7 :30 pm email B/C/ VLPIàbanned from posts on message boards

10/19/01 @ 9:23 am B/C VLPI-àshort 25% @1.95 (add)
10/19/01 @ 9:17 am Elgindy places order to short VLPI @ 1.96

10/23/01 @ 10:56am Elgindy shorts VLPI @ 1.83-1.90
10/23/01 @ 11:44am B/C VLPI-àshort 20% @ 1.80-2.00
10/23/01 @ 3:57pm email B/C-à VLPI report on InsideTruth
10/23/01 @ 4:10pm email B/C “go audio, my last ‘til my return”
10/23/01 @ 5:02pm email B/C/ “new policy while I am gone”
10/23/01 @ 7:24pm email B/C “Ace Hardware denies selling VLPI Anhrax kits”

10/24/01 @ 10:56am during the day, Elgindy covers 90% of his VLPI position @ .80

10/28/01 @ 12:55pm email B/C “I am in Cairo, it appears to be incredibly safe”

11/20/01 @ 8:09pm email B/C “I am home, hope everyone is well”
11/20-11/27/01 Elgindy re-shorts VLPI @ average .60

11/28/01 @ 12:30 B/C “VLPIàSEC investigation, Tests were never certified”
12/14/01 B/C “VLPI à raided by FBI, cover at 18 cents.
12/14/01 Elgindy covers all VLPI short position @ 18 cents

I was convicted of front running based on a short sale made on 10/23/01. This was the third call made on this stock, adding to a position that we had begun trading on 10/17/01, and traded almost every day for a week. As you can see in the chronology, I made a call on VLPI on 10/17 @ 1.26. I then made a second call, adding to my VLPI short, on 10/19 @ 1.95. I clearly state it’s an “add” to an existing short position. Finally on 10/23 I make a third call, also an add, @ 1.80-2.00. I sold 5,000 shares at an average price of 1.85 on the 23rd. I was short over 100,000 shares of VLPI, yet this one 5000 share trade resulted in a felony conviction of wire fraud? This is not even front running. Further, how can any additional short sales in VLPI possibly front run anyone since they are presumably already short?

Count 21 alleged that I traded against my advice. What advice? The sell short calls on 10/23/01 that preceded the SELL recommendation I published on InsideTruth.com were made when the stock was trading near $2.00 as you can see from the above chronology. This chronology shows that I participated in every trade I suggested with one exception. On 10/23/01 at 7:24 pm Ace Hardware denied they were selling the test kits. The next day, VLPI shares plunged. My previous short call and sales were at roughly 1.90, and the stock was at .80 on 10/24. However, since I was leaving the country, and could not monitor the position, I decided to quietly book most of my VLPI profits of over 50% so I wouldn’t have to worry about a six figure short position in a penny stock while I was away. Upon my return, I quietly re-entered my short position, at a price lower than where I covered. In other words, I paid a .20 premium just for the peace of mind I had of not having to worry about an open position while on vacation.

The prosecution failed to disclose the price at which I sold VLPI on 10/23, or the price at which I bought it on 10/24. They also never disclose the critically important intervening announcement that Ace Hardware was not selling the Anthrax test kits as had been represented. The price dropped by 50% overnight. ANY trader in my shoes would have covered that position. Had the government been candid and the jury understood what had occurred, they would have seen the last “short” call on VLPI was a cover @ .18 on 12/14/01.This would have given anyone who followed my calls a profit of close to or above 90%. Site members weren’t empty headed children; they were fully grown, mature traders perfectly capable of making their own decisions and managing their own money. None of them required that I “call” each and every transaction I made on my own behalf, nor did they expect that, nor did I promise that. How does my covering a position prior to my vacation relate in any way to their own money management decisions?

The Government was not able to find any huge amounts of money made by me in any of these tiny scams that Cleveland and Royer searched, nor could they find any victims. They had no choice but to dig into the minutia of thinly traded stocks that, on average, made me $10,000 each. The significance of these transactions are put in perspective by understanding that I made more trading HAND, the rival of PALM, than ALL of the stocks mentioned in the indictment combined. These thinly traded scam stocks were more for my entertainment than for profit.

This was part of the government’s strategy – confuse the jury, and then offer simplistic, contrived “explanations” to make them think they understood when they clearly didn’t. The jury was faced with an enormously complex case, which made it easier for them to be persuaded by the government’s pre-packaged account of the facts as well as the prosecutor’s own bias against short selling in general.

I was convicted even though I did exactly what I said I was going to do. No fraud, no testimony of fraud. Can you imagine a stock fraud prosecution in which the prosecutor never tells the jury the price at which the defendant bought or sold the stock? Where the prosecution never shows harm as a result of the trade, or puts a single “victim” of the alleged fraud on the witness stand?

I ask myself how is it possible to exaggerate negative sentiment in a company that is a fraud to begin with. Where is the line between appropriate negative and exaggerated negative? Is it now a crime to express extreme views, or have strongly held beliefs? Why am I not allowed to believe a stock is a good short or a scam, and communicate that opinion to others? How can it be a crime to tell 10, 20 or 100 people that a scam trading at $5.00 is in fact a scam? Is it manipulation because 50 people try to short a stock at $5 and only 7 or 8 get the position at $5, another 3 or 4 get it at $4.50 and the rest get nothing? If a company is a real company, any price dip will be met with enthusiastic buyers, happy to get a good deal, and normal market conditions will regulate the stock price. Smart investors will recognize the opportunity to buy more shares for less money. Only if a stock is a fraud will there be no buyers, because the price was artificially inflated to begin with. Scammers and insiders rely on pump and dump schemes, and become angry and vindictive against those who uncover their fraud, because the price will soon collapse when selling based on truthful information is combined with the insiders own selling.

Similarly, is it a crime to be short 10,000 shares of a stock, and trim down that position to 7,000 shares, or 3,000 shares as one manages his own capital and risk exposure? Is it really so inconceivable to believe a stock is a scam, and yet still trade it cautiously because the manipulation upward was so strong? Why should I not be allowed to profit from a trade simply for believing that the company share price will eventually implode to pennies per share? Why am I not allowed to close positions and restart them while always trading from a net-short position? Those on the site knew all about “recycling”, “milking the cow”, “private trading” and numerous other expressions used almost exclusively on the site. Most site members could tell you in detail how to extract 3-4 points from a $2.00 stock, using trading volatility.

Unfortunately that testimony was not presented at trial, since many site members who wanted to testify were intimidated by the government’s threats of possible prosecution, or being named as un-indicted co-conspirators. They were confused by the ability of the government to keep the names of the stocks sealed until time of trial, thus preventing both site members and their legal counsel from adequately assessing their own legal status. Those actions by the prosecutor, who according to the ABA Model Rules of Professional Conduct is required to act as a "minister of justice," meant that the jury had to rely in large part on Derrick Cleveland for information about how the site worked.

Common sense tells you that you don’t make money unless you take your profits. Especially in scam companies, one never knows when the next false press release will generate a 20-50 or 400% rise in the stock price. I was always trading the scams from the short side, but as a trader part of my discipline is always to book profits when they become available. We called it the 15-20% profit rule on the site.

It was further pointed out that in every one of my reports was a disclaimer stating that “I can and often do maintain a position consistent with my reports.” By extension this also means that I may NOT maintain such a position, although I usually did. Somehow the prosecution believed that partially covering a profitable short position, just like selling some of a profitable long position was not smart trading but rather trading against my advice and against my site members. It is a ludicrous concept, but yet that’s what the jury was led to believe. It is just another example of how confusing and contrived their presentation was, and how the jury really was misled. The fact that there was no trade that I broadcast that I did not actually do at a similar time as the broadcast, or that there was no evidence of a price differential to my benefit or to a site members’ detriment simply did not matter.

The allegations of “spreading false or misleading statements” concern two statements taken from hundreds of thousands of public statements made about thousands of topics over a period of many years. The first statement was my accusation in an email that Paul Brown was a convicted felon and the second was a statement that Insidetruth.com had uncovered ties between Adnam Kashoggi and Osama Bin-Laden. This latter report was released on September 25, 2001, AFTER trading in GENI had already been halted by the NASDAQ. Incidentally, after that report was published, GENI shares NEVER traded again.

The Paul Brown accusation was the result of a routine criminal background search that was conducted by a site member on December 18, 2001 showing Paul Brown to be a convicted felon. The site member “Quack” testified that he sent me that information the next day, December 19, 2001. I then contacted the Idaho Dept. of Corrections, and on a taped, site-wide audio broadcast phone call co

-- posted by Kirk

Top 206. Nov 2, 2005 2:52 PM

» Kirk - 11/2/05 “The Jury Charge”

.
To: Anthony@Pacific who wrote (93096) 11/2/2005 12:18:37 PM
From: Anthony@Pacific Read Replies (1) of 93105

Anthony's words, posted on his behalf.

Bob Zumbrunnen aka SI Bob

-------------------------------------------------

“The Jury Charge”

Dear Folks,

In this case, there are dozens and dozens of issues that are significant enough and fatal enough to warrant a complete reversal of the verdicts against me. I have raised some of the issues here on SI, and one of the places in the trial that is a fertile ground for appellate
issues is are the jury charges themselves, for a jury can only follow the instructions provided to them. One of the most obvious issues is the language about criminal records. It is found on page 8839, line 2:

The fact that some criminal records are “publicly” available in
the sense that they can be found in a public place if a person is
looking for them, knows where they are being kept, and has the
information required as a practical matter to link the records to
specific individuals connected to particular companies, does not
necessarily mean that these records are “public” for the purposes
of the insider trading laws.

IS FURTHER COMMENT EVEN NECESSARY?

I am now going to address another issue. There are NO PROVISIONS in the jury instructions allowing for honest research and due diligence. As we were going over the jury instructions, I was compelled to write to the Court about this glaring deficiency. I offered a hypothetical scenario to make my point.

Let’s say you buy 1000 shares of ABC Corp. at $10.00 per share. You realize that the company is located nearby, so on the way home you stop at their location. The door is locked, blinds are drawn, and as you peek in, you find the office is empty. Nothing at all. No desks, no product, no people, just empty office space. You get in your car and race home, calling your broker on the way telling him to sell your 1000 shares. He does, and you get out at $9.00 a share, with a small loss. Your broker asks what’s wrong, and you tell him. He suggests that you should short the stock. If what you have told him is true, then you would profit if the stock price were to fall further. You take his advice, and short 1000 shares at $9.00. You then contact both the SEC and FBI and advise them that you have information of a possible scam that they might be interested in. A day later, an SEC attorney and an FBI agent call you back. They inquire about your information and both sound genuinely interested and want to stay in touch after taking down all your information.

Have you done anything wrong? You wouldn’t think so, correct? Well according to the jury instructions you would be guilty of inside trading. You have information that arguably no one has, nor could have, unless YOU told them or unless they took the EXACT same action you took, and did their own due diligence and research. The jury charge on page 8838, line 12-19 states as follows:

Information becomes public when disclosed to achieve a broad dissemination to the investing public generally and without favoring any special person or group; or when, although known only by a few persons, their trading on it has caused the information to be fully impounded or reflected in the price of a particular stock. To constitute non-public information, information must be specific and more private than general rumor.

A fair and reasonable person reading that language would feel obligated to issue a world-wide press release every time he/she got additional information that is “more specific and more private than general rumor.” This is simply wrong.

Peace,

Anthony

-- posted by Kirk

Top 207. Nov 2, 2005 2:57 PM

» Kirk - 11/2/05 Last for this day

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From http://www.siliconinvestor.com/readmsg.a...

To: Anthony@Pacific who wrote (93098) 11/2/2005 12:25:11 PM
From: Anthony@Pacific Read Replies (1) of 93105

The last of this batch of Anthony's posts, posted on his behalf.

Bob Zumbrunnen aka SI Bob

-------------------------------------------------
Dear Folks,

This post has been the most difficult post I have ever had to prepare in my life. As many may know, I am in New York waiting to be sentenced so I can finally get the appellate process moving. Just recently, two of my lawyers came to see me to let me know that the prosecutor, Mr. Levine, (Former AUSA Breen is now a criminal defense lawyer) will be asking the Judge to sentence me to LIFE in prison. Not 5 years, not 10 years, not 15 years. He wants me to die in prison. If anyone ever had any doubt that this case was always more about who I was than anything I ever did, they need look no further. Other than myself, all the defendants in this case are white Anglo-Saxon, and every last one of them has been treated in a drastically different way than I have been treated. Every one of them is going to walk away relatively unscathed. The person who made the most money and had his own secret chatroom will do no more than 18 months while getting to keep almost every last penny he made. This is how it all breaks down.

Name Ass’t govt. “illegal gains” forfeiture request Money kept Punishment

Jonathan Daws“archer”/Gryphon NONE $5,583,248 $199,999 $5,383,249 18 months
Kendall Mcgregor(not a current member) NONE $2,013,124 NOTHING $2,013,124 NONE
Jeff Thorpe“Mweka” NONE $1,480,929 NOTHING $1,480,929 NONE
David Slotnick“Ectopy” NONE $165,242 NOTHING $165,242 NONE
Don Terrell“Quack” TESTIFIED $78,828 NOTHING $78,828 NONE
Bob Hansen“rhansen” TESTIFIED $134,379 NOTHING $134,379 Probation
Cleveland/Brezido“Ascot” TESTIFIED $49,677 NOTHING $49,677 Probation
S/A RoyerS/A Wingate NONE -$1,540. NOTHING He can keep his losses 0-8 years
Troy Peters NONE $325,000 NOTHING $325,000 Probation
Anthony Elgindy NONE $159,112 $11.8 million Cannot keep anything LIFE IN PRISON

As you can plainly see now, the Egyptian born Muslim Arab-American short seller was successfully dragged 3,000 miles to stand trial next to ground zero. Studying the above breakdown allows one to conclude that the prosecutors were never interested in justice. They don’t really want $11 million “illegal” dollars to be turned over to them. They only care to satiate their seething hatred with my life. If they really wanted that money, and more importantly if they REALLY BELIEVED it was derived “ILLEGALLY,” they would take it from the people who not only made it but get to keep it. They can’t and won’t do that because they know it’s never been about anyone else; it’s always just been about me.

When Cleveland was first arrested, he had a loaded handgun in his possession. Being a convicted cocaine trafficker with a gun is an extremely serious crime, a felony that carries a mandatory minimum sentence of 15 years, but Cleveland was never charged. Even Royer, who is arguably one of the stupidest FBI agents this government ever gave a gun and badge to, gets a pass on over 1500 uncharged felonies. Compare their treatment to mine. When I tried to use a fake ID to go home 2 days early last April, they managed to squeeze 5 state and federal felony counts out of the one incident.

Isn’t that really what all of this is? A lynching? Isn’t that why Daws and the rest get a few months in camp or probation, getting to keep the money while I am forced to forfeit their gains and then die in jail? Isn’t that really a modern day post 9-11 lynching of the nasty Arab guy?

I may have been born an Arab, but I grew up as an American. My parents, brother and I immigrated to this country when I was only 3 years old. I loved this country with all my soul; even when I did those four months in Taft, my feelings only grew stronger, grateful for a chance to make amends. Today I am sad to say I no longer recognize this country. This isn’t the America I learned about when I was growing up. There are so many things I no longer understand.

What I do know is that I am 37 years old. Sixteen years ago I married the daughter of a Baptist minister named Mary Faith. We were both very young, and I have not always been the best husband, but God willing I would like the next 16 years to be what the last 16 should have been.

Together, we have three beautiful boys, ages 14,11 and 8. My oldest son, Adam, has Tourettes Syndrome and ADD. My middle boy, Gabriel, is carrying the weight of this tragedy on his shoulders, being strong for all of us; far too heavy a burden for any child to bear. My youngest, Samy, is my baby. He grew up on my lap, behind Bloomberg monitors. Now he is in therapy because he hits himself in the head and says “he’s the stupidest kid in the world.” He thinks this is his fault. His birthday is on January 23, and unfortunately the verdict came out the next day. My beautiful baby boy Samy did nothing but wish that his Daddy would come home for his birthday. It tears me apart that I can’t hold him and comfort him. I want them to know that I am innocent. I want them to know they did nothing wrong. My 3 boys are more important to me than money, houses or cars. They are my life, and my world. I don’t care about the FBI, about scams, or even trading. I only care about Samy’s wish.

I want them, and everyone, to know that I am fighting as hard as I can and I will never stop until I am once again free to be with them again. Hatred, prejudice, and all the ugliness must lose in the end. It just has to.

Anthony

As of 11/2/05 the Total Return for "Kirk's Newsletter Portfolio" since 12/31/98 is Up 171% while the NASDAQ is down 4%!!! (my portfolio beta is roughly equal to that of QQQQ.

For 2005, Kirk’s Newsletter is Up 4.2% YTD vs QQQQ down 1.4% YTD vs DJIA down 2.9% YTD vs S&P500 Up 1.5% YTD

-- posted by Kirk

Top 208. Dec 12, 2005 7:26 AM

» Kirk - 12/11/05: CLEVELAND AND THE DEAL THAT ISN’T

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Message #93789 from Anthony@Pacific at 12/11/2005 10:38:14 AM

CLEVELAND AND THE DEAL THAT ISN’T

a new post from Anthony in his own words posted on his behalf.
Bob Zumbrunnen aka SI Bob

Dear Folks,

This post will be my second to last for 2005. Let me first start off by asking that discussion here on Dear Anthony please be limited to stock scams and trading posts. Obviously posts about my current dilemmas, my posts, the trial record, relevant news stories or news stories that name me or any of the various characters involved are obviously relevant and any ensuing discussion is completely appropriate. but this thread was started as a trading thread, and I would like to see it used as such. Please do not post things that are not directly linked to me or what I have said above, keep all the incessant cut and paste posting elsewhere, like on the “banned” thread. This will also help prevent my posts from being buried prematurely underneath stuff that is of no benefit being here “location-wise.” Thank you in advance for your cooperation.

What I will be posting next will be about certain people. I have discussed the conviction stocks, the jury charge, counts 16-32, the verdicts on and on. I have not chosen to not engage in personal attacks nor have I resorted to the “old Tony” tactics of the past. Very serious things have taken place and no one is more aware than I am of the gravity of things. Having said all that, I would like to point out that I will digress very briefly in this post as the “old-Tony”, because I truly believe it to be appropriate, you won’t miss it, and I hope you agree it is within acceptable parameters.

I have publicly made allegations of serious misconduct by former AUSA Ken Breen and Seth Levine. Both men no longer work for the government and in past documents I have discussed the lack of knowledge they each possess about the markets and how utterly wrong they were about almost every aspect of our capital markets. I have also touched upon the misdeeds of convicted drug trafficker and government witness Derrick Cleveland. To truly appreciate the significance and depths of the deception on the court and jury, I will have to do what I do best. I will expose them publicly. I hope that when I am finished even the staunchest critic will have no choice but to concede the truth. The report will be entitled:

THE TRIAL CRIMES OF CLEVELAND AND BREEN

Before I begin, I want to make a few observations and comments about convicted cocaine trafficker and star witness, Derrick Cleveland.

Mr. Cleveland, took the stand and lied over and over. He pulled me into the midst of an unholy alliance between himself and Royer. Mr. Cleveland, you rob, cheat, deceive and betray everyone you come in contact with. It makes me ill, because all I did to you was try to teach you how to earn an honest living. My wife and I allowed you in our home, you slept in our baby son’s room and you ate at our table. Your criminal relationship with Royer is yours’and yours alone. What you believed should be a secret, I openly disclosed and reported. Nobody except you and Royer ever knew what you two were really up to. When you were caught red-handed you quickly recognized you were being given an opportunity to slip the noose from around your neck to mine, and you grabbed that opportunity.

Let me now tell you where your problems are, and how I aim to increase them exponentially. I will also tell you how you might be able to save yourself by, for once in your life, doing the right thing. I have ZERO confidence that a single word I’ve written will sink into that petrified septic sewer between your ears, but that will also be to my benefit in the end.

You signed and entered a plea agreement with the US Attorney’s office in Brooklyn, NOT with Ken Breen or Seth Levine. You swore to tell the truth, or else the “deal” was off. Now, it is very possible that the gentleman who replaced your two handlers will simply swallow and adopt the bizarre “company-line” Breen created based on no known laws, but I will tell you soon why I think that might not happen. More important than all of this is the Judge. The Honorable Judge Raymond Dearie is NOT bound to do what Breen or you want or agreed to.

In fact, my Insidetruth report, “The trial crimes of Cleveland and Breen” will be released first to the US Attorney General’s Office, the US Attorney’s Office in Brooklyn, and to the Honorable Raymond Dearie. It will then go to the media, and finally I will release and publish it here on SI. You may be tempted right now to pick up the phone and call your lawyer, or maybe Mr. Breen himself, and I wouldn’t blame you. Big things are going to happen.

Let me now tell you a little something about the person who has taken over this case. He is an attorney who went in the reverse direction; he used to be in the private sector, and then moved to public service. He used to work at a firm that represented Wall Street “heavies” like Merrill Lynch. This move could possibly be indicative of a man who values truth and justice more than money or a golden parachute. If so, then this move is not helpful for you.

Breen and Levine are gone. They have jumped ship and abandoned you before you get sentenced. Your lies and crimes may not be embraced for too much longer. If I were you, Mr. Cocaine-trafficker, I would gather yourself and sprint as fast as is humanly possible to the Department of Justice in Washington, D.C. and then to the US Attorney’s Office in Brooklyn, NY and spill your guts, before it’s too late to help yourself. It is my firm belief that not only myself, but you, Breen, and Levine all know what you did; however it doesn’t look like the man who replaced them is cut from the same cloth. Then there is the Judge, a man who I believe will not be pleased with the proof I provide him about you.

You have not yet been sentenced, and I am betting that if I can show all the honest people at the Department of Justice and or Judge Dearie that you lied over and over under oath, the proof will not be denied. Just like the most graphic pictures of criminal activity at Abu-Ghraib, I am out to blow the whistle on what you did and what they allowed you to get away with.

I will now try my best to give the above words some authority

I. The Constitution requires prosecutors to seek justice rather than victory as the Supreme Court recently affirmed. It has long been established that the prosecution's "deliberate deception of a court and jurors by the presentation of known false evidence is incompatible with rudimentary demands of justice."
Banks v. Dretke, 540 U.S. 668, 124 S.Ct. 1256, U.S.,2004. In proceedings before the trial court, a prosecutor has an independent, constitutional duty to correct testimony he knows to be false. A rule thus declaring "prosecutor may hide, defendant must seek," is not tenable in a system constitutionally bound to accord defendants’ due process. Banks v. Dretke , US. V. Agurs, 427 US 97.

II. The prosecution is actually REQUIRED to develop evidentiary leads that it believes would expose a witness's lies. Whenever the prosecution has "notice of the real possibility" that a witness is misleading the court or jury, the Due Process Clause requires it to conduct an investigation to determine whether the testimony is false and to expose any falsehood it finds. As then Associate Attorney General and Circuit Judge Stephen Trott eloquently wrote in a Justice Department publication, "Criminals are likely to say and do almost anything to get what they want, especially when what they want is to get out of trouble with the law. This willingness to do anything includes not only truthfully spilling the beans on friends and relatives, but also lying, committing perjury, manufacturing evidence, soliciting others to corroborate their lies with more lies, and double-crossing anyone with whom they come into contact."U.S. Dep't of Justice, Prosecution of Public Corruption Cases”, 117- 18 (Feb. 1988). See also United States v. Bernal-Obeso, 989 F.2d 331, 333 (using informants is a "dirty business").
A prosecutor's "responsibility and duty to correct what he knows to be false and elicit the truth requires a prosecutor to act when put on notice of the real possibility of false testimony. This duty is not discharged by attempting to finesse the problem by pressing ahead without a diligent and a good faith attempt to resolve it. A prosecutor cannot avoid this obligation by refusing to search for the truth and remaining willfully ignorant of the facts." Napue v. People of State of Ill. 360 U.S. 264, 79 S.Ct. 1173,U.S. 1959.

III. False, uncorrected testimony as to a witness's bias violates Due Process just as much as false, uncorrected evidence wrongly incriminating the accused. Napue. The prosecution must step forward and correct known false or misleading statements in open court whenever they are discovered. U.S. v. LaPage, 231 F.3d 488, 2000. All perjury pollutes a trial, making it hard for jurors to see the truth. No lawyer, whether prosecutor or defense counsel, civil or criminal, may knowingly present lies to a jury and then sit idly by while opposing counsel struggles to contain this pollution of the trial. A prosecutor has a special duty commensurate with a prosecutor's unique power, to assure that defendants receive fair trials. "It is as much his duty to refrain from improper methods calculated to produce a wrongful conviction as it is to use every legitimate method to bring about one." Berger v. United States, 295 U.S. 78.

IV. The Supreme Court has consistently held that a conviction obtained by the knowing use of perjured testimony is fundamentally unfair, and must be set aside if there is any reasonable likelihood that the false testimony could have affected the judgment of the jury. U. S. v. Agurs, 427 U.S. 97, 96 S.Ct. 2392.

AND FINALLY

V. Finally, from the Second Circuit where I was prosecuted, “where the prosecution knew or should have known of the perjury, the conviction must be set aside 'if there is any reasonable likelihood that the false testimony could have affected the judgment of the jury.' " U.S. v. Wallach, 935 F.2d 445, C.A.2,(N.Y.),1991, U.S. v. Seck,48 Fed.Appx. 827,C.A.2 (N.Y.),2002 among many other cases that say the same thing.

Mr. Cleveland, as you can see, denial will no longer suffice. The truth will be told. Three years ago you decided that you and your freedom was worth more than my entire family and the future of my three sons. It’s time I believe to show the world how wrong you were.

Regards,

Tony Elgindy
http://www.siliconinvestor.com/readmsg.a...

-- posted by Kirk

Top 209. Dec 13, 2005 10:49 AM

» Kirk - U.S. court rejects NASD turf challenge to SEC

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Anthony Wins one!

UPDATE 1-U.S. court rejects NASD turf challenge to SEC
Tue Dec 13, 2005 12:16 PM ET

(Adds court comment, background)

WASHINGTON, Dec 13 (Reuters) - A federal appeals court on Tuesday dismissed a petition from brokerages regulator NASD that represented its first-ever challenge of a Securities and Exchange Commission action on an NASD sanction.

The U.S. Court of Appeals for the District of Columbia Circuit rejected the NASD's petition, saying the regulator did not have legal standing as "a person aggrieved" to seek a review of the SEC decision.

"In short, NASD's petition for review is not only unprecedented, it is legally unsupportable," the court said.

At the heart of the dispute is a more than 5-year-old trading abuse case involving Amr Elgindy, former owner of brokerage Key West Securities Inc., and shares in firearms safety mechanisms manufacturer Saf T Lok Inc. .

NASD in March 2000 accused Elgindy of manipulative short selling in Saf T Lok shares over several weeks in 1997. In May 2003, an NASD adjudication committee barred Elgindy from the securities business, banished Key West Securities from NASD, and fined him and the firm $51,000 each.

Elgindy and Key West appealed the NASD ruling to the SEC, which oversees the NASD. The SEC is a government agency and the NASD is a self-regulatory organization to which most U.S. brokerages must belong and obey as their regulator.

In March 2004, the SEC questioned the evidence in the Saf T Lok case and overturned most of the NASD's sanctions. The agency lifted both Elgindy's industry bar and Key West's expulsion from NASD, and reduced the fines to $1,000 each.

In an unprecedented response, the NASD three months later appealed the SEC's actions to the court, arguing in September that its reputation is undermined when its attempts to regulate the Nasdaq Stock Market are challenged by the SEC.

The SEC replied that the adjudicatory process for disciplining brokers would be complicated if the NASD could get a court to overturn an SEC change to an NASD sanction.

Spokesmen for the NASD and SEC had no immediate comment.
http://today.reuters.com/investing/finan...

More about NASD

-- posted by Kirk

Top 210. Dec 23, 2005 7:51 AM

» Kirk - Re: U.S. court rejects NASD turf challenge to SEC

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In response to U.S. court rejects NASD turf challenge to SEC posted by Kirk:

I posted that Story on Anthony's board and this is his reply from prison:

To: Kirk who wrote (93790) 12/23/2005 5:33:15 AM
From: Anthony@Pacific 93838 of 93839
http://www.siliconinvestor.com/readmsg.a...

the following text are Tony's words.
Bob Zumbrunnen aka SI Bob

Dear Folks,

On December 13, 2005, the United States Court of Appeals in Washington, D.C. handed down an historic decision without precedent. This was a decision that ultimately dealt with what was then a new and equally bizarre theory of stock manipulation. This theory was formulated just for me. The NASD, in their pursuit of permanently silencing me manufactured a theory that said it is possible to manipulate the price of a stock using accurate and truthful information. Armed with this novel idea, the NASD in 1997 went after me for manipulating shares in a tiny scam under the ticker symbol “Lock.”

In this case the NASD alleged that I manipulated LOCK shares by issuing negative and cleverly timed sell recommendations that contained truthful but extremely negative information. It was seemingly a ridiculous case, but the NASD was deadly serious about it, and we went all the way through the hearing process. I won. This didn't stop the NASD; they appealed the decision to their own NAC council, also known as the NASD kangaroo court. This time the NASD prevailed, and I was found guilty of manipulating shares of LOCK by using the truth. During this time, the prosecutors here in NY seized this opportunity to pursue me on a much wider scale in many, many more stocks. They used NASD v. Elgindy case as the only authority stating it’s possibly to manipulate a stock by using the truth. It is the exact theory and case precedent the US Attorney’s office used in Brooklyn at my criminal trial; there they also suggested that the truth could be manipulative.

My position on the other hand was and has always been that it is IMPOSSIBLE to manipulate shares of any stock regardless of circumstance, if one is using the truth, and or what is believed to be the truth.

In a Wall Street Journal article last year, this very issue was raised on the first day of my criminal trial, November 1, 2004. The story’s title:

“When telling the Truth is a Crime:
Elgindy faces charges he manipulated stocks with ACCURATE information”

“Courts have generally held that putting out accurate material wasn't manipulative….the prosecutors in the Elgindy case, however, are taking a more encompassing view of manipulative activity. In a letter last year to presiding Judge Raymond Dearie, the US Attorney’s office in Brooklyn said ‘the government’s case alleges the release of accurate information can indeed be part of a manipulative scheme.’”

It doesn't matter if I tell 1 person, 10 people, or 10 million people what I know or any part thereof. It doesn't matter if I tell 3rd graders first, your grandmother next, and the 7-11 guy last. It cannot be manipulation. It doesn't matter who I tell the information to, or when I communicate it. The government has not right to reign in my views or beliefs. They cannot tell me or you what we can or cannot do with truthful information in our possession, nor can they stop our pursuit of the truth.

A theory that has no basis in law was allowed to be presented to the jury. Because this theory of manipulation was so utterly wrong and it was this very theory relied on for the criminal charges, it has to be “Game-Over”. The verdicts weren't just based on bad law, they were based on no law at all and must be reversed.

My jury was allowed to consider this bogus manipulation theory and it is reflected in both the jury charge and the government’s summation. On page 8,119, line 12 -22 they state:

It's the comments of a coordinated short-selling attack scheme that's designed to artificially impact the market with sudden unnatural impacts. How the market was particularly affected depended upon how the information was released and the reaction of the public. If the longs panicked, and we heard about puking up stock, that would have one effect. Sometimes it wouldn't work.

I ask that you please read this a few times and think hard about what the prosecutor is saying here to the jury. He is saying that the way this manipulation worked is by the sudden introduction of information (arguably negative) and HOW it was released. If the stock went down, say for example after an Insidetruth.com report comes out, that is manipulation. A little farther along we see once again in their summation, on page 8,121, line 5-9:

the deceptive trading practice of a coordinated release of negative and sometimes false information, to have the effect to crush, destroy, ruin the stock price, and, when it's done in a collusive manner that happened here, that's improper, that's illegal, and that's what they did.

Not only in all of this in their summation completely false, it is completely devoid of any foundation whatsoever in the law. It is exactly what I have been fighting against for the past 8 years. Imagine being convicted of conduct that ends up being completely legal after all? The only person who alleged this conduct was illegal is the same person who on a so-called “terrorist” task force never prosecuted a single terrorist in his entire life; a man who knew and continues to know less than nothing about our capital markets; a man who has tried mightily to force a “short-sellers-square” into a “terrorist-circle.”

For the past three years the truth has been criminalized, but as of December 13, 2005, this is no more. It is finally over. The caustic words of the High Court’s decision hopefully will prevent these feeble minded lawyers at the NASD from seeking another public thrashing at the Supreme Court level. Eight long and expensive years battling the NASD and the parasites they spawned have exacted a heavy toll on myself and my family. My children continue to be ridiculed, taunted and humiliated on an almost daily basis because their father is in jail and a “terrorist”. The real terrorist is out there, walking free, having used my life as a spring-board into the private sector, doing exactly what he found so distasteful by Royer.

Knowing about, assisting and/or initiating FBI or SEC investigations is completely legal. Disseminating negative, even overwhelmingly negative, information about frauds or scam stocks is completely lawful conduct. Choosing to release all or parts of this information to specific people, groups or the general public is a legitimate choice that no one can take from me, especially the government.

If I make a trading call, write a report, or disclose truthful information and that translates into dozens, hundreds, or thousands of sell orders, the resulting explosion in orders or volume in NOT artificial or exaggerated "negative" sentiment. It is as real and bona-fide as negative sentiment can get, and thankfully it continues to be the law.

Peace, and happy holidays to all

Anthony

-- posted by Kirk

Top 211. Feb 17, 2006 7:29 AM

» Kirk - Govt Admitted Their claims were fictitious and bogus

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To: Man on the moon who wrote (92429) 2/16/2006 7:51:50 PM
From: Anthony@Pacific Read Replies (1) of 93894

http://www.siliconinvestor.com/readmsg.a...

NEWSFLASH!!! NEWSFLASH!!! NEWSFLASH!!!

Title above and text below in Anthony's own words
SI Bob

IT'S OFFICIAL!

As of this very second, the government has admitted that the former prosecutor's claims, gains of $12 million, were fictitious and bogus.

Real claims plummet by more than 90%.

Stay Tuned Folks!

Anthony

-- posted by Kirk