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Unveiling the Reality of Naked Short Selling: A Rebuttal to ‘The Loony Conspiracy Theory Threatening Wall Street’ article by Forbes

Dear Brandon Kochkodin & Forbes,

In his recent article “The Loony Conspiracy Theory Threatening Wall Street,” Brandon Kochkodin attempts to discredit the existence and impact of naked short selling, labeling it a mere conspiracy theory. However, a comprehensive analysis of the evidence and historical precedents reveals the pervasive nature of naked short selling and its detrimental effects on our financial markets.

Kochkodin argues that naked short selling is virtually non-existent today due to the SEC’s amendment of Regulation SHO in 2008. However, this assertion overlooks the fact that regulatory measures are not always fully effective in eliminating illicit practices. The SEC itself has acknowledged the ongoing issue of naked short selling, and in 2008, the SEC issued an emergency order to enhance investor protections against naked short selling. The very need for such an order indicates that naked short selling was a significant concern, even after the amendment of Regulation SHO.

Additionally, the assertion that naked short selling is a non-issue today contradicts the numerous cases of failure to deliver (FTD) reported by the SEC.

FTDs occur when a party fails to deliver securities that it has sold by the settlement date. While not all FTDs are due to naked short selling, it is a common cause. The persistence of FTDs suggests that naked short-selling continues to occur.

Let us consider some recent cases that further demonstrate the prevalence of naked short selling:

SEC Charges Two College Professors in Naked Short Selling Scheme (2014)

In January 2014, the Securities and Exchange Commission (SEC) charged two college professors in Tallahassee, Florida, with perpetrating a complex naked short-selling scheme for more than $400,000 in illicit profits. The professors engaged in a series of sham transactions to perpetuate a naked short position, intentionally failing to deliver the securities within the standard settlement period. They maintained the uncovered naked short positions and profited from them. This case highlights the ongoing occurrence of naked short selling even after the amendment of Regulation SHO.

SEC Charges Investment Adviser and Principal in Abusive Naked Short Selling Scheme (2023)

In June 2023, the SEC charged investment adviser Sabby Management LLC and its managing partner with fraud in connection with a long-running scheme involving misrepresentations and violations of rules for short selling. The complaint alleged that Sabby and its managing partner engaged in illegal “naked short selling” by improperly placing short sales without borrowing or locating the shares and then failing to make timely delivery. This case demonstrates the continued existence of naked short-selling and its fraudulent nature.

FINRA Penalizes UBS Securities $2.5M for 73,000 ‘Naked’ Short Sales (2022)

In May 2022, the Financial Industry Regulatory Authority (FINRA) imposed a $2.5 million penalty on UBS Securities LLC for violating Rule 204 of Regulation SHO. UBS Securities executed over 73,000 “naked” short sales, selling securities it did not have or arrange to borrow. These sales were executed with an unsatisfied close-out requirement. The case against UBS Securities highlights the persistence of naked short selling and the need for regulatory enforcement to address such violations.

It is also essential to address the specific case of $MMTLP, which Kochkodin mentioned in relation to naked short selling.

$MMTLP was on the OTC Threshold list for 41 consecutive days from October 14, 2022, to November 4, 2022. Despite being on the threshold list, naked short-selling persisted, and no fines were imposed, indicating a lack of effective enforcement.

This case highlights the failure of regulations to prevent naked short-selling and raises serious questions about the fairness and integrity of the regulatory process.

These recent cases, including the case of $MMTLP, clearly indicate that naked short selling persists despite the amendment of Regulation SHO in 2008.

By selectively dismissing these cases, Kochkodin fails to acknowledge the ongoing need for vigilant regulatory oversight to combat the detrimental effects of naked short-selling.

In conclusion, dismissing claims about naked short-selling as baseless conspiracy theories undermines the substantial evidence and real-world consequences associated with this practice. Naked short selling is an issue that demands serious attention from regulators, investors, and the public. By acknowledging its existence and thoroughly investigating its impact, we can work towards a more transparent and resilient financial system for the benefit of all stakeholders.


Fair Markets Now Team

Fair Markets Now is a community-driven organization started by members directly affected by the irregularities surrounding MMTLP. Our mission is to advocate for fair treatment and equal access for retail traders in the equity markets. All investors, regardless of their size or resources, should have a level playing field.

We aim to hold hedge funds, shorts, market makers, and brokers accountable for their actions and ensure they adhere to the same regulations as other market participants. By advocating for the enforcement of existing rules and penalties for rule breakers, we strive to create a transparent and equitable market for everyone.

SEC Charges Two College Professors in Naked Short Selling Scheme (2014).


SEC Charges Investment Adviser and Principal in Abusive Naked Short Selling Scheme (2023).


FINRA Penalizes UBS Securities $2.5M for 73,000 ‘Naked’ Short Sales (2022).