(snip)"Court Gives Overstock.com the Okay to Proceed and Denies Prime Brokerages Attempts to Derail Exposure
Nasdaq: OSTK) () announced today a favorable ruling in the lawsuit pending in the Superior Court of California, County of San Francisco against most of the largest prime brokerage firms in the country, including Morgan Stanley & Co. Incorporated, Goldman Sachs & Co., Bear Stearns Companies, Inc., Bank of America Securities LLC, Bank of New York, Citigroup Inc., Credit Suisse (USA) Inc., Deutsche Bank Securities, Inc., Merrill Lynch,Pierce, Fenner & Smith, Inc., and UBS Financial Services, Inc.
On July 17, 2007, Judge John Munter of the California Superior Court for the City and County of San Francisco ruled that Overstock and it co-plaintiffs have stated viable claims for market manipulation under California securities law, for common law claims for conversion and trespass to chattels, as well as for injunctive relief under California's Unfair Business Practices Act against the defendant prime brokerage firms based on those defendants allegedly executing naked short sales of the stock of Overstock with the intent of manipulating the market price for the shares of those companies' stocks. In addition, the Court granted Overstock (and its co-plaintiffs) leave to amend other of their claims for restitution under the Unfair Business Practices Act and for the common law claim of interference with advantage, to more specifically plead the factual basis of these claims…"(snip)
For anybody that is unfamiliar, 'naked shorting' is a supposedly illegal stock trading technique where big money movers go into the stock market and 'sell' shares of stock that they don't actually own. Of course the buyers don't know that the sellers are unable to deliver on the stock shares they just bought. The sale of these non-existant extra shares pushes down the stock price. At that point the big money movers go into the market after the fact and start buying shares at the lower price to 'cover' their previous sale of non-existant shares, which they are then able to deliver. The conspiracy theory crowd is of the opinion that 'naked shorting' has been used extensively to force down the stock price of companies prior to takeovers / buyouts ... and has also arguably been used extensively in the commodities markets to depress the price of gold and silver. See
So far very little has taken place at the federal level to seriously investigate and prosecute 'naked shorting' activities. It now appears that state courts can be successfully used for this purpose !



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