The SEC has temporarily halted trading of Neuromama Ltd.(bloomberg.com) |
The SEC has temporarily halted trading of Neuromama Ltd.(bloomberg.com) |
...with no link to click on
WTF?
It's pretty beautiful in an illegal sort of way: So the clever short sellers borrow and sell 100,000 shares of stock at $2 each, hoping to profit when it crashes to zero.
By hypothesis, there are no buyers. But we buy. We buy those 100,000 shares for $2 each, laying out $200,000. Now we own 300.1 million shares, out of 300 million outstanding.
On Thursday we go to our brokers and say "you know what, we changed our minds, we want our stock back from whoever you loaned it to."
So the brokers call in the short sales.
The short sellers can't borrow the stock anywhere else. We own it all. So they have to close out their short sales by buying in the stock.
But they can't buy the stock anywhere else either. We own it all. So they have to buy it from us. How much do we charge?
Yeah, $15. Or $20 or whatever, I don't know. We can charge whatever we want. If the short sellers don't buy the stock, they're breaking the law. So they'll pay whatever we ask.
They pay $20 to buy back the shares they sold us at $2, making us a $1.8 million profit.
source: https://www.reddit.com/r/investing/comments/4wvlkv/a_scam_wi...
[edit: formatting]
It provides additional context, some entertaining footnotes, and is generally just very much worth the trip.
[0] https://www.bloomberg.com/view/articles/2014-07-11/cynk-make...
Who are the short sellers? Who are the brokers? are they complicit? Is one of them acting as the market maker for the stock? When the con is exploded and the money gets paid back, where did it come from? The short sellers? the brokers? thin air?
I am entirely unsure how this search engine works.
We're sorry... but your computer or network may be sending automated queries. To protect our users, we can't process your request right now. See https://support.google.com/websearch/answer/86640 Google Help for more information.
Why isn't this guy on the bad actors list?
[0] - https://www.youtube.com/watch?v=ok-8uVR4Pa0
[1] - https://www.youtube.com/watch?v=tZhI5zRJ8zw
[2] - https://www.youtube.com/watch?v=hreCQlJB7bE
[3] - https://www.youtube.com/watch?v=23C_fKGuSls
[4] - https://www.youtube.com/watch?v=A1rbxisJGJ4
[5] - https://encrypted.google.com/search?hl=en&biw=&bih=&q=site%3...
[∞] - https://www.youtube.com/channel/UCbSwch2hCQcgy-ecz1Z_guQ
edit: spacing
So if you wondered what a shell company is, one way to get a publicly traded company is to buy the "shell" of an existing company that is already public but wound down operations.
Sort of a take over of just the name, incorporation documents and exchange documents that let it list. You'd then delist and have your shares only trade OTC. This helps explain why they haven't filed any financials for the past few years.
If you look at its trading history, NERO US Equity<HP GO> if you have a Bloomberg terminal, you can see that it traded a few hundred shares a day and slowly climbed up each day. This probably indicates that the shares are very tightly held. So the owners can't really cash out by selling their shares, but they can possibly use the shares as collateral.
Being so tightly held also eliminates the possibility of shorting the company, though shorting any OTC symbol is always a bit sketchy.
"To fully understand the difference between our Business Opportunity ad and all the other business opportunity ads you've been reading, the first thing you must know is that we are offering an overflowing profit palette of business 'opportunities', not just a single business 'opportunity.'..."
Plus 30 more paragraphs of similar madness.
[1] http://investor.neuromama.com/licensing-territories.html
> Why would it make sense for APPLE Computers to acquire NeuroMama, Ltd.
> (1) If APPLE acquired NeuroMama, Ltd. it could potentially generate $100 billion, by selling advertising, in new revenues per year within 5 years by replacing GOOGLE with Neuromama.com’s Search Engine based on Neural Technology in APPLE's browser - SAFARI. Of course, it no longer will be NeuroMama.com search engine .... it will be APPLE Search Engine.
...what?
Of course.
What we seem to know and the unanswered questions:
- this seems to be an atrociously bad startup (their "search engine" proxies Google but can be easily tripped)
- it seems to have been a genuine IPO (2000???) that then failed (see search engine) and yet the outstanding shares trade OTC (between large institutions privately - a very common method)
- the scam that seems to be happening is curious (See good explanation about Eve down thread). The idea is bad scammers can trap genuine hedge funds into a short squeeze on this very rarely traded stock. But no sane hedge fund will short the stock without also buying a call option - and so it seems only insane hedge funds get ripped off here.
My questions:
Why on earth are these stocks still lying around and being traded OTC. This seems the sort of thing that would never get allowed on any genuine exchange (the company could barely fulfill minimum reporting requirements)
Why did anyone take this as a "naked short"? Options trading is risk risk risk and people do this for a living aren't fools. Are they?
Even if this got public in the dotcom boom, why is such a scammy company still allowed to operate with outstanding shares ? I mean they have only just halted trading on a company that proxies Google ... Why give the imprimatur of SEC over the past few years to such crap?
Bill Ackman reads this and says "Oh, shit ... you can do that? Why didn't someone tell me that before I lost about $1 billion shorting that POS Herbalife pyramid scheme?"
In other words, sometimes "insane" hedge funds are run by BSDs[1] who are convinced they are the smartest guys in the room. They're so convinced that a stock is worthless that they don't bother doing something prudent like buying protective calls.
And then guys like Carl Icahn buy HLF stock just for the lulz, knowing that they are giving Ackman a very painful galactic wedgie.
Wall Street is definitely Adult Swim. And occasionally joker hedge funds need to be reminded of that.
[1] not Berkeley, but Liar's Poker
Presumably they couldn't find someone to write the call option at a reasonable price. Which makes sense for a volatile thinly traded stock.
Short plus a call is a put. If you can buy a call you can just buy a put. Thinly-traded stocks such as this one would not have exchange-listed options.
https://i.imgur.com/pSWLXIx.png
The rotating carousel backgrounds on their homepage are comically bad Photoshop jobs, and the logo looks like it's traveled here from the early 2000s.
"This $35 billion company supposedly owns 'a clone of Amazon’ and is developing atomic fusion — and the SEC thinks something might be wrong."
It's a 68 page, haphazardly stitched mess of documents. Can't say they're not confident in their product:
From page 37: "NeuroBrowser of NeuroMama.com is the best, easiest to use, and blocks all kind of viruses and pop-outs on your screen...In 2 years the NeuroMama stock will be the most popular and will make NeuroMama shareholders and employees very, very rich. NeuroMama.com is the best Search Engine in the world."
I think this is pretty much like gambling though... Not so different from how most people deal with the NYSE or NASDAQ (most people know nothing and make decisions based entirely on hype/media). People gamble on horses and lottery, and they also gamble on stocks... I think if someone can pull this off, they deserve the money as much as any legitimate company on the NASDAQ or NYSE.
A lot of these NASDAQ/NYSE companies have overinflated valuations (far beyond their real intrinsic value); it's the same thing except in this case, the intrinsic value is 0.
I'm reminded of Cormac Herley's theory about Nigerian scammers acknowledging they're from Nigeria because they prefer to deal with people naive enough not to see that as a red flag https://www.microsoft.com/en-us/research/publication/why-do-...
Unlike your average Nigerian scammer, these guys also presumably had the ability to afford a web designer and someone to write copy that looked vaguely legitimate if they'd wanted to. Trouble is, investors that aren't ludicrously unsophisticated are more likely to ask awkward questions and get lawyers involved...
The 2012 film remake of Red Dawn made China the bad guys compared with 1984 original Red Dawn where Russia and Cuba were the bad guys.
But seriously, could this be used to launder money, or the scam wouldn't allow for it based upon the setup of the short squeeze? Could money be put in the system this way and cleaned and turn a profit at the same time?
Some con artist gets expelled from US after spending 6 years in prison for investment fraud. Tries new pump and dump gig from Mexico called NeuroMama, deliberately hilariously crazy stupid.
Issues some 650M shares, sells 200 for 50$, probably to himself, gets stopped by SEC. Holds the remaining 650M-200 shares, that's where the trillion dollar figure comes from.
Time to stop calling virtual shares 'market cap' or even 'worth'!
That's pretty old and boring, the 'new' attempted twist is called short squeeze, see and thank @thegranderson for explanation.
Shun the Neuromama meme.
This gives a whole new dimension to the word 'pump and dump con artist': https://www.youtube.com/watch?v=A1rbxisJGJ4
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This forum post has links to some of their financials which are just comical.
Note the fake NASDAQ symbol.
I only watched 5 minutes of it. Interestingly, Neuromama.com does indeed return Microsoft as the top result for "computer software": https://neuromama.com/get/web/computer+software
But the rest is the same as Google.
https://www.youtube.com/watch?v=tZhI5zRJ8zw
Wow.
Not saying owners are not crazy, but in this case crazy happens to also help them.
Stick with it for a few minutes and you can listen to him describe heavy ion fusion in terms of an "angel the size of Los Angeles that runs off nuclear power" while inexplicable jet-skiing videos play in the background.
Edit: Eight minutes later and water sports are still playing behind him. He's talking about Mt. Kilimanjaro now.
> NeuroMama.com is the best in the world Search Engine and Social Network, researched, designed, developed and implemented based on Neural Technology and artificial intelligence ..... Developed by the best International team of mathematicians, and computer analysts.
This rise in value was orchestrated no doubt.
thats what i got
http://www.automobilemag.com/news/porsche-and-volkswagen-wha...
This is so bizarre!
As you can see, it's returning a Laravel exception, displaying the Google Captcha check HTML code to avoid this type of thing.
He says "adventure capitalists" more than a few times, then appears to be possessed
Actually, I just posted it.
http://www.nbcsandiego.com/news/local/Ocean-Beach-Pier-Death...
Apparently that's the CEO's daughter? But the only references I can find say the death was ruled to not be a homicide, so I don't get the references in the text to being murdered by a loved one. And why he put a eulogy to his daughter into the footer of all his web pages are beyond me.
Can also see it as a clever ruse -- act a little bit "crazy" to attract some short sellers. In hope they'd think something like "This is some crazy company, so cringeworthy, looks overvalued, let's short it".
I believe it's pulled from here?
http://www.eurasialasvegas.com/our-mission.html
Or re-used...
What a creepy story
Alice sees that the stock price has increased and this puts it on her radar of companies to investigate. She sees that NeuroMama is a worthless stack of nothing but shady incorporation papers. Alice thinks the stock value will decline. She goes to her broker, Bob, to borrow shares so that she can short sell. Bob calls around Long Island and locates some shares belonging to Eve for Alice to borrow.
Alice offers these shares for sale. Eve buys up a significant portion of them and puts them back on the market for sale at a massive markup.
Eve calls back her shares. Alice is required to return the shares to Eve. But Alice has sold those shares, so she must buy them back. She tries to find anyone to buy them from. Unfortunately, Eve is the only one selling, so Alice must pay Eve's price.
The only money that has changed hands is between Alice and Eve. There was no $34B, only a small fraction of the shares changing hands at highly inflated prices. If Eve is caught she'll need to disgorge her earnings to Alice.
Didn't really work out for them in the end. They executed the short squeeze to acquire VW but they're owned by VW now.
http://www.automobilemag.com/news/porsche-and-volkswagen-wha...
The short sellers are anyone with a negative outlook on the stock. For example, some hedge funds do 50% buying, 50% short selling, so in theory they are neutral to overall market conditions.
The brokers in this case have been permitted to lend out the stock to earn extra money, the short sellers are ordinary customers of the brokers, the short sellers don't necessarily have any special relationship with the brokers.
The market maker would be buying as much as selling, and not holding any position over extended time, so they don't influence this event.
In theory, the short sellers have to pay up to meet their obligations.
Not trying to correct you, I just think grammar is nifty.
https://www.bloomberg.com/view/articles/2014-07-11/cynk-make...
Let's set up three parties to this scam: 1. The Scammers - these people start the company 2. The Short Sellers - these are the "smart money" who uncover some fictitious/sketchy company and want to profit 3. Brokers - these are the intermediaries through which both The Scammers and The Short Sellers trade
First, The Scammers set up the company and take it public on some sort of lightly regulated exchange (look up pink sheets, over-the-counter trading, etc.). These are not the NY Stock Exchange where an IPO has to be somewhat legitimate.
Second, The Scammers lightly trade the stock up among themselves over time until it looks overvalued enough for The Short Sellers to notice it in their quantitative screens and get interested.
Then, expecting the price to drop, The Short Sellers decide they want to sell short the stock. This would generally mean that they borrow the shares from someone that has them (e.g., borrow 100 shares at $10 a share), sell them to someone else (e.g., all 100 shares at $10 a share), and buy shares again when the price goes down (e.g., buy 100 shares at $2 a share) to repay the person they bought them from (to whom they owe 100 shares, regardless of share price).
So, in order for the Short Sellers to orchestrate this, they turn to Brokers, who match buyers and sellers. Since this company is a scam, only The Scammers have any shares. So the Brokers go find The Scammers (hopefully not realizing they are scammers), and ask them to lend their shares to The Short Sellers. The Scammers gladly do this.
Next, the Short Sellers want to sell their borrowed shares back to someone, so they are set up for when the price drops. Again, The Scammers are glad to buy these shares (putting up some cash to do so).
When enough Short Sellers get involved, or when The Scammers feel like it, they will call up their Brokers and ask for the shares they loaned back. There are some rules around this, but they can generally call them back. Now begins an epic short squeeze - the Short Sellers don't have any shares, but they owe them to someone, not realizing that the person they borrowed from is the same as the person they sold to (The Scammer in both cases).
So, the Short Sellers go out looking for shares to buy to repay their loan (again, denominated in shares, not cash). But since only The Scammers have shares, they can demand any price, and they do. They demand higher and higher prices, until the Short Sellers finally have to pay up exorbitantly for shares to pay back their loan. The Short Sellers buy shares from The Scammers at wildly high prices, and return them (through a Broker) to The Scammers, who are very pleased with themselves, having both sold their shares for 100s of times what they bought them for, and having gotten the shares returned to them.
So I get the point where the scammer is selling options amongst themselves to get the stock price to rise. I put out an "ask" and then later come back with another shell company/identity and buy that stock with my "bid". Brokers are handling these transactions by connecting the buyers to the sellers (which happen to be the same people so they can buy an sell at an arbitrary price and only the brokers are making any money on the transaction fees.)
Now you stipulate this causes the stock to show up as "over valued" based on pretty standard technical analysis. Sort of "look no revenue but people are buying this stock for $2? WTF?"
So our short seller (who isn't a scammer right? they are being scammed?) goes to their broker and says we think this price is too high and its going down, so we want to sell a put option (that is the promise of a sale) of these shares at $2 a share, 6 months from now. Since they are an options trader and they know how these things go, they also buy a call option, to buy shares at $2.25 6 months from now. This is known as a "butterfly" if the shares go up you will be able to cover your put options with shares from the call option and "lose" only 25 cents per share, if the shares go down, the person on the other side of your put buys your shares for $2 and you sell them for less than $2 and pocket the difference.
What I don't understand is what broker is going to play the other side of the short seller's order book?
If our scammers agree to sell a call option at $2 to counter balance the short seller's put option, they are forced to sell at $2, they can't decide to sell at $20.
How does the scammer get the short seller's broker to take a bath here? They aren't some dupe in an investment club who things "its going to the moon!" and so buying what ever comes out, they are trading options on high risk securities over the counter (in many ways the highest risk securities).
So the only way I see this working is if the broker in this melodrama is corrupt and telling someone to short a stock which the broker does not ever get control over (essentially con them into a naked short).
Your point still stands and in respect to broker(s), I wonder if they:
* knew, but could ignore it, because it is legal and they wanted to collect the fees
* didn't know
* knew, and should have done something, but didn't, and thus broke some law.
It looks like a casino where you are allowed only to lose, not a free market where you can trade however you like. Once you find a profitable scheme you go to jail.
