Post by jannikki on Nov 15, 2005 20:49:35 GMT -4
It Starts with a Phone Call…”Be Merciless” – November 13, 2005
David Patch
You’re a stockbroker working on Wall Street, the phone rings and the voice on the other end of the line says “Sell with Unbridled Levels of Aggression” and “Be Merciless.” What do you do?
For nearly half a decade a small Pennsylvania Company called Sedona Corporation (SDNA) have asked themselves what possessed that broker, and at least one other to act; to be “merciless” to their stock. Exactly what did the Company and shareholders do to deserve such abuse and manipulation?
In 2003, evidence of an audio recording containing exactly that communication was presented as part of arrest warrants issued against brothers Thomas and Andreas Badian of Rhino Advisors. The DOJ arrest warrants identifying that it was in fact Andreas Badian who was initiating that phone communication to two brokers reportedly working for Refco Securities.
Sedona had entered into a Private Investment into a Public Entity [PIPE] arrangement in 2001 that was being brokered by Rhino Advisors on behalf of a Swiss Fund called AMRO International SA. The deal included provisions for a stock for cash swap in which AMRO would provide necessary funds to Sedona to develop their business operations and in turn, Sedona would provide AMRO with discounted stock shares. The quantity of shares that would be issued would be based on a discounted basis to the stock price at the time of the conversion.
In the workings of Wall Street, the basic opportunity that you receive shares at $0.85 on the dollar is not adequate profit enough. Profits could be substantially increased, far more than the original deal, if you sold into the stock ahead of the stock conversion making more money in the shorting process than in the actual financing deal. It was this activity that Rhino was being charged with; manipulating stock prices for higher profit. Stock Manipulation using shares that did not yet exist.
Andreas Badian requested the “merciless” selling of shares in Sedona Corporation and was even recorded congratulating the brokers on a job well done for the ‘collapse’ of Sedona’s stock. He did so for greed and profit and at least two known brokers aided him in this fraudulent act.
For most people who do not follow the markets closely or understand this issue, this may appear to be a non-event. Professional financial reporters can’t grasp the magnitude of this situation and thus dismiss it as an isolated activity that damaged one small company that may not have survived anyway. And our Regulators are perplexed as to what the big deal is. Investors never should have invested in Sedona, forget the fact it was Wall Street manipulating it.
The big deal is that people and small businesses have every right to survive. The big deal is massive white-collar crime that is destroying our Country, town by town, and beyond. Investors today pay for the purchase of securities in many stocks, good and bad, and Wall Street Institutions lie about executing that trade while profiting from the lie. The Institutions commit mail fraud by way of a trade settlement statement yet nobody seems to care.
It is not supposed to be our Democratic Nation where elected officials demonstrate such protectionism of the wealthy at the expense of the people. But it happens.
For Rhino’s participation in over $50 Million worth of market loss stock manipulation a $1 Million fine was imposed on the firm and executives. To this date, Refco has never been charged by the SEC nor have brokers or traders that executed those manipulative trades. The SEC has been ‘negotiating’ a settlement with Refco for several years.
Beyond these easily visible criminals are the hidden gems the SEC has tried for years to ignore. Regulators ignored enforcement against buy-side Broker-Dealers who purchased these illegal shares from the Refco Brokers, and never sought out delivery of these shares to protect their client’s investments. Taking receipt of stolen goods is a crime in itself, just not on Wall Street.
You see the shares being sold into the market with “unbridled levels of aggression” never existed. These trades were based on stock certificates never issued or registered by the Company at the time of the trade. When the trades came up for settlement the settlement failed because there were no shares to deliver. It then took the conspiracy of the buy-side Institutions to ignore delivery obligations that allowed for Andreas Badian to be successful. Wall Street Institutions had to look the other way and they did because the Securities and Exchange Commission did as well. The buy-side brokers received a commission and profited along the way.
Data provided by PlacementTracker.com indicates that within the timeline that Rhino Advisors and AMRO International SA were offering PIPE placements into Sedona Corporation they were also in deals with many other public companies as well. In fact, AMRO and Rhino were involved in over $48 Million PIPE placements together. Rhino was involved in an additional $43 Million in PIPE Placements they funded themselves and all totaled Rhino had participated in $307 Million PIPE placements offerings covering 146 separate deals during a span of time ranging between 1997 and 2001.
While the listing from PlacementTracker identifies 146 separate entries for deals, many companies are listed a variety of times making the total number of companies involved in Rhino PIPE’s much smaller. Companies such as Xybernaut, whom recently filed for bankruptcy, had as many as 4 separate dealings totaling $4.25 Million. Others such as ObjectSoft Corporation were involved in 6 deals totaling over $2 million in 1998/1999 before terminating their registration in Nov. of 2004.
But while Xybernaut and ObjectSoft are standouts due to the number of times they went to the till with Rhino Advisors, what is more interesting is the number of companies that no longer exist from this list and, of those that remain, how many have been listed on the recent Regulation SHO’s threshold list at one time or another.
With a total of 99 Companies listed as acquiring financing through Rhino Advisors, 58 of those companies remain public today with 41 now terminated. One company, OpenMarket Inc. terminated SEC registration on 10/22/2001 simply 5 months after entering into a $6 Million equity line with Rhino Advisors.
By the best of my accounting, at least 8 of the 58 companies now in existence have been listed on Regulation SHO with 6 of the 8 being listed on January 7, 2005. The first day the lists were produced.
Is it coincidence that nearly 14% of the public companies that survived Rhino Advisors financing have a reported settlement problem with their stock? The 14% being a far greater percentage than the percentage of companies that make the threshold list vs. total publicly traded companies. Could Rhino fails still exist in the system even with Rhino out of business?
The distribution of Companies funded by Rhino Advisors was wide ranging in market capitalization. From the true micro-cap to the large caps, Rhino was there.
Market Cap % of Rhino Investment
0 – 20M 10%
20M – 50M 26%
50M – 100M 31% (Sedona Corporation was categorized here)
100M – 200M 20%
200M – 500M 15%
1B – 5B 2%
It is reported that 31% of the monies invested was a Convertible Debenture such as the deal undertaken with Sedona Corporation and another 46% issued as part of a structured equity line. Both are easy opportunities to profit illegally if attempted.
It all started with a phone call with a voice on the other end saying “Be Merciless” and “Sell with Unbridled levels of Aggression.”
Those are not words that come after an introduction like “Hello Mike, my name is Dave, and I want you to do me a favor.” Those are words that come from a conversation that is more typical of “Mike, this is Dave we need to do it again. We have another one we can make money on.” The people on the phone clearly knew each other and had a comfortable working relationship to have a dialogue such as this.
It was about securities fraud, orchestrated to destroy public companies.
The Federal Agencies that heard this communication understand this was not the first communication of this nature.
For how long have conversations like this been around? How many other phone calls throughout the industry contained similar dialogue for destruction? We will probably never know due to the negligence of the Securities and Exchange Commission to seek out and protect investors.
The SEC grandfathered the fraud perpetrated by those that sold what was unavailable to sell and neglected to protect any other potential injured parties involved in Rhino Advisors dealings. In fact, Rhino Advisors entered into 31 additional offerings after this infamous call was made. Would Rhino have stopped after such previous success? Do bank robbers stop robbing banks?
The SEC limited their investigation to one company, Sedona Corporation, to present an impression of taking care of the markets. The SEC did not want to disrupt the status quo yet could not refuse this investigation into Rhino Advisors vs. Sedona Corporation. Sedona came to the SEC with a former Director of the SEC on their Board. At least the SEC takes care of one of their own if nobody else.
We now know today that the SEC is the enemy of the investor and not the investor advocate. It will take leaders in Washington and the State Regulators to address this egregious violation of our rights to equal protection under the law.
I would say that we could put faith in the self-regulator agencies (SRO’s) that monitor the different markets but with Rhino doing deals with NYSE, AMEX, NASDAQ, and OTC companies, no single SRO was able to detect and address this fraud either.
The Industry needs impartial policemen that are looking out for the investing public and yet today’s police are paid by the industry they are responsible to police. It can’t work that way.
As Rhino was selling shares of Sedona it never owned, Wall Street Institutions were buying these bogus shares on behalf of their clients. These Institutions accepted these trades as failures just as a fence accept stolen goods to re-distribute. The NASD has elected to ignore those that aided Rhino Advisors in the manipulation of Sedona as they have ignored enforcement against all buy-side broker-dealers and clearing agencies that ignored the responsibilities of prompt trade settlement.
The NASD makes excuses but excuses do not put food on the table of the victims. Between the SEC and NASD, the cases undertaken against this fraud pale in comparison to the magnitude of this fraud evidenced by the Regulation SHO threshold list.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2005
David Patch
You’re a stockbroker working on Wall Street, the phone rings and the voice on the other end of the line says “Sell with Unbridled Levels of Aggression” and “Be Merciless.” What do you do?
For nearly half a decade a small Pennsylvania Company called Sedona Corporation (SDNA) have asked themselves what possessed that broker, and at least one other to act; to be “merciless” to their stock. Exactly what did the Company and shareholders do to deserve such abuse and manipulation?
In 2003, evidence of an audio recording containing exactly that communication was presented as part of arrest warrants issued against brothers Thomas and Andreas Badian of Rhino Advisors. The DOJ arrest warrants identifying that it was in fact Andreas Badian who was initiating that phone communication to two brokers reportedly working for Refco Securities.
Sedona had entered into a Private Investment into a Public Entity [PIPE] arrangement in 2001 that was being brokered by Rhino Advisors on behalf of a Swiss Fund called AMRO International SA. The deal included provisions for a stock for cash swap in which AMRO would provide necessary funds to Sedona to develop their business operations and in turn, Sedona would provide AMRO with discounted stock shares. The quantity of shares that would be issued would be based on a discounted basis to the stock price at the time of the conversion.
In the workings of Wall Street, the basic opportunity that you receive shares at $0.85 on the dollar is not adequate profit enough. Profits could be substantially increased, far more than the original deal, if you sold into the stock ahead of the stock conversion making more money in the shorting process than in the actual financing deal. It was this activity that Rhino was being charged with; manipulating stock prices for higher profit. Stock Manipulation using shares that did not yet exist.
Andreas Badian requested the “merciless” selling of shares in Sedona Corporation and was even recorded congratulating the brokers on a job well done for the ‘collapse’ of Sedona’s stock. He did so for greed and profit and at least two known brokers aided him in this fraudulent act.
For most people who do not follow the markets closely or understand this issue, this may appear to be a non-event. Professional financial reporters can’t grasp the magnitude of this situation and thus dismiss it as an isolated activity that damaged one small company that may not have survived anyway. And our Regulators are perplexed as to what the big deal is. Investors never should have invested in Sedona, forget the fact it was Wall Street manipulating it.
The big deal is that people and small businesses have every right to survive. The big deal is massive white-collar crime that is destroying our Country, town by town, and beyond. Investors today pay for the purchase of securities in many stocks, good and bad, and Wall Street Institutions lie about executing that trade while profiting from the lie. The Institutions commit mail fraud by way of a trade settlement statement yet nobody seems to care.
It is not supposed to be our Democratic Nation where elected officials demonstrate such protectionism of the wealthy at the expense of the people. But it happens.
For Rhino’s participation in over $50 Million worth of market loss stock manipulation a $1 Million fine was imposed on the firm and executives. To this date, Refco has never been charged by the SEC nor have brokers or traders that executed those manipulative trades. The SEC has been ‘negotiating’ a settlement with Refco for several years.
Beyond these easily visible criminals are the hidden gems the SEC has tried for years to ignore. Regulators ignored enforcement against buy-side Broker-Dealers who purchased these illegal shares from the Refco Brokers, and never sought out delivery of these shares to protect their client’s investments. Taking receipt of stolen goods is a crime in itself, just not on Wall Street.
You see the shares being sold into the market with “unbridled levels of aggression” never existed. These trades were based on stock certificates never issued or registered by the Company at the time of the trade. When the trades came up for settlement the settlement failed because there were no shares to deliver. It then took the conspiracy of the buy-side Institutions to ignore delivery obligations that allowed for Andreas Badian to be successful. Wall Street Institutions had to look the other way and they did because the Securities and Exchange Commission did as well. The buy-side brokers received a commission and profited along the way.
Data provided by PlacementTracker.com indicates that within the timeline that Rhino Advisors and AMRO International SA were offering PIPE placements into Sedona Corporation they were also in deals with many other public companies as well. In fact, AMRO and Rhino were involved in over $48 Million PIPE placements together. Rhino was involved in an additional $43 Million in PIPE Placements they funded themselves and all totaled Rhino had participated in $307 Million PIPE placements offerings covering 146 separate deals during a span of time ranging between 1997 and 2001.
While the listing from PlacementTracker identifies 146 separate entries for deals, many companies are listed a variety of times making the total number of companies involved in Rhino PIPE’s much smaller. Companies such as Xybernaut, whom recently filed for bankruptcy, had as many as 4 separate dealings totaling $4.25 Million. Others such as ObjectSoft Corporation were involved in 6 deals totaling over $2 million in 1998/1999 before terminating their registration in Nov. of 2004.
But while Xybernaut and ObjectSoft are standouts due to the number of times they went to the till with Rhino Advisors, what is more interesting is the number of companies that no longer exist from this list and, of those that remain, how many have been listed on the recent Regulation SHO’s threshold list at one time or another.
With a total of 99 Companies listed as acquiring financing through Rhino Advisors, 58 of those companies remain public today with 41 now terminated. One company, OpenMarket Inc. terminated SEC registration on 10/22/2001 simply 5 months after entering into a $6 Million equity line with Rhino Advisors.
By the best of my accounting, at least 8 of the 58 companies now in existence have been listed on Regulation SHO with 6 of the 8 being listed on January 7, 2005. The first day the lists were produced.
Is it coincidence that nearly 14% of the public companies that survived Rhino Advisors financing have a reported settlement problem with their stock? The 14% being a far greater percentage than the percentage of companies that make the threshold list vs. total publicly traded companies. Could Rhino fails still exist in the system even with Rhino out of business?
The distribution of Companies funded by Rhino Advisors was wide ranging in market capitalization. From the true micro-cap to the large caps, Rhino was there.
Market Cap % of Rhino Investment
0 – 20M 10%
20M – 50M 26%
50M – 100M 31% (Sedona Corporation was categorized here)
100M – 200M 20%
200M – 500M 15%
1B – 5B 2%
It is reported that 31% of the monies invested was a Convertible Debenture such as the deal undertaken with Sedona Corporation and another 46% issued as part of a structured equity line. Both are easy opportunities to profit illegally if attempted.
It all started with a phone call with a voice on the other end saying “Be Merciless” and “Sell with Unbridled levels of Aggression.”
Those are not words that come after an introduction like “Hello Mike, my name is Dave, and I want you to do me a favor.” Those are words that come from a conversation that is more typical of “Mike, this is Dave we need to do it again. We have another one we can make money on.” The people on the phone clearly knew each other and had a comfortable working relationship to have a dialogue such as this.
It was about securities fraud, orchestrated to destroy public companies.
The Federal Agencies that heard this communication understand this was not the first communication of this nature.
For how long have conversations like this been around? How many other phone calls throughout the industry contained similar dialogue for destruction? We will probably never know due to the negligence of the Securities and Exchange Commission to seek out and protect investors.
The SEC grandfathered the fraud perpetrated by those that sold what was unavailable to sell and neglected to protect any other potential injured parties involved in Rhino Advisors dealings. In fact, Rhino Advisors entered into 31 additional offerings after this infamous call was made. Would Rhino have stopped after such previous success? Do bank robbers stop robbing banks?
The SEC limited their investigation to one company, Sedona Corporation, to present an impression of taking care of the markets. The SEC did not want to disrupt the status quo yet could not refuse this investigation into Rhino Advisors vs. Sedona Corporation. Sedona came to the SEC with a former Director of the SEC on their Board. At least the SEC takes care of one of their own if nobody else.
We now know today that the SEC is the enemy of the investor and not the investor advocate. It will take leaders in Washington and the State Regulators to address this egregious violation of our rights to equal protection under the law.
I would say that we could put faith in the self-regulator agencies (SRO’s) that monitor the different markets but with Rhino doing deals with NYSE, AMEX, NASDAQ, and OTC companies, no single SRO was able to detect and address this fraud either.
The Industry needs impartial policemen that are looking out for the investing public and yet today’s police are paid by the industry they are responsible to police. It can’t work that way.
As Rhino was selling shares of Sedona it never owned, Wall Street Institutions were buying these bogus shares on behalf of their clients. These Institutions accepted these trades as failures just as a fence accept stolen goods to re-distribute. The NASD has elected to ignore those that aided Rhino Advisors in the manipulation of Sedona as they have ignored enforcement against all buy-side broker-dealers and clearing agencies that ignored the responsibilities of prompt trade settlement.
The NASD makes excuses but excuses do not put food on the table of the victims. Between the SEC and NASD, the cases undertaken against this fraud pale in comparison to the magnitude of this fraud evidenced by the Regulation SHO threshold list.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2005