Wes Christian tells how he uses law to fight naked short sellers

By Lucy Komisar

This is my interview of Wes Christian, the Houston attorney who has been in the forefront of bringing naked short selling cases for twenty years. The link.

June 2, 2021

Among the key points:

Overstock a victim of negative stories

Wes Christian handled a case for Overstock, which complained that Gadient and Camelback stock analysts were being paid to put out negative stories on the company, to bring down the share price and benefit short sellers.

He said it was a “perfect storm. They sell shares they don’t deliver and analysts print bad things about you.” The SEC started an investigation, but pressure from media “influencers” killed it.

Lending fake shares

The next big case was Taser, the stun gun company.

He explained short sellers’ brokers are supposed to borrow shares before shorting, but that’s “not how big boys” do it. He said, “Their mission is to use every share to cover up the crime.”

Stock that was being lent to cover shorts didn’t exist.

He said “bad guys” were going into the market, doing “reverse conversions,” buying puts [options to sell] and calls [options to buy] to combine into synthetic shares. “The options contracts were torn up two days before consummation.” And, “Fails were hidden in subsidiaries.”

Or, he said, “Locates were given on shares multiple time when there was one share. Or many locates where shares didn’t exist.”

Christian said the brokers were lending cash account shares, which were not leveraged with borrowed funds, were required to be segregated from margin accounts and under SEC rules “can’t be touched, but they are being used.”

How to protect against that. He said, “Get a lock up agreement from your broker.”

Proprietary trading

He said prime brokers’ biggest money makers are proprietary trading and stock lending.

He said Merrill Lynch fined multi millions of dollars for using cash accounts of world-wide customers for their own trades.

Marking shorts as long

Christian said, “In 2005, in effect, there were thousands of companies” whose stocks were shorted. “Now very few. They are marking lot of [short] tickets long. I can circumvent RegSho: mark it long. It doesn’t go in short interest [count]. It means the reported short interest is garbage in many cases. Shares are marked long but fails [to deliver] not reported.”

He judged that 50 to 150 percent of short interest does not appear in the biweekly reports put out by the SEC. He said it amounted to over $500 million.


One trick, he said, is, “They are bifurcating sale from delivery. One will sell shares. An affiliate in London or Hong Kong or Canada will deliver. It doesn’t show up on such ex-clearing transactions.” Ex-clearing means not going through the U.S. clearing house, the DTCC. “There are two sets of books. One goes through the NSCC [the clearing subsidiary of the DTCC] and leaves an audit trail. “I believe lot of that ex-clearing goes broker to broker outside the DTCC.”

He said, “The ex-clearing has gotten to be much more prevalent than it used to be. It eliminates the audit trail. [Other trades have] to be dealt with by auditors. They have to sign off on it. Having transparency of those fails is critical. Broker to broker is easier to conceal.”

He said dark pools did cross border trades and that, “every security that trades on the Toronto exchange affects the US.”


He noted, “I believe lot is going through the [DTCC] obligation warehouse.” It is billed as an “automated service of the NSCC that facilitates the matching of broker-to-broker ex-clearing trades and provides Members with the ability to track, manage and resolve their failed obligations in real-time.” The first part is true, but the “resolve” part is ignored by naked short sellers.

Christian called “in-house fails the stock graveyard.” He said, “The number of fails there is growing.”

Market Makers

He said, “The bona fide market maker exemption still exists in RegSHO,” allowing them extra days to cover shorts. But he said, “A lot of market makers are not bona fide, they are shorting funds.”

Market makers are supposed to offer to buy from and sell to all clients. And they post sale prices. Christian said, “We believe market makers use the tool for spoofing. They post a series of block offers throughout the day, but 3 minutes before close, they pull them down.”

He said, “This did not start till the late 90s, early 2000s. The DTC bought the NSCC whose sole purpose was to lend stock.” He said it sent things “haywire.”

Electronic trading

He said, “Electronic delivery was a ripe environment for fraud.”

He said the SEC “needs to eliminate dark pools, high speed trading. Not allow shares to be lent more than once. Maybe do blockchain. Overstock has preferred shares [sold on] blockchain.”

The Justice Department doesn’t do its job

Christian said, “There are criminal statutes, rules of the SEC, that should force [naked shorting] to not exist. You shouldn’t be able to sell something you don’t own and don’t deliver.”

“We worked on Operation Bermuda short that helped convict Mark Valentine.” That investigation targeted organized crime mobsters.

“We worked with the Justice Department on chasing Thomas Badian and Andreas Badian.” They were Austrian fraudsters that cheated small companies through “death spiral financing” and lent them money to be converted into shares equal to the loan, and did naked shorting to batter the share prices.

He said, “Because that involved Refco, a huge options securities firm that went public and blew up because of connections with Bawag Bank [in Austria] allegedly connected with the mob. But the Justice Department has not prosecuted what needed to be prosecuted. A slap on the wrist.”


He said, “The prime brokers have enormous amounts of money doing a lot on their own account, not just hedge funds. They make it when you buy the stock, then they short against you with the stock you bought and lend it to others.

Synthetic shares and failures

He said, “What I’m seeing is creation of future instruments, rehypothecation instruments, putting put and call together, reverse conversion, many fancy names, ultimately culminates in dissemination of false information. They will show it to the Compliance Department.”

He said, “They create puts [options to sell] and calls [options to buy]. Or get someone to sell shares that are short but they marked them long. That nets out naked shorts to zero. Or a futures contract that never gets consummated.”

He said, “Legitimate hedging is acceptable.” Then he explained, “But subsidiaries are different stories,” He explained, “I don’t think it includes fails overseas. They show up on balance sheet of an entity in the UK.” He wondered, “How long have these fails been there? Sometimes years.”

Data that could reveal this is kept secret

Christian said, “Every issuer contracts with the DTC [the stock vault] to get services, including the daily position report of each broker. Imagine all stock of GME that Merrill Lynch holds sent to the DTC, which puts that in Cde & Co street name under their number. Deposited and redeposited every day. Having that daily position report is real important. They should be able to share that with shareholders. Let’s you compare that with what’s trading in market place.”

He said one could do that with cooperation of the stock issuer:, “In several cases in Georgia brought under the state civil racketeering RICO statute, we could figure that out with public data.”

Over voting

He said, “Many times, over half of 60 or 70 companies had more votes at annual meeting than shares were issued and outstanding. That doesn’t count people who take the proxy and throw it in trash. Or naked short sellers who are not voting their shares.” He said it the result of counterfeit synthetic phantom shares the corporation did not authorize.

He said, “It’s a bigger issue today. It disturbs corporate governance.” The board owes a fiduciary duty to shareholders. But, “It gets zeroed out.”

He said, the company should do what Overstock and Taser did, figure out who is responsible and sue them. In most states, if a corporation won’t do it, shareholders can derivatively do it. They have been damaged by the dilution of their shares.

About his lawsuits

“We’ve done due diligence on over 70 companies, taken 20 companies’ cases.” He said, “We take cases on a contingency basis. It costs even at our level $7 million to prosecute a case. We need a high damage model. Typically, we represent the company and its largest shareholders.” He explained, “We need a damage model of at least $100 million. The issuer has the largest damages.”


“We have systems to identify who perpetrators are. You have to do it day by day to see distorted supply/demand curve.”

Some of his early cases were dismissed. He said, “When you’re dealing with judges, you’re dealing with people. Generally, it’s tougher for judges in New York to give us discovery than other places. State judges take more keen interest in it than federal judges. Some federal judges are exceptions, better than state judges.

He said his later cases were never tried. He said, “You have to be as strong as 8 acres of garlic in Texas. Two or three of us against 10, 20 40 lawyers. They represent a client that’s a crook.” But, he said, “The facts are so nasty they settle.

The take-away

“We need to stop the rigging of the system by prime brokers.”

“It will take a massive effort by the investing public to rise up, keep their shares in cash accounts, make sure they are not lent. Make sure the big pension funds see that lending stock deteriorates their portfolio, their asset base goes down.”

Here is the video.


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10 Responses to "Wes Christian tells how he uses law to fight naked short sellers"

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  3. Daryl   Jul 19, 2021 at 2:56 pm

    Excellent article. Has Mr. Christian looked at Boeing as a possible contingency case? I filed a complaint with SEC about 10 days ago on blatant price manipulation (down even on very good news days), but doubt SEC will do anything/even read the complaint? Stock is down over $18 billion since 9 Jul close, and 73 points down (over $36 billion drop) since 15 Mar high of $78 for 2021. Thanks. Daryl

    Is a “bear raid” manipulation of Boeing stock illegal, but unaccountable? Boeing has dropped over 25% since March 15, 2021 highs of $278 to as low as $205 today on 9 Jul 21 it has been down as much as $12 in the a.m. (over $6 billion early day decline). It appears likely orchestrated by market makers, big banks/brokerages, media, and organized crime.

    Reading SEC and other discussions, a common practice is to use illegal naked short selling to drive down prices. Legally they are required to borrow shares before shorting them (except for market makers – license to steal from investors, etc.?). However articles indicated a huge amount of “fail to deliver” actual shares after the short occurs, which means a lot of “pretend shares” are used to short stocks, but the SEC rarely holds the offenders accountable for the very profitable fraud – if so just a token fine. There are multiple accounts of major brokerages/banks pleading/found guilty of felonies for stock/commodity price manipulation, but minimal penalty applied.

    Does the SEC have the ability or even interest in investigating if dark money pools used naked shorts today to tank the stock market by as much as 1,000 points in Dow? Fear and greed are the motives used to drive stock trading. If dark pools can manipulate the market with impunity, and the SEC has no ability/interest to umpire the actions, then the market is heavily rigged against retail investors.

    Dark money pools have been discussed, which are offshore type funds that are allowed to be hidden from most NYSE investors. It allows offshore hedge funds to manipulate the market. These dark pools are often owned by brokerages/market makers/foreign entities….

    The SEC action seems similar to the corrupt path of Supreme Court 2010 ruling in Citizens United that basically makes “bribes”/political donations legal (and don’t have to disclose donors or amounts). The SEC should never allow dark money pools/trading, which basically allows organized corruption of the NYSE by being hidden from the public.

    News stories are repeated or ignored to manipulate stock prices. A timeline below gives some examples trying to justify BA stock price drops (most likely due to naked short selling from market makers/dark pools and touts used to scare investors and tank the stock).

    Jun 29 – The biggest Boeing plane sale in a decade was rumored to be announced on 29 Jun to United. Jim Cramer was quoted as saying on a 28 Jun CNBC show that Boeing stock wouldn’t go up much even if the sale was announced on 29 Jun. The sale was announced and the stock went up $4 early, but then tanked down $4.20 from the prior day close. It sounds similar to a movie where a tout would say so and so likes/dislikes this stock, which would drive it up or down as directed.

    July 2 – a Boeing made Cargo plane landed on water due to 1 reported engine failure and a 2nd engine in trouble. This happened between 730 and 830 EDT, but was reported early and often by CNBC/Jim Cramer in early morning on 2 Jul as bad news for Boeing. It actually should have been a nonstory as it was a 45 year plane being run by a different outfit that was being shut down for a terrible maintenance/safety record effective on 13 Jul. However the FAA notification of a shutdown in 30 days on 13 Jun (per David Shepardson article 16 Jul at 1041 on Reuters) did not appear for several days.

    The Boeing plane landing in water just off Hawaii story was repeated numerous times over the next several days. Boeing stock dropped $3.05 from $239.73 on 1 Jul close to $236.68 on 2 Jul close. The Boeing float is listed as over 534 million shares, which resulted in over a $1.5 billion decline in Boeing stock valuations in 1 day attributed to the article.

    A couple thoughts come to mind: is FAA closely reviewing the flight data and water landing of the 45 year old plane to ensure the accident/news wasn’t staged? A $1.5 billion dollar decline on insignificant “news” was a major reward for short sellers. It provides a motive, means, and opportunity for organized crime to manipulate Boeing stock prices.

    Jul 8 – China agrees to review Boeing Max plane still grounded in China (closer to likely ungrounding and possible plane sales to China). Cramer (CNBC) again downplays any stock price improvement from news.

    Jul 13 FAA announces new Boeing plane likely won’t be certified until 2023. Boeing had announced a few months back that in likely wouldn’t be delivered until late 2023.
    It was similar to old news, but was emphasized by Cramer/CNBC as very bad for Boeing. The stock dropped $10.09 per share or over a $5 billion decline.

    Jul 14 – a sensor test problem from fall 2020 was repeated with FAA saying mandatory tests of sensors now required at certain intervals. Cramer and CNBC again attacked
    Boeing management and stock dropped $3.75 or over $2 billion.

    Jul 19 – Delta variant is touted as reason for huge selloff in airlines. The Covid vaccine has proven effective, but you can’t give a shot to improve stupidity if people won’t take it. Air travel is increasing per data reported, so appears fear is being used to explain naked short sale attack again on Boeing.

    The circumstantial evidence seems rather conclusive.

    1. Ban short selling by everyone – including by market makers. (If not banned, at least require serial number ID for each share borrowed and put stiff penalties for violations. For example, give 6 month suspension for first violation, 1 year for second, and permanent suspension for 3 violations. Numerous articles identified major brokerages manipulating stock/commodity prices routinely. When they are caught (infrequently), they receive a slap on the wrist, such as $1 million fine, but no jail time. They actually are incentivized to repeat their misconduct. If a 1 million fine every few years, but can gain billions(?) yearly, then greed/corruption is actually encouraged/wins.

    Unfortunately, Congress seems easy to buy off and regulators installed are often tied to the offending brokerages. A major scandal may lead to modest reforms, but the reforms are usually watered down or soon eliminated.)

    2. Ban dark pools (offshore funds used to circumvent the rules and manipulate stock prices up or down).

    3. Crack down on brokerages/media manipulating “news” by repeating or hiding stories, as well as using a “front man” to direct stock prices up or down. The sometimes irrational trading patterns seem likely tied to dark pools of offshore money easily used in naked short selling. There is a utube video of Jim Cramer confessing to manipulating news and stock prices when he was a trader and how it is done. It shouldn’t still be a routine corrupt practice.

  4. Mark Aris   Jul 21, 2021 at 1:59 pm

    With all the information gathered on Naked Short selling and Dark Pools being illegal, why has the SEC and DTCC responsible for letting it happen, not being sued and prosecuted ? Did Congress have a hearing on this, if so, do they not understand the illegality, the blatant disregard for the law/rules, the destruction of businesses, lost jobs, home repos, and even suicide as a result of this activity? Or are there amongst them lawmakers ignoring it because it benefits them materially, in which case they should be removed from Congress, prosecuted and jailed?

    It is pathetic that the world knows what is going on and the shameless officials responsible for maintaining fair and equitable flow of equities are turning a blind eye because they are corrupt and influenced by big money. The present regime has failed by placing in high government positions some people who are responsible to not only follow the law but also enforce it.

    What has the new SEC chairman done to address the illegal activity of the Hedge Funds? His response to Naked short selling, dark pools, etcetera was ‘it needs to be addressed and we are looking into it’. Well, the SEC itself made rules his predecessors deliberately did not enforce, and he has been in office 2 months and seem like he’s following in their footsteps; even yesterday’s new rules are not being enforced today.

    It is a slap on the face of the new administration to put it on the back burner, causing the demise of people’s quality of life by letting Hedge Funds continue their illegal stock manipulation, in fact allowing them to continue their evil ways! The richest and most powerful country in the world refuses to correct the illegal and unfair activity of Wall Street, the corruption of which can raise havoc in the economies of the world!

  5. realist   Sep 4, 2021 at 3:02 pm

    Mark Aris -as Roger Daltrey sang…….. “Meet the new boss, same as the old boss…”

  6. Alan Chase   Jan 14, 2022 at 9:51 am

    I bought over a million in AMC stock in May I’m down to $315,000 today. The amount of naked short selling in order for the hedge funds to cash in on the in-the-money calls and the low level puts they’ve sold/and/or bought every week for a year, has really killed me. I’ve written the SEC, the Justice Dept’s Merrick Garland, Nancy Pelosi, Elizabeth Warren etc, The SEC is still helping the hedge shorts to continue de- frauding investors. I’d like you to use me in a class action.

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  8. Paul   Feb 5, 2023 at 6:21 pm

    Lucy, did Wes Christian know who Roger James Hamilton was before he did an interview with him? Apparently, RJH has an interesting past. There seems to be quite a ‘Ponzi’ history of his escapades with XL Results Foundation and a lot more. You may want to tell Wes to have that interview with Roger pulled to keep his reputation intact.

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