Today we have spent hours reading on the whole CMKM Diamonds debacle and the government’s involvement in what they have termed a “sting” to actively pursue people and corporations involved in naked short selling and the illegal activities that are often part of the penny stock market world. We are still dumbfounded that this wasn’t all over the press for the world to know.
Granted there are a lot of lawsuits filed every day, but it seems that one of this magnitude, a $3.87 trillion lawsuit against U.S. Securities and Exchange Commission Chairman Mary L. Shapiro, as well as several other current and former SEC commissioners, would be a little more publicized. Recently a clip on television criticized SEC officers for watching porn while on the clock. If that was newsworthy, this lawsuit which alleges a multitude of illegal activities and misrepresentations from our government certainly is also.
The long and short of the situation is best summed up by some of the direct quotations from the complaint filed by Pasadena attorney Al Hodges on behalf of the CMKM Diamonds shareholders. The complaint was filed on January 8, 2010 in the U.S. District Court, Central District of California.
[Complaint paragraph 31] During the period of June 1, 2004 through October 28, 2005 a total of 2.25 Trillion “phantom” shares of CMKM Diamonds Inc., was sold into the public market through legitimate brokers, illegitimate brokers and dealers, market makers, hedge funds, ex-clearing transactions and private transactions. The sales of the majority of such shares were at all times known to the Securities and Exchange Commission, including Defendants herein.
[Complaint paragraph 32] At some date prior to June 1, 2004 the Securities and Exchange Commission in concert with the Department of Justice of the United States, together combined with Robert A. Maheu and others to utilize CMKM Diamonds, Inc. for the purpose of trapping a number of widely disbursed entities and persons who were believed to be engaged in naked short selling of CMKM Diamonds Inc. stock and cellar boxing the company.
Furthermore, the complaint states that the Security and Exchange Commission worked in cooperation with the Department of Justice and the Department of Homeland Security to take the covert operation to a whole new level as they believed and developed evidence that said short sellers were utilizing their activities to illegally launder monies, wrongfully export monies, avoid payment of taxes, and to support foreign terrorist operations. Pretty serious stuff that was truly deserving of the efforts put forth by the government to catch the criminals. The problem is that all of this was done at the shareholder’s expense. All of the naked short selling and corruption eventually led to CMKM inevitably being delisted in October of 2005.
We obviously gave a very abridged version of the complaint, but hopefully made the point. The government went to great lengths to set up this operation and fulfill its purpose, but (and here’s the important part) no arrests were made. In lieu of prosecution, the people involved were granted immunity in exchange for statements and repayment of illegal monies obtained. So, where is the money? That is what the shareholders of CMKM Diamonds want to know.
Despite numerous, documented attempts to collect the money that has been promised by the government to the shareholders, no transactions have taken place to reimburse shareholders for their losses. The carrot has been dangled several times through promises of “within the month” or “in a couple weeks” to properly compensate the holders of CMKX stock, but it has never been completed. Hence, the lawsuit has finally been filed that alleges that the SEC is illegally withholding funds collected from unscrupulous broker/dealers that facilitated the selling of more than 2.25 Trillion shares of CMKM Diamonds stock into the market.
Time will tell how this situation will play itself out as the common conception is that it will be settled before it ever reaches trial. In the meantime the shareholders will have to sit and wait.
A copy of the complaint can be viewed at: http://www.qualitystocks.net/misc/hodges_SEC.pdf
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