What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing hedge funds sit at the pinnacle of wall street, with top managers making billions of dollars for themselves and their investors. Many of these hedge funds are honest operations. They employ hundreds of investment professionals who perform deep fundamental analysis to identify stocks that are undervalued or overvalued, but when hedge funds fail to generate returns through legitimate means, they sometimes resort to illegal market manipulation, methods to generate returns. One of the most common manipulation practices employed on wall street is the so-called short distort method.

This involves shorting shares of a company and then disseminating false information to push the share price down. When the stock price drops, the short seller can cover the short position at a massive profit. It's difficult to tell exactly how many short and distort campaigns there have been over the years, because the short sellers are often anonymous, making them difficult to prosecute. But we know that as a prevalent practice before he was a mad money.

Host jim cramer ran a hedge fund on wall street. In a rare interview from the early 2000s kramer describes how market manipulation was a widespread practice among short selling hedge funds. They would often turn to shortened distort schemes when they were having a bad year in desperate to show their investors a positive return. Another stock that a lot of people are focused on right now seems to be apple, yeah, apple's, very important to spread the rumor that um that both uh verizon and bel and uh att have decided they don't like the phone right.

That's a very easy one to do, because it's also you want to spread the rumor that it's not going to be ready for macworld, and this is very easy, because the people who write about apple want that story. And you can claim that it's credible because you spoke to someone at apple because apple isn't and it doesn't right, they're not going to comment they're not going to. So it's really an ideal short, and i would again if i were a short apple. I would be working very hard today to get that and the way you would do that is you pick up the phone.

You call six trading desks, you say: listen. I just got the phone with my contact of verizon. He has already said: listen we're not we're a lucky g house uh, we're a samsung house. We we're a motorola house, there's no room for apple.

They want too much that we're not going to let them in this is not we're not going to. Let them do what they did to music, and you know, i think, that's a very effective way to keep a stock down right. I might also by the way, because the stock at 84.85, a little bit of capital you go buy some january 80 puts that makes it look like there's going to be something going on. So maybe you, you know, give morgan an order to buy.

A thousand jan80 puts, then you go position limit with uh. You know, uh, you use a hat firm that doesn't know what that can do. Maybe you go to ubs for puts and you just kind of create an image that there's going to be news next week and that's going to frighten everybody and you get they all go out and say large, put buyer uh ubs. Then they call pizani again.

You have to use those guys and say: listen, i'm about you know. I see a big buyer puts and i'm told that it's like it's sac. You would do that too um and these are all uh. What's really going on under the market that you don't see right, nobody else talked about, but what what's important, when you're in that hedge fund mode is to not do anything remotely truthful, because the truth is so against your view, right that it's important to create a New truth to develop a fiction in this video we'll go over the top 5.

Most shocking cases of shortened distort manipulations in market history. This topic was chosen by our channel members. In addition to voting, members also get access to our backlog of videos before they release to the public. Our backlog can be viewed by members in the community tab and it always contains at least 5 videos.

If you become a member, you are also supporting this channel. Thank you. The first entry on our list is emulex corporation, a california-based internet connectivity company that is eventually acquired by broadcom. In 2000, a 23-year-old named mark jacob was working at market wired.

Market wired was a press release, distribution service which helped publicly traded companies, disseminate corporate information. They distribute press releases about earnings, reports, merger announcements and other corporate news in his spare time. Jacob traded stocks on his personal brokerage account. He came across amulek stock and after some due diligence, he thought his shares were overvalued.

He then decided to initiate a short position. Despite his analysis, emilek's stock continued going up, causing his short position to incur massive losses by mid-2000. His losses added up to almost a hundred thousand dollars. This trade was a yellow for jacob.

If things didn't turn around quickly, he'd be ruined in august of 2000, he thought of a way that he could turn his trading loss into a massive profit. He wrote up a fake press release, saying that emilex's ceo had abruptly resigned and the company was restating his previous earnings results to show a loss instead of a profit. He went to work at marketwire the next day and published a fake press release without his supervisor's permission. Marketwired was a trusted outlet for corporate information at the time.

As soon as investors saw the report, they thought that there must be some sort of fraud going on at emulex and immediately started dumping. Their shares. The report was released at 10, 13 am and within just 16 minutes. The stock price fell from 104 to 43 dollars.

A share or a roughly 60 in decline, this wiped 2.2 billion dollars off the company's market cap and existing shareholders lost more than 100 million dollars by selling their stock at the bottom, shares were halted and the company refuted the false claims within a day once this Happened: the share price almost immediately recovered to 105 dollars per share before the shares were halted. Jacob was able to cover his entire short position for a 240 dollar profit. The most shocking part about this case is how dumb it was as an employee at market wired. It was trivial for the fbi to trace the fake report back to jacob.

He was arrested and sentenced to 44 months in prison. He was also ordered to pay back his 240 000 of ill-gotten gains, as well as a fine of 103 000. Next off we have the strange case of emmanuel lemelson, who was a hedge fund manager and also a greek orthodox priest. Emanuel was born in arizona and his original name was gregory limelson.

He took an interest in religion at a young age. He attended the hellenic college holy cross, greek, orthodox school of theology in massachusetts, where he was awarded a master of divinity in 2003.. He rose the ranks of the greek orthodox church and was ordained a priest in 2011.. In addition to being a religious man, he also had a keen interest in business while still a student at the hellenic college.

He started an e-commerce company called amvona where he sold photography accessories eventually, lemelson started posting his own analysis of stocks on his website and advocated a christian investment philosophy in 2012. He took his interest in investing to the next level when he started his own hedge fund called lemelson capital management. In the first few years. The fund's performance was quite impressive.

If he had invested 100 in lemelson at inception in 2012, it would have grown to 288 dollars by january of 2017.. A 100 investment into the s p 500 would have only grown to 178 dollars. Lemelson was very outspoken about his investing acumen. The wall street journal quoted him as saying quote my whole life.

I always knew things before they happened. I guess it's just a gift from god. Unquote in 2014, emmanuel's god-given talent led him to short the stock of ligand pharmaceuticals. Ligand was a small pharmaceutical company whose main product at the time was a hepatitis c drug called promacta.

After initiating the short position, lemelson published reports and gave interviews where he said, the company was teetering on the brink of bankruptcy. He falsely claimed that legan's investor relations firm agreed with his own assessment that promacta would soon become obsolete to further substantiate his claims against promacta. He cited a european doctor who said the drug was bad. He did not disclose that the doctor was a large investor in his hedge fund and stood to benefit significantly.

If ligand's price declined given limitless strong track record, the market believed his claims and the stock declined precipitously in 2014.. He was able to cover the position at the lows and book: a 1.3 million dollar profit for himself and his investors in 2018, the sec caught wind of the case and charged lemuelson with running a shortened distort scheme. They seek to have lemelson return, his ill-gotten gains and pay monetary penalties. Lemelson denies any wrongdoing and claims the sec is persecuting him for his religion.

The court proceedings have been delayed due to the pandemic and he is expected to stand trial in the fall of 2021.. The next entry on our list is isaac. Lemaire isaac is the godfather of market manipulations in the early 1600s. He orchestrated the first ever short and distort campaign in recorded history.

Isaac was a wealthy dutch merchant who became the governor and largest shareholder in the dutch east. India company in 1602 in 1605, he was forced to step down from the company after other shareholders accused him of manipulating the accounts to increase his own share of the profits. This disgrace caused isaac to develop a deep grudge against the company in an effort to get revenge. He met up with king henry iv of france.

He proposed that the king should fund the french east india company, which would take market share from the duchy's india company. The king agreed and funded a few initial trading voyages isaac thought that the new french competition would decrease the profitability of the dutch east india company and started shorting shares. The idea of shorting stock was new at the time. Isaac would meet up with shareholders at taverns or other social gatherings and write individual contracts to borrow their shares.

In 1610, king henry iv died and his successor dissolved the frenchie syndia company, as he thought it was a waste of money. This was a disaster for isaac. The french competition was the crux of his bear caves. With this now gone, the dutch east, india company would continue to make profits and the share price would continue to rise.

He needed to find a way to make the share price go down and fast. To this end, he started going around taverns in amsterdam spreading negative rumors about the company. He would make up outright fabrications such as saying their voyages were failing or their ships were sinking. These schemes successfully sowed fear, uncertainty and doubt among the shareholders, many of whom sold their shares to isaac, allowing him to cover part of his short position at a profit.

The manipulation was eventually exposed. The dutch government banned short selling of stocks and shares of the dutch east india company started to rise significantly by this point. Isaac had not yet covered his entire position. He was forced to buy back some shares at the highs which financially ruined him by this point.

What remained of his reputation had been completely ruined and he moved out of amsterdam. The next entry on our list comes from an anonymous short-selling hedge fund, who manipulated the stock of general electric one of the biggest and most iconic corporations in the united states. While ge was once the most valuable company in the us, it started falling on rough times over the past few years, its over leveraged balance sheet and unfavorable movements and commodity prices caused its stock to decline. Almost 80 percent from 2016 to 2018.

after multiple ceos failed to execute on a successful turnaround. The company became a screaming target for short sellers. One hedge fund, hired financial fraud, expert harry markopoulos, to write up a short report, accusing ge of fraud. Markopoulos made his name by exposing the bernie madoff ponzi scheme and his words carried a lot of weight in the financial world.

On august 15, 2019 markopoulos published a 175-page report accusing ge of an enron-esque accounting fraud worth 35 billion dollars. He said the industrial giant was under-representing liabilities in their insurance business and was headed to bankruptcy, ge stock, almost immediately tanked, 11 percent. On the news i mean it begs the question: there's going to be some criticism, criticism out there that you know, given the fact you are working with an undisclosed hedge fund, given the fact that the stock is six percent lower today that, even if these allegations don't Turn out to be true that you know, there's still a conflict of interest here. How do you counter that i needed to i needed to get my team engaged, and i put a team of experts on this and the public deserves to know the shareholders deserve to know.

I've been a big advocate for investor protection. I've done many cases on behalf of investors, including the foreign currency cases. I did the cases against many ponzi schemes, including burning man off and several other billion dollar plus hedge funds that have been ponzi's put a lot of people in prison over the years and i'm just continuing that trend and i need to get paid. I have a family to support.

Ge is losing 5.27 for each dollar of premium income they are taking in those losses are unsustainable and they're growing at an exponential rate for 2018. They grew at 60 percent rate. It's growing exponentially and it's going to make this company probably filed for bankruptcy, worldcom and ge and enron. Last about four months once their accounting frauds were exposed, we'll see how ge does marcopolis made shocking claims saying that ge was enron and worldcom combined and was heading for bankruptcy as it turned out, there was no fraud at ge and the report and the claims were False despite the unprecedented challenges of the pandemic, ge has survived, and the stock price is now higher than when markopoulos published his bombshell report.

The undisclosed hedge fund could have made millions of ill-gotten gains if they covered their short position in the days following the short report's release. To date, neither markopoulos or the hedge fund have been charged with any crime. Last on the list is, barry, mean cow, mikao started a carpet cleaning business called zebes in california, which she took public in the 1990s. Unfortunately, the vast majority of the business was fake and investors lost hundreds of millions of dollars when it unraveled a few weeks ago.

We made a video exploring his carpet cleaning fraud in depth. The link is in the description below after minka was released from prison. He attempted to turn his life around. He also started a business called the fraud discovery institute.

He claimed to use his expertise as a former fraudster to uncover frauds and protect investors. We were claiming to be doing restoration, jobs, totaling in excess of 50 million dollars we weren't doing any, and so how did you manage to convince bankers? Lawyers, investors, that this was on the up and up by um, getting an auditing firm and getting them the paperwork and and much to our shame, creating documents that would support earnings and contra. 22 000 documents all phoning yeah. And we went to great lengths to to fool and to deceive, but it worked like you know, most frauds, that's the way they are they.

I call it the second law of fraud dynamics. They go from order to disorder, they work, but it's not. If you're going to get caught, but when, when it did collapse, he left investors holding the bag for 26 million dollars, wiping out life savings and ruining lives. He founded a company called the fraud, discovery institute and lectures business students, law enforcement officers and corporate executives on white-collar crime.

He actually began investigating white-collar crime. Two years ago, when a friend asked him to check out a questionable investment. I looked at the thing it was volumes of information on websites and i thought to myself. If i was a crook, what would i do to pull this off and i thought there's a unique approach.

He quickly discovered the company. Mx factors was operating without a business license and appeared to be a scam. He searches, public records, employs private detectives and goes undercover to perform the kind of due diligence. Most investors don't know how to do he's now.

Helped authorities uncover far more fraud than he ever perpetrated and, as a result, judge dick when tabrizian, who originally sentenced mako to 25 years, released him from the terms of his probation. Unfortunately, barry was not a changed man. Ironically, his fraud discovery institute was itself a fraud. He would personally short stocks and then publish false or misleading reports in an effort to manipulate the price downward.

One of his most egregious cases of market manipulation was with the real estate company lenar. In 2009, minkow issued a report saying the company was running a massive ponzi scheme calling the company a financial crime in progress. He published the report, despite the fact that his own private investigators could not substantiate the allegations. The day he published the report lindar stock declined from 11.57 cents to 6.55 cents or almost 50 percent.

He bought 20 000 worth of put options on lennar before the report was published. To make matters even worse. He bought the shares of the company after his report was released. This indicates that he knew his allegations were false and the stock would eventually recover.

He initially denied trading in lennar's stock, but finally had to admit it. When his trading records were exposed. He eventually admitted to forging documents that alleged misconduct on the part of lennar in 2011. He was sentenced to five years in prison for his market manipulation in order to pay 584 million dollars in damages to lennar.

At the sentencing, the judge said that minkow had no moral compass, alright, guys that wraps it up for this video. What do you think about these market manipulations? Are there any others that you think we should have included on the list? Let us know in the comments section below, if you enjoyed this content, make sure to hit the like button and subscribe. So you don't miss future uploads as always. Thank you so much for watching and we'll see in the next one wall, street millennial signing out.