SEC charges Wolfson Brothers with short selling violations
31 January 2012 Washington
Image: Shutterstock
The SEC has announced it is charging two brothers living in Chicago and New York with naked short selling violations.
According to the SEC’s order instituting administrative proceedings against Jeffrey and Robert Wolfson, the brothers generated more than $17 million in ill-gotten gains from naked short selling transactions.
The SEC added that in a recorded telephone conversation, Jeffrey Wolfson stated, "What I sell them is not guaranteed, it never gets delivered, it’s funny paper.”
The SEC’s Division of Enforcement alleges the violations occurred while Jeffrey Wolfson was working as a broker-dealer himself and later as the principal trader at a Chicago-based broker-dealer that is no longer in business. He also taught his brother and others how to do it. Robert Wolfson conducted illegal naked short sales while trading through an account at New York-based broker-dealer Golden Anchor Trading, which also has been charged in the SEC’s enforcement action. The firm has changed its name to Barabino Trading.
“By engaging in naked short selling, the Wolfsons had a major advantage over competitors who complied with the law and incurred the costs associated with actually borrowing the securities,” said George Canellos, director of the SEC’s New York Regional Office. “The SEC is committed to recovering substantial ill-gotten proceeds made by traders who seek to circumvent important short selling regulations.”
According to the SEC’s order instituting administrative proceedings against Jeffrey and Robert Wolfson, the brothers generated more than $17 million in ill-gotten gains from naked short selling transactions.
The SEC added that in a recorded telephone conversation, Jeffrey Wolfson stated, "What I sell them is not guaranteed, it never gets delivered, it’s funny paper.”
The SEC’s Division of Enforcement alleges the violations occurred while Jeffrey Wolfson was working as a broker-dealer himself and later as the principal trader at a Chicago-based broker-dealer that is no longer in business. He also taught his brother and others how to do it. Robert Wolfson conducted illegal naked short sales while trading through an account at New York-based broker-dealer Golden Anchor Trading, which also has been charged in the SEC’s enforcement action. The firm has changed its name to Barabino Trading.
“By engaging in naked short selling, the Wolfsons had a major advantage over competitors who complied with the law and incurred the costs associated with actually borrowing the securities,” said George Canellos, director of the SEC’s New York Regional Office. “The SEC is committed to recovering substantial ill-gotten proceeds made by traders who seek to circumvent important short selling regulations.”
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