Citadel Has Been Stealing From You and GameStop

Heel my foaming at the mouth lawyers. "Heresy!" one is exclaiming from one of the 10 foot tall, 37 floors . Alas, here I am stating that Ken Griffins Citadel has been stealing from you. What specifically?

Price Discovery.

I can understand that some are rolling their eyes and likely even saying "'take off the tinfoil hat" but how do you dispute all of the links that I have provided to this point herein and previously? Citadel has been stealing price discovery. This 2010 Academic study suggests that short sellers play an important role in the price discovery process and that short sellers trading activity makes prices more informationally efficient. In the study, tests taken together, these different approaches all suggest that short sellers’ trading contributes significantly to price discovery in equity markets. Short selling is associated with more efficient pricing - in the sense that prices appear to be closer to efficient or fundamental values when short sellers are more active. In contrast, we find no evidence that hints at price destabilizing or manipulative trading by short sellers.

Till now. I submit that now, over a decade since Boehmer and Wu's "study", there exists an abundance of evidence (not only hinting at) of price destabilizing and manipulative trading by short sellers.

How can there be price discovery if there is a 60-70 short % (based on the amount of volume shorted) with 50% of trades going through Dark Pools (data taken from sec.gov, yahoo.com, shortvolumes.com, Interactive Brokers, Market Chameleon and etfdb.com)? In fact, 80% of retail trades do not affect the price at all. According to Q1 data from the SEC, between 80-90% of trades in GameStop after the January squeeze are "Odd Lot" trades. Odd Lot trades are trades under 100 shares. "Hey 'Just a random IT dude', proof?"

"I too can input random numbers into a spreadsheet" one may say; but so can the US SEC SEC.gov | Metrics by Individual Security. Odd Lots have another effect that prejudice retail investors. From FINRA's FAQ on?Market Transparency Reporting, Section 310, A310.3 we find this:

"odd lot transactions do not update the high, low and last sale price for the security"

Yes, you read that right! 80-90% of trades in GME have absolutely no effect whatsoever on the price. Interest from retail, because we deal with smaller lots than 100 shares, has no effect. The rules of Supply and Demand are suspended because of the rules in place. Through further studying the odd lot rate for three tickers, a story unfolds.

GME:?80-90% odd lot rate since January shows a great deal of retail interest still exists (most definitely a buy). Odd lots are also a sign of HFT, so they are likely contributing to this high % as well.

TSLA: HFT is associated with odd lots to take advantage of the whole NBBO situation, so no surprise it’s consistently at ~90% along with the fact TSLA is what I view as an O.G. meme stock, so naturally, lots of retail.

MovieStock: Given it has returned back to its lows of 30% in July 2020, inconclusive for now. Just one data point. Let's see what the next two show until we fully speculate.

AAPL:?Who knows, no one follows stocks.

(Odd Lots Show that GME Interest is Not Subsiding | SEC Market Structure Data : Superstonk (reddit.com))

Even worse is that odd lot trades done in ATS (Dark Pools) might not even make it onto the consolidated tape based on page 10 of Alternative Trading Systems: Description of ATS Trading in National Market System Stocks

This subsample also excludes trades of less than 100 shares (which are generally not required to be reported to the consolidated tape)

Then to compound this all, Citadel Connect and Dark Pools are uncovered. Tim Fries (In-Depth: Citadel Connect and Dark Pools Uncovered - The Tokenist) explains it very well. Aside from being a dark pool operated by Citadel Securities, Citadel is the largest Designated Market Maker (DMM) on the NYSE, and accounting for?47% of US-based retail trading volume, Citadel Securities LLC also accounted for a significant portion of?Robinhood’s Q1 2021 revenue?thanks to Robinhood’s PFOF (payment for order flow) business model. PFOF is a highly controversial practice (pioneered by Bernie Madoff - TULLY, SHAWN (March 1, 2021)) because it tends to cause conflict of interest, which is why it is illegal in many Western nations (the UK, Canada and Australia). Here's the thing. Citadel Connect is not registered as an ATS, nor does it report its trading volume to FINRA, which is (apparently) overseen by the SEC. SEC Chair?Gary Gensler differentiated?between dark pools (ATSs) and off-exchange wholesalers, observing that:

“That leaves about 38 percent, most of which was executed by off-exchange wholesalers. Just seven wholesalers accounted for the vast majority of this group…Within the off-exchange market maker space, we are seeing concentration. One firm has publicly stated that it executes?nearly half of all retail volume.”

Can a Dark Pool be abused? Did you read my last article and see what sort of people are in control of the market with me providing some of the fines and crimes?

• On October 3, 2012,?SEC charged eBX LLC?for failing to protect the confidential information of its subscribers, allowing third parties to use the information.
• On June 6, 2014,?SEC charged a New York broker?for mishandling confidential information and using it for marketing purposes.
• On January 15, 2015,?SEC charged UBS Securities LLC?for failing to disclose an order type that it pitched exclusively to market makers.
• On August 12, 2015,?SEC charged ITG and AlterNet Securities?for operating a secret trading desk and misusing confidential trading data.
• On January 31, 2016,?SEC charged Barkley Capital and Credit Suisse?for numerous violations, among them executing 117 million illegal sub-penny orders.
• On September 14, 2018,?SEC charged Citigroup?for misleading dark pool users and routing orders in other trading venues.
• On November 7, 2018,?SEC charged ITG and AlterNet Securities?again for similar violations as the last time.

I touch upon it later on but Citadel is paying for Order Flow from NINE ONLINE BROKERS too

E*TRADE

TD AMERITRADE

Charles Schwab

Webull?(download the zip file for Q4 2020)

Ally Invest

Firstrade Securities

Fidelity?(routing stock & options orders, but only being paid for options, thanks Fidelity...)

TradeStation

Prove to me how Citadel is not stealing Price Discovery. I'll wait.

Manipulation is the foundation that runs the US stock market.

In my last article, I made note of Merrill Lynch Professional Clearing Corp, Royal Bank of Canada Capital Markets, LLC, Goldman Sachs with violations. These are violations that take post 2008; nothing has been learned. Did you know a Merrill Gold Trader's chat exposed how easy it is to manipulate the market? ("I F..k The Markets Around A Lot" - Merrill Gold Trader's Chat Exposes "How Easy It Is" To Manipulate Metals Markets | ZeroHedge)

Bloomberg's Bre Bradham reports, chat logs introduced as evidence against Edward Bases?and?John Pacilio showed the two traders bragging about how easy it is to manipulate prices.

"...that does show u how easy it is to manipulate it sometimes,"?Bases wrote minutes after one such manipulation.

“I f..k the mkt around a lot,”?Bases said in another message.

That's only one incident though. How about these;

• Gold Manipulators Busted After Zero Hedge Report On Flagrant Gold Spoofing
• Gold Manipulation, Spoofing Futures And Banging Fixes: Same Banks, Same Trading Desks
• Feds Crack Down On Traders "Spoofing" To Manipulate Prices Amid Record Number Of Cases
• Deutsche Bank Gold Manipulator: "Spoofing Was So Commonplace I Figured It Was OK"
• Former Deutsche Bank Traders Convicted Of Fraud For Spoofing Precious Metals Between 2008 And 2013
• JPM Pays Record $1 Billion Fine; Admits Spoofing Of Gold And Treasuries

Or how about how Deutsche Bank enabled a massive US Ponzi Scheme > https://finance.yahoo.com/news/deutsche-bank-enabled-massive-u-115237119.html

In the previous article, I covered some FINRA fines. With that knowledge, I would encourage folks to watch this AMA for Wes Christian hosted by Dave Lauer. He talks about the number of occurrences where the actual short interest is severely understated based on the data his firm obtained for legal proceedings. According to his numbers, in most cases the short interest is 50% - 150%?MORE?than what is reported by the SEC?(starting at 14:30).

The objective isn’t to address the issue: it’s to keep the issue hidden. Firms that underreport their short interest are gaming the system by taking advantage of how the short interest calculation is done. When the SEC relies on reports that broker-dealers provide, and FINRA takes YEARS to reveal the lies within those reports, the broker-dealer can lie without immediately facing the consequences. It allows these firms to operate in a high-risk environment without exposing just HOW big their risk-appetite is (House of Cards - Part 3 : Superstonk (reddit.com). One example used by Wes was for Merrill Lynch who was fined $415,000,000.

Remember when we mentioned?SEA 15c3-3?in the case with Apex? They were asking customers to book short positions to either a cash account or a short margin account.?SEA 15c3-3?protects those customers from allowing brokers to lend out the securities within their cash accounts...Merrill Lynch "Hold my beer"...

Merrill made it seem like the required deposit in their customer reserve account was much lower than it truly was. They wouldn’t have been able to use that cash if it reduced the amount below the minimum capital requirement, so they found a way to mess with the numbers. In doing so, they managed to prevent a CODE RED while reaping the benefits of a high-risk ‘opportunity’. Should Merrill have filed bankruptcy during that time, those customers would have been completely blindsided.

In the case of short selling, the?true?exposure of short interest is unknown… Atobitt wasn't just talking about the short sale indicator. When a firm fails to deliver securities that were sold short, there’s a pretty good indication that they’ve exposed themselves to a bit of a problem. Now imagine a case where the FTDs start piling up and they STILL continue to short sell that same security.. are you thinking this is a joke? Take a look at Royal Bank of Canada

That was a shocking one but the crown definitely belongs to Goldman Sachs

Goldman had 68 occasions in 4 months where they didn’t close a failure-to-deliver. In 45 occasions, they CONTINUED to accept customer short sale orders in securities which it had an active failure-to-deliver.

When a firm is really starting to sweat, they pull certain tricks out of thin air to quell the situation. Again, this is nothing but smoke and mirrors because that’s all they can really do. Just as Merrill Lynch artificially lowered their customer reserve deposit, other firms make it look like they cover their short positions.

One of the ways they do this is by short selling a WHOLE LOAD of shares right before a buy-in… Since we’re talking about Goldman Sachs, this seems like a great time to showcase their experience with this.

With this amazing research from Atobitt, the following quote of his is the equivalent of a mic hitting the floor: "I promise… It really is as dumb as it sounds…"

So the perception here is when Goldman’s client has an FTD, and they find out a buy-in is coming, the required buy-in would obviously be too extreme for the client to handle. So they begin to buy those shares while simultaneously shorting AT LEAST the same amount they were required to purchase.

Have you ever failed to repay a loan so you went to another bank and got a loan to cover the first one? Well, that’s exactly what this is. I know what you’re probably thinking, “Didn’t that just kick the can down the road?”. The answer is YES: it didn’t actually solve anything.

There’s still one more citation that Goldman received which truly represents the pinnacle of?no-sh*ts-given.?How could argue the systematic risks inherent in the securities lending business do not exist?". Check it out:

Atobitt discovered that for 5 years, Goldman relied on a team of 10-12 individuals to locate shares to be used by its clients for short selling. This group was known as the “demand team”. Naturally, as the number of requests coming in the door started to increase, it became difficult for the team to properly document all of them. The volume peaked at 20,000 requests PER DAY, but the number of individuals that handled this job stayed the same.

Obviously, this became too much for them to handle so they opted out of the manual process and found another solution- the F3 key….

Yes- the F3 key… This button activated an autofill system which completed?98% of Goldman’s orders to locate shares

The problem with Goldman’s autofill system was that it used the number of shares available to borrow at the beginning of that day, which had already been accounted for. After using the auto-locate feature, the demand team didn’t even verify the accuracy of the autofill feature or document which method was used to locate the shares for each order… and this happened for 5 years.

Simply. Amazing. I have to show one of Goldman’s short sale indicator violations… It’s too good to pass up.

One violation for a 4 year period involving over 380,000,000 short interest positions…

One violation for a 4 year period involving over 380,000,000 short interest positions…

One violation for a 4 year period involving over 380,000,000 short interest positions…

Is that imprinted in your head yet? One thing to note here is the way in which short sellers use options to “cover” their positions. Wes gave a great overview of this in the AMA(starting at 6:25). Basically, one group will buy puts and another group buys calls. This creates a synthetic share that is only provided if the option is activated. Regardless, short sellers will use that synthetic share to cover their short position and the regulators actually accept it. As Wes points out though, most of those options expire without being activated which means the share is never delivered. This expiration can be set months down the road and allows the short seller to keep kicking the can.

So back to Kenny and Citadel. In December 2020 they reported an increase in their short position of 127.57% YOY. ?The financial statements of Citadel Securities between 2018 and 2020 were looked at primarily because Citadel Securities?actually?has a set of published financial statements as opposed to the 13Fs filed by Citadel Advisors. First, Citadel is a conglomerate as they have a hand in literally every pocket of the financial world (including yours, in case you haven't been paying attention). Citadel Advisors LLC is managing $384,926,232,238 in market securities as of December 2020...

Yes, seriously-?$384,926,232,238

$295,347,948,000 of that is split into options (calls & puts), while $78,979,887,238?(20.52%)?is allocated to actual,?physical, shares (or so they say). The rest is convertible debt securities. The value of those options can change dramatically in a short amount of time, so Citadel invests in several "trading practices" which allow them to stay ahead of the average 'Fidelity Active Trader Pro'. Robinhood actually sells this data (option price, expiration date, ticker symbol, everything) to Citadel from its users. Those commission fees you're not paying for? yeah.... think again.. Check out?Robinhood's 606 Form?to see how much Citadel paid them in Q4 2020. Mind blowing. Did I provide the link to the FINRA report published which cites 58 regulatory violations and 1 arbitration? Here it is again https://files.brokercheck.finra.org/firm/firm_116797.pdf

After explaining how Ken Griffin basically controls the world through the tentacles of the Citadel octopus, it lists detailed cases and fines that were usually?'neither admitted or denied, but promptly paid'?by Citadel Securities.

Let me shed some light on a?FEW:

1. INACCURATE REPORTING OF SHORT SALE INDICATOR. FIRM ALSO FAILED TO HAVE A SUPERVISORY SYSTEM IN PLACE TO COMPLY WITH FINRA RULES REQUIRING USE OF SHORT SALE INDICATORS.?DATE INITIATED 11/13/2020 - $180,000 FINE
2. TRADING AHEAD OF ACTIVE CUSTOMER ORDERS... IMPLEMENTED CONTROLS THAT REMOVED HUNDREDS OF THOUSANDS OF MOSTLY-LARGER CUSTOMER ORDERS FROM TRADING SYSTEM LOGICS... INTENTIONALLY CREATING DELAYS BETWEEN MARKET MAKERS' TRANSACTIONS WHILE THE UNRESPONSIVE PARTY UPDATED PRICE QUOTES.... NO SUPERVISORY SYSTEM IN PLACE TO PREVENT THIS.?DATE INITIATED 7/16/2020 - $700,000 FINE
3. FAILED TO CLOSE OUT A FAILURE TO DELIVER POSITION; EFFECTED SHORT SALES.?DATE INITIATED 2/14/2020 - $10,000 FINE
4. BETWEEN JUNE 12, 2013 - OCTOBER 17 2017 (YEAH, OVER 4 YEARS) THE FIRM PRINCIPALLY EXECUTED BETWEEN 248 AND 7,698 BUY ORDERS DURING A CIRCUIT BREAKER EVENT; FAILED TO ESTABLISH AND MAINTAIN SUPERVISORY PROCEDURES TO ENSURE COMPLIANCE.?INITIATED 1/22/2020 - $15,000 FINE
5. ON OR ABOUT 11/16/2017, CITADEL SECURITIES TENDERED 34,299 SHARES IN EXCESS OF IT'S NET LONG POSITION (naked short);?DATE INITIATED 8/21/2019 - $30,000 FINE
6. CEASE AND DESIST ORDER ON 12/10/2018: FAILURE TO SUBMIT COMPLETE AND ACCURATE DATA TO COMMISSION BLUESHEET ("EBS") REQUESTS. (BASICALLY FAILED TO PROVIDE PROOF OF TRANSACTIONS TO THE SEC). BETWEEN NOV 2012 AND AUG 2016, CITADEL SECURITIES PROVIDED 2,774 EBS STATEMENTS, ALL OF WHICH CONTAINED DEFICIENT INFORMATION RESULTING IN INCORRECT TRADE EXECUTION TIME DATA ON 80 MILLION TRADES.?DATE INITIATED 12/10/2018 - $3,500,000 FINE
7. TENDERED SHARES FOR THE PARTIAL TENDER OFFER IN EXCESS OF ITS NET LONG POSITION (more naked shorting); FAILED TO ESTABLISH SUPERVISORY PROCEDURES TO ASSURE COMPLIANCE WITH THE RULES.?INITIATED 3/22/2018 - $35,000 FINE
8. IN MORE THAN 200,000 INSTANCES BETWEEN JULY 2014 AND SEPTEMBER 2016, FIRM FAILED TO EXECUTE AND MAINTAIN CONTINUOUS, TWO-SIDED TRADING INTEREST WITHIN THE DESIGNATED PERCENTAGE (scraping pennies between bid-ask) ABOVE AND BELOW THE NATIONAL BEST BID OFFER....?INITIATED 10/13/2017 - $80,000 FINE
9. ANOTHER CEASE AND DESIST FOR MAJOR MARKET MANIPULATION BETWEEN 2007 - 2010.?INITIATED 1/13/2017 - $22,668,268 FINE

Naked shorts, failure to provide documentation to SEC, short selling on trade halts..... is this starting to sound familiar? Let's look at some recent events that occurred with trading halts in $GME. On March 10 2021 (Mar10 Day) we watched the stock rise until 12:30pm when an?unbelievable?drop triggered at least 4 circuit breaker events

Now... Atobitt did not believe retail traders did this. Most importantly, the market was totally frozen for the majority of that 25 minutes. Even if people were putting in orders to sell, there were just as many people trying to buy the dip.

The volume of shares flooding the market- at the same exact time- was premeditated. He can say that with confidence because several media outlets (mainly MarketWatch) published articles WHILE this was happening, after nearly a week of radio-silence. MarketWatch even predicted the decline of 40% before the entire drop had occurred. When Redditors reached out to ask what was going on,

the authors set their Twitter accounts to private.

"But wait.... didn't example # 4 say that Citadel was fined $15,000 for selling shorts during circuit breaker events!?"

Yup! and here are?TWO?more instances:

1. CITADEL SECURITIES LLC EFFECTED TRANSACTIONS DURING NUMEROUS TRADING HALTS.

Think Citadel is alone in all of this? Think again... It's actually been termed-?"flash crash".

$12,500,000 fine for?Merrill Lynch?in 2016..

$7,000,000 for?Goldman...

$12,000,000 for?Knight Capital...

$5,000,000 for?Latour Trading...

$2,440,000 for?Wedbush...

$4,000,000 for?MORGAN STANLEY

No one can tell you who was responsible for that flash crash though but for anyone to suggest it was not market manipulation is laughable. Remember, the short shares reported on Citadel's balance sheet as of December 2020 were up 127% YOY. The price of several heavily shorted stocks skyrocketed since Jan 2021. Remember in article one where Citadel said their securities were held by others and the DTCC?

Well once again, that's just terrific, because the DTCC just implemented?SRCC 801?which means they?DON'T?have your shares. The FINRA research and wording is provided by Atobitt on Reddit. I provided a lot of House of Cards Part 3, but here are the first four he wrote that I would encourage professionals to read; we're not dumb money.

1. Citadel Has No Clothes
2. The EVERYTHING Short
3. The House of Cards – Part 1
4. The House of Cards - Part 2

Article 2 noted "FINRA’s portfolio is held by the same entities they are issuing violations to". It makes you think whether FINRA is really taking in a fine or taking in a cut of the crime...nothing should surprise you based on the environment I have painted for you with the individuals participating along with their character. I leave you with a quote from Dave Lauer,

"Without accusing anyone of anything, market makers are certainly taking the other side of these retail buy orders, and market makers also have an exemption that allows them to sell short without having located shares to borrow. So there is certainly plenty of short selling that takes place OTC."

-Just a random IT dude, Tom