" Cohen's life work is being destroyed," he wrote in a note to Business Insider, "I feel good. Shooting SAC Capital dead and throwing all of its employees into the streets is simply civilization scraping some dog--- off its shoe. I felt it was time I spent $100k on a derisive ad in order to say that."
A Federal Grand Jury indicted SAC Capital on charges of insider trading this week after years of investigation.
Meanwhile, since 2005 Byrne has been saying that powerful market actors have been working to destroy his company. In 2010 he identified them as Michael Milken and SAC's Steven Cohen.
Two years later, emails accidentally leaked by lawyers representing a number of Wall Street banks described how the banks were allegedly naked short-selling Overstock.com stock and advising their hedge fund clients on how to do the same.
SAC Capital, as you know, is one massive hedge fund client.
"Eight years ago I was roundly criticized by coming out publicly and saying, in brief: A network of dirty hedge funds were practicing all kinds of dicey practices, including insider trading and naked short selling (and being serial killers of firms in the process)," Byrne wrote. "T he SEC was not doing its job protecting our markets because it is a captured regulator, and this combination was destabilizing the system."
He continued: "Also that the mastermind, the Napoleon of crime, so to speak, was someone I initially identified as the "Sith Lord" of all that was evil and wrong on Wall Street. In the months after, I gradually dropped broader and broader public hints that I was talking about Stevie Cohen. Of course, through all of this my claims were spun, ridiculed, and mocked."
If the documents leaked by bank lawyers are any indication, Overstock was not only being ridiculed by the media, but also by insiders at Wall Street banks. Naked short selling (or "failing" a stock) is the practice of shorting a stock that has never actually been borrowed. It's illegal, in part, because it creates fake supply of a stock, and in 2005 and 2006 Overstock.com claims naked short-selling created six times the actual supply of its stock in the market.
Someone might choose to naked short sell a stock when the stock is a negative rebate stock — too expensive to borrow. That's why it sounded so damning when the emails leaked from banks said things like this:
"We are NOT borrowing negatives... I have made that clear from the beginning. Why would we want to borrow them? We want to fail them," said one Merrill exec.
Now that you're clear on that, this portion of Byrne's note will make more sense (emphasis ours):
"Cohen is directly responsible for corruption in our capital markets that has cost hundreds of thousands, maybe millions of people, their jobs," he said. "Now SAC has been indicted, and Cohen's life work is being destroyed, I feel good: Shooting SAC Capital dead and throwing all of its employees into the streets is simply civilization scraping some dogs--- off its shoe. I felt it was time I spent $100k on a derisive ad in order to say that."
"Besides," Byrne added, "if you're not going to kick a man when he's down, when are you going to kick him?"
So that explains that, then.
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