Trump Media alerts Nasdaq to potential market manipulation from 'naked' short selling of DJT stock

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41. Stock market scammers talk about "naked shorts" and DRS in order to fleece retail suckers

Over the last few years a number of financial stock cults have sprung up in the wake of Gamestop's rise. They've borrowed lots of the paranoia and time-tested scam language from financial-scams past and have synthesized into a grand narrative.

Gamestop's (GME) cultists are at the forefront of this. They idolize the CEO and chairman of Gamestop, Ryan Cohen, who praised the Jan 6ers and is a covid denialist. If you're unfamiliar with him, you can think of him as a dime store Elon Musk. He first invested in Gamestop in late 2020.

Some background:
Gamestop is a retailer of video game hardware and software, new and used. It's a poorly run company with a bad reputation with employees and customers. In 2020, many financial professionals thought the company, which had be circling the drain for years, would finally go out of business due harder operating conditions during covid. They (legally) shorted the stock, which is a bet that the company would do worse. In late 2020 retail investors and some outside investors like Ryan Cohen and Michael Burry had taken the opposite view that the bankruptcy concerns were overblown. This dynamic led to the Jan 2021 meme stock explosion that saw GME stock increase 100x in value due short sellers closing their position followed by a buying frenzy. (There was an SEC report that confirmed this).

In the wake of the retail buying frenzy there were a lot of retail traders that had bought at the highs and were suffering heavy unrealized losses. They began to construct ever more elaborate theories as to why they were being cheated out of millions (and even billions!) and how, inevitably, the corruption would be untenable, would be exposed, and they would have their riches.

At the core of it, these retail traders were themselves engaging in a scheme to manipulate the price of a security. They were (and still are to this day) trying to engineer a short squeeze in GME.

The pitch is that there are short sellers that face "unlimited" liability and that if all the retail stockholders can hold firm their shares of GME that they can force the liquidation of, essentially, all the wealth of the stock market and the US itself via government bailouts in order to satisfy these claims. It's sovereign-citizen level reasoning that sees them becoming unfathomably wealthy and everybody that doesn't hold GME shares utterly ruined. Remarkably, they see themselves as the good guys "fighting corruption".

They focus on "naked" shorts for two reasons. First, the amount a stock is shorted is roughly known and reported. If this number is too low then the scheme doesn't work. So there needs to be hidden shorts that cult members can take on faith exist. Two, naked shorting, while never a widespread practice, was banned during the Bush administration so that the existence of naked shorts gives the cult a righteous cause to fight against. (It's technical but naked shorting is only allowed for the purposes of bonafide market making. Market makers do not hold positions, positive or negative for very long. Think of it kind of like walmart selling apples... they have an inventory that they need to conduct the transaction but they're not accumulating apples. Market making is highly regulated.)

They focus on DRS, which stands for direct registered shares, as a mechanism to enforce their scheme to manipulate the price of a security. Most people hold their stocks in the brokerage account. These shares are technically registered to an organization, not you, in order to facilitate bookkeeping. To DRS your shares means to remove the shares' registration from this organization to your own name. Eventually, the theory goes, retail will DRS all the available shares thereby cornering the market and causing a short squeeze. They obfuscate the language slightly because when you say it like that it sounds really illegal. Scam CEOs DRS this because directly registered shares take longer to sell and so insiders can dump all their shares before retail holders can react.

Over the last few years we've seen a gradual convergence of meme stock cults with other right wing cults. Even if the original participants in the meme stocks were apolitical or not MAGA, they've been pipelined towards the right wing. Trump media, in some ways, is the apotheosis of this phenomenon.