Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Wednesday, November 19, 2008

SEC Charges Day-Traders with Manipulative Short-Selling Scheme

The SEC filed charges against two day-traders, Robert Todd Beardsley and George Lindenberg, who allegedly perpetrated a manipulative short selling scheme through brokerage accounts at a now defunct broker-dealer, Redwood Trading LLC ("Redwood"). As alleged in the complaint, Beardsley and Lindenberg engaged in their manipulative short selling scheme by repeatedly selling short securities in violation of the then-existing short sale rule, commonly referred to as the "uptick rule," with the intent to artificially depress the price of shares that they had sold short in order to enable them to cover their short positions at favorable prices. In a related civil injunctive action, the SEC alleges that Dennis McNell, the former Chief Executive Officer and Chief Operations Officer of Redwood, aided and abetted the illegal short selling scheme. The complaint also alleges that McNell engaged in an unrelated fraudulent scheme to hide substantial trading losses that he had incurred in a Redwood proprietary account.  The SEC has settled the charges against Lindenberg and McNell, pending court approval.

http://lawprofessors.typepad.com/securities/2008/11/sec-charges-day.html

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