SEC Lowers the Boom on Brothers

     WASHINGTON (CN) – Two brothers, living New York and Chicago, made $17 million in ill-gotten gains from naked short-selling, the SEC says.



     The SEC issued a cease-and-desist order against Jeffrey Wolfson, of Chicago, his brother Robert Wolfson, and Golden Anchor Trading aka Barabino Trading, of New York.
     “Jeffrey Wolfson engaged in illegal naked short sales while working as a broker-dealer himself and later as the principal trader at a Chicago-based broker-dealer that is no longer in business,” the SEC said in a statement. “He also taught his brother and others how to do it.”
     In its cease-and-desist order, the SEC says the defendants “made millions of dollars in illicit profit” from naked short selling.
     Short sellers borrow shares in hope of profiting from declining prices. Short selling is legal, but the SEC requires short sellers to actually locate shares to sell short, and to deliver the borrowed securities by a specified date. Naked short selling involves selling short without actually locating the borrowed shares to make delivery.
     The SEC said in its statement that the Wolfsons “generated more than $17 million in ill-gotten gains from naked short selling transactions involving such stocks as Chipotle Mexican Grill Inc., Fairfax Financial Holdings Ltd., Novastar Financial Inc., and NYSE Group. As Jeffrey Wolfson stated in a recorded telephone conversation, ‘What I sell them is not guaranteed, it never gets delivered, it’s funny paper.'”

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