Daniel Loeb’s First Amendment Riot
In late 2005, I spent over four hours interviewing Overstock.com CEO Patrick Byrne as part of a podcast series on entrepreneurship I created.
After I published the audio of the interview, somebody posted a link to it on the Yahoo Finance message board dedicated to Overstock.com.
Seeking the origin of the resulting surge in downloads led to my first stock message board visit.
It was really strange.
What first struck me was the flurry of responses to the original posts in which users with foul mouths and bad attitudes warned that the linked mp3s contained computer viruses.
Of course, no mp3 has ever carried a virus, as I’m fairly certain the posters knew.
These were followed up by all manner of lies meant to discourage others from listening to any of the three Byrne interviews I would eventually publish.
Worse, they posted all manner of lies about Patrick Byrne personally – something I was in a unique position to recognize having just interviewed him at length.
Intrigued, I started examining the posting histories of the most prolific sources of this disinformation, trying to identify patterns that might in turn reveal their underlying motives and, often enough, their real identities.
Well over two years later, I remain engaged in the same pursuit. And, to be frank, I suspect that by now, I understand it better than anybody else, largely because of a few methods I've developed and the great amounts of information I’ve received from others.
What follows is a little bit about what I’ve learned.
First: just as there are dishonest people paid to post lies on stock message boards for the purpose of artificially boosting share prices, there are also bad people paid to post lies on stock message boards for the purpose of artificially lowering prices.
In the case of the latter, they are either paid outright as contract “stock researchers”, or paid in put options (which increase in value as a company’s stock drops in value).
Second: make no mistake, it’s short-biased hedge funds who are paying these stock “bashers” (as they’re often called).
Third: in some cases, it’s actually the managers of these short-biased hedge funds doing the bashing.
Consider the following notable example.
I’ve previously written about evidence received demonstrating that hedge fund Third Point, LLC contracted with convicted stock fraudster Michelle McDonough, whose duties included coordinating the efforts of message board bashers and inducing certain captured journalists to report negatively on targeted companies.
I’ve also written about Third Point founder Daniel Loeb’s well-known history of posting on the Yahoo and Silicon Investor stock message boards under the alias Mr. Pink.
Before getting to the rest of the story, here’s some background.
About the same time I first visited Yahoo Finance, a company called SFBC International (now PharmaNet Development Group) came under a blistering attack by Daniel Loeb, who very publicly announced Third Point’s sizeable short interest in the company.
SFBC got hit from all sides, and its share price withered.
In particular, there was a deluge of libelous (though tame compared to others I’ve seen) posts to Yahoo’s SBFC message board. Most notable were the attacks leveled against then-SFBC Chairwoman and President Lisa Krinsky.
Krinsky responded by filing a lawsuit against ten anonymous posters: Does 1 through 10.
In order to discover the identities of the ten Does, Yahoo was served with a subpoena.
In accordance with policy, Yahoo alerted the posters, giving them two weeks in which to contest the subpoena – an expensive proposition few bashers have the financial ability to pursue.
And indeed, none of the ten Does opted to put up a fight.
With one exception: Doe number 6, known on Yahoo Finance as Senor_Pinche_Wey (which is a slang Spanish term that is as obscene as you can imagine).
A typical post by Senor_Pinche_Wey reads:
…I will reciprocate [fellatio] with Lisa [Krinsky] even though she has fat thighs, a fake medical degree, "queefs" and has poor feminine hygiene…
Doe-6 fought the subpoena, was rejected, and appealed to California’s Sixth Appellate court.
Clearly, Doe-6 had some resources backing him up…to say nothing of a deep motivation not to be exposed.
And, fortunately for Doe-6, his appeal was successful and the subpoena was quashed.
This decision – handed down in February of this year – essentially affirms the First Amendment rights of message board bashers to say whatever they want about the officers of public companies. (An excellent analysis of the decision can be viewed here.)
In their decision, the Court noted:
We likewise conclude that the language of Doe 6's posts, together with the surrounding circumstances -- including the recent public attention to SFBC's practices and the entire "SFCC" message-board discussion over a two-month period -- compels the conclusion that the statements of which plaintiff complains are not actionable. Rather, they fall into the category of crude, satirical hyperbole which, while reflecting the immaturity of the speaker, constitute protected opinion under the First Amendment.
Interesting.
Ready for the other shoe to drop?
I’ve learned, through multiple sources, that the immature speaker in this case, Doe-6 (aka Senor_Pinche_Wey) was none other than Daniel Loeb himself.
As a matter of fact, Senor_Pinche_Wey is one of many abusive message board identities used by Loeb to harass officers of companies Third Point was shorting, often illegally.
On August 12, 2005, Patrick Byrne first publicly accused several hedge funds of working in coordination to illegally manipulate the share price of Overstock.com and many other small, public companies. Within 48 hours, armies of bashers arrived for the first time on the Overstock.com stock message boards across the web, all working off of a the same obvious set of talking points. Among the points these bashers took the greatest care to make, time and again: that Byrne was crazy for thinking that any two hedge funds would ever work together when shorting.
In case there are any doubts left regarding Byrne’s claims, I invite you to look at this message board exchange, between Senor_Pinche_Wey, LaseriumQueen, bobbingbargains, disgustedinvestor, kidstockjoec, jidoo, and Polytechnic_Trader.
What makes it so interesting is that at least 72% of the participants are hedge fund managers shorting the company they’re smearing.
Specifically, Senor_Pinche_Wey belongs to Daniel Loeb, while LaseriumQueen, bobbingbargains, disgustedinvestor, and kidstockjoec all belong to Robert Chapman, founder of hedge fund Chapman Capital.
Polytechnic_Trader and jidoo may or may not belong to Loeb or Chapman...I don't know either way.
I do know that Chapman also posts under the aliases tautologicaltrader, ghaulty_lodgick, notably_absent, and herniatedgorilla – all of which can be seen, time after time, posting things I’m quite certain Chapman would not dare say in person.
Do hedge funds coordinate their attacks?
Yes.
And as you'll read in a soon-to-be-published-post, message board bashing is only the beginning.
Paid bashers: cracking the code.
Third Point, LLC is a hedge fund run by Daniel Loeb, also known on stock message boards as “Mr. Pink.”
Michelle McDonough (formerly Michelle Sarian), is a convicted felon who has spent one year in prison for securities fraud. Today, as before going to prison, McDonough has a company called Magic Consulting.
Floyd Schneider is a prolific message board poster, whose many pseudonyms can typically be found repeating the same drumbeat of fraud and executive incompetence. Schneider’s posts frequently encourage shareholders to file SEC complaints and/or join shareholder lawsuits.
Yolanda Holtzee is also a prolific message board poster, most notably as Ms. Mint Green, who holds herself out at a close associate of Daniel Loeb/Mr. Pink. Holtzee is also frequently found to be encouraging shareholders to complain to the SEC and participate in shareholder lawsuits.
Roddy Boyd is a reporter for the New York Post and frequent online supporter and offline apologist of Floyd Schneider and Yolanda Holtzee.
AntiSocialMedia.net has learned that Third Point has, on multiple occasions, engaged Michelle McDonough to generate support for SEC investigations and/or class action lawsuits brought by shareholders against companies in which Third Point has substantial short interests. (Daniel Loeb refused to comment on the nature of his relationship with Michelle McDonough.)
McDonough, in turn, frequently engages Floyd Schneider and Yolanda Holtzee (among others) to foment and feign support for such shareholder actions on stock message boards. (McDonough refused to comment on the nature of her relationship with Schneider and Holtzee.)
Roddy Boyd has been asked on two occasions to comment on his relationship with McDonough. The resulting exchanges, via email with Judd Bagley, proceeded as follows:
Judd Bagley: “…What do you know about a woman named Michelle McDonough?”
Roddy Boyd: “re Michelle M: nothing. Should I? google has about 1mm entries for that name.”
Judd Bagley: “She used to go by the name Michelle Sarian. Today she runs “Magic Consulting.” I think she did a year in prison back in 2001.”
Roddy Boyd: “re sarian or mcdonough...youre concern, not mine.”
The second, more recent, exchange proceeded as follows:
Judd Bagley: “While I've got you…you recently denied knowing Michelle McDonough (formerly Sarian). Is that still your position?”
Roddy Boyd: “sorry judd, im not talking to you about anything else, period. if youre not comfortable with me asking the questions-fine. but im not anwering yours.”
That’s right…Roddy Boyd, a reporter, essentially twice gave me a reply of “no comment” when asked about any relationship he may have with Michelle McDonough.
This is a vastly complicated topic, which ASM, with the help of many, will spend the foreseeable future unraveling.
Loeb, McDonough, Holtzee, Schneider, and Boyd are again encouraged to contact me with any relevant comments they may have on this topic as we continue to explore it.
Yolanda Holtzee’s House of Mirrors: Part One
Before reading what follows, it’s important to know that Yahoo! message board aliases ymh_ymh_ymh, ursa_of_245_park_avenue, ursa_383_madison_avenue, and ursa_minor_245 all belong to Yolanda Holtzee. You can read more on these relationships here.
According to a Wall Street Journal story dated April 18, 2006 (reprinted here, one week later):
In 1998, hoping to make more cash, [Holtzee] began managing money, she says, for a handful of wealthy individuals. She says she stopped taking in new investors in 2000 and won't disclose her firm's assets under management or its performance.
Ms. Holtzee refers to her company, Alcap LLC, as an "investment club" and says she employs two traders in Connecticut and a compliance officer.
Holtzee’s first apparent mention of the fund appears to come in January of 2002.
11-Jan-02
Yolanda, as ursa_of_245_park_avenue, first mentions the fund, which she called ALCAP, LLP. Here she explains what that name means.
26-Jan-02
Two weeks later, ursa_of_245_park_avenue hints as to her fund’s performance
Heebner's returns are not as good as mine by any stretch of the imagination
In a subsequent post, Holtzee continues:
It's not a hedge fund, per se. It's a private investment partnership called ALCAP, LLP aka Casino Ursa.
30-Jan-02
Here Yolanda, as ymh_ymh_ymh, offers insights into the holdings of “Casino Ursa aka ALCAP,” also noting:
Ursa does a great job making Marc and his boys much Richer.
14-May-02
Here ymh_ymh_ymh discloses the cost of a new trading account at Casino Ursa (ALCAP, LLP)...or is she promoting trading accounts at Bear Stearns?
…Who's ready to dump SCH, ET, and AMTD and trade up to my boys and girls at BSC? 500K minimum on a trading account, kids. Casino Ursa ain't cheap but it's worth the price.
24-May-02
Following much confusion by her fellow posters over several seemingly contradictory statements by Holtzee about the nature of ALCAP, ymh_ymh_ymh offers this explanation:
It's a trust fund, LLP type and it is known as the holding company, ALCAP. No listing for it. Small and private.
9-Jun-02
Yet two weeks later, Yolanda, as ursa_383_madison_avenue, goes out of her way to suggest that she actually works for Bear Stearns.
…Yes, my firm, took many dogs public and our clients got those shares at offer price. Our clients sold those dogs in late 1999/2000 for the most part and we shorted the living hell out of them and made some very nice money taking them downhill skiing. Our clients are not naive. Our brokers are the world's best. My firm's trading within 10% of an all time high. My firm is the might Bear Stearns (BSC:NYSE)…Our clients are happy. Our brokers are happy. Our price chart is BEAUTIFUL. We are the mighty Bear Stearns (BSC: NYSE). BSC stands for Breakfast of Super Champions. For more on my firm, please view my YHOO profile.
ursa_383_madison_avenue’s user profile, static since May 15, 2002, lists as her profession “Hedge Fund Manager.”
14-Nov-02
Five months later, ymh_ymh_ymh says she’s back in the hedge fund business.
I co-manage a hedge fund called ALCAP. We're offshore, not registered.
At this point, it’s unclear whether Holtzee’s ALCAP is a hedge fund, a trust fund, or an investment club, and why Bear Stearns continues entering the picture.
But much more interesting is the question of what role billionaire Marc Rich plays in this fund.
Recall the above comment from January 30, 2002, in which Holtzee commented: “Ursa does a great job making Marc and his boys much Richer.”
Now compare that comment with the remnants of a comment made by Yolanda as ursa_minor_245 on a since-deleted thread, dated August 28, 2000, and captured by another poster here a few months later.
by: ursa_minor_245
(F/Zug, Switzerland)
8/28/00 3:16 pm
Msg: 9274 of 11531
…For the record, and the 5th time at least: I don't work for BSC and I have never worked for BSC. I don't want to work for BSC or ANY hype house. They don't pay enough. I serve Marc Rich, the best trader that ever lived, Baar none. You make as much money as you want serving him. No rules...just go for it.
Subsequent comments by Holtzee make it clear that she is in fact referring to fugitive billionaire Marc Rich, who at that point had yet to be pardoned by President Clinton.
If true, this admission of directly engaging in commerce with an expatriate fugitive whose indictment on tax fraud in 1983 was called the “biggest in history” is shocking.
Furthermore, the possibility that the shadowy ALCAP/Casino Ursa/Bear Cub Capital Management, which, depending on when you ask the question, is either a trust or a hedge fund or an investment club organized as an LLC or LLP, that either is or is not affiliated with Bear Stearns, might have served as one of Marc Rich’s notoriously numerous offshore money laundering or campaign finance law-skirting vehicles should be investigated.
The next installment of Yolanda Holtzee’s House of Mirrors will examine Holtzee’s more contemporary online stock commenting activities, and the role Marc Rich and others might play in influencing her rather malleable attitude toward certain companies’ share values.
Yolanda Holtzee’s House of Mirrors (foreword)
In the search for a pithy introduction, all I've managed to come up with is this: if I hadn't seen it myself, I would not have believed it.
But even that misses the point somewhat, as I feel very much as though the layers surrounding the enigma that is Yolanda Holtzee have barely been peeled back, and that the greatest revelations have yet to come.
If that's possible.
What I am certain of is the fact that if I were to wait until I felt confident that all relevant data had been gathered and considered, this post never would have happened, as each day brings more and the pace of discovery is only accelerating. That's why this topic will be treated over the course of at least three installments (not including this post, which is essentially a preface to what follows).
Given the scope of this project, we're also actively requesting the assistance of additional supporters. Please email me to learn more about how you can help us do this project justice.
Between now and the first full installment of this story (arriving within 48 hours), please review this sidebar, which serves to outline some of the overwhelming numbers of Yolanda's online identities, in addition to providing a brief explanation of how we've come to establish these relationships.