The Greatest Episodes of Market Manipulation…Is Silver Next?

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Market manipulation has a long and storied history.

From the Tulip Mania of the 1600s all the way to the recent housing bubble, market manipulators have employed a wide range of tactics to lighten the wallets of unsuspecting investors.

And even though market manipulation is prohibited in the U.S. under a section of the Securities Exchange Act of 1934 – it's as American as apple pie.

Everyone from high-ranking government officials to investment bankers have been caught with their hands in the cookie jar.

The list includes scofflaws like Ivan Boesky, Michael Milken, and Jack Abramoff.

Jim Cramer, the host of CNBC's "Mad Money," said he regularly manipulated the market when he ran his hedge fund, calling it "a fun…and lucrative game."

Not surprisingly, a recent study found that those closest to the information loop -corporate insiders, brokers, underwriters, large shareholders and market makers – are most likely to be the perpetrators.

To give you an idea of how things work, here are three notorious examples of market manipulation.

Stock Market Manipulation Is
as Old as the Hills

1) The Erie War: In 1867, American financier and railroad builder Jay Gould sat on the board of directors of the financially troubled Erie Railroad.

In what is known as the 'Erie War' Gould fought to keep Cornelius Vanderbilt from acquiring Erie and consolidating the industry.

To pull it off, Gould issued 100,000 shares of new Erie stock by illegally converting debentures.

He then used the money to bribe New York legislators to make the conversion legal. Outfoxed, Vanderbilt settled, receiving $1 million as a sweetener.

Afterwards, Gould vastly expanded Erie's debt and launched it on an expansion campaign. Meanwhile, he sold its stock short, and made a killing before Erie went bankrupt in 1875.

2) The Enron Scam: After merging two gas pipeline companies to form Enron Co. in 1985, Ken Lay helped establish the market for selling electricity. Later, he successfully lobbied the U.S. Congress to deregulate the sale of natural gas.

Enron soon began trading these markets to drive up energy prices and significantly increase its revenue. Meanwhile, Lay and CEO Jeff Skilling used accounting loopholes and misappropriated investments to keep billions in debt off the books.

But perhaps their greatest feat was their ability to pressure Arthur Anderson & Co. staffers to cooperate in fooling the board of directors and audit committees.

Investors lost more than $70 billion when the Enron scandal ended in one of the biggest bankruptcies in history, driving its stock down from a high of $90 per share in mid-2000 to less than $1 by the end of November 2001.

Andersen, one of the five largest accounting partnerships in the world, lost most of its customers and shut down.

The scandal eventually led to the enactment of the Sarbanes-Oxley Act to expand the accuracy of financial reporting for public companies and punish those attempting to defraud shareholders.

3) The Internet Swindle: It used to take rooms full of stockbrokers feverishly working massive phone banks to manipulate a company's shares.

Now anyone can reach millions of potential traders instantly, all while remaining completely anonymous.

In 1999, two UCLA students drove the stock of a bankrupt printing company from 13 cents to more than $15 in two trading days, dramatically demonstrating how the Internet had transformed the old game of stock market manipulation.

The students had spent two weeks acquiring 97% of the thinly traded stock of NEI Webworld Inc., The New York Times reported. After the market closed on Friday, they sent out hundreds of messages on Internet bulletin boards touting a takeover and the huge profits to come.

On Monday, based on orders made by those who believed the fake postings over the weekend, the stock rocketed up 106,600% to $15.50a share–in a half- hour.
The students sold their shares into the buying frenzy and eventually bagged over $350,000 in profits. NEI shares closed that day at 75 cents.

Is Silver Next?

The latest market manipulation could be ripped from the pages of a Hollywood thriller, according to Peter Krauth, a highly regarded expert in metals who runs the Global Resource Alert investment service.
Only this story is not fiction… and it's happening now, he says.

Krauth spent the last six months conducting an exhaustive investigation of a backroom deal to keep the price of silver artificially depressed. Now he's ready to expose what's been going on behind the scenes in the silver market and why the price is headed to $200 or more.

He reveals all the details – and how investors can profit – in a free report.

You can access it here.

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Join the conversation. Click here to jump to comments…

  1. BOB | February 24, 2012

    WITH ALL THE RULES AND ATTEMPTS TO REGULATE AND OPERATE AN HONEST STOCK MARKET, THERE IS ALWAYS SOME INDIVIDUAL OR GROUP THAT FINDS A WAY TO MANIPULATE THE MARKET TO THEIR OWN PERSONAL GAINS. THE PUBLIC HAS BEEN BURNED OVER AND OVER AGAIN, YET STILL COMES BACK FOR MORE. THE WORST OF THESE ARE OUR OWN SENATORS AND CONGRESSMAN THAT LINE THEIR POCKETS FROM ENDLESS DEALS WITH LOBBYISTS, NOT FOR THE GOOD OF THE COUNTRY, THAT THEY SWEAR TO PROTECT, BUT FOR GREED THAT EVENTUALLY WRECKS OUR ECONOMY. DUE TO ALL THOSE EVENTS, WE ARE LOOSING OUT TO OTHER NATIONS AND BECOMING A SECOND RATE COUNTRY.

  2. Burton Sweet | February 24, 2012

    I'm a collector of coins and find that now is the time to hold on selling too.It's been my experience to find that some of the later coins have dropped in price and others have become better ones to sell.
    EX.: the 2009 double Eagle Gold coin [100,000] minted was really on fire about 6 months plus ago.Now it has dropped off in value by quite a few $100 dollars.I have mine graded by either PCGS or NGC and they are selling now in MS 69 for around $2500 plus where as the MS 70 is quite alot higher in price but still low compared to last year.So it is an example of a coin to hold as the prices well return to much higher value and saleability.I find this is an area that needs to have a close watch on as to many of the 1992 plus dates in bullion plus some coins that have limited mintages.
    Two others are the 2001 Bi metalic in UNC $10 gold/ Plat coin only 6000 minted.
    $5 piece in 2000 lib. of congress UNC also about the same mintage.Hold these only in UNC as they are winners.
    Sincerely Burton

    • Volodymyr Osinchuk, Ukraine | February 27, 2012

      Hi! I have been collecing Ukrainian commemorative coins since Year 0 – late 1995 when first such coins were minted abroad for the lack of equipmemnt and were denominated in Karbovanets (note: noe it id Hryvnia). Among those coins, ther are a lot of .925 silver coins. Silver price hike is so much discussed these days. Question: should one expect that .925 silver would appreciate proportionally?

      Sincerely, Volodymyr

    • Lee Nichols | March 3, 2012

      That's good information, and it's very kind of you to share it so succinctly, so that even beginners can understand it. Best comment I've read on a dozen boards this week. Many thanks

  3. waldipup | February 27, 2012

    Sprott sold all his own silver holdings in his own fund while encouraging others to buy . How come these newsletter sellers here dont know that? Was he a part of the conspiracy also?

    If silver is going to 200 , why do you need a paid newsletter to tell you what to do? Just buy some half decent producers and hold onto em and you'll become rich .

  4. John Johnson | March 2, 2012

    Anyone consider that this very article, or the report that it mentions, might in and of itself be an attempt at market manipulation?

    I quote:

    "Now he's ready to expose what's been going on behind the scenes in the silver market and why the price is headed to $200 or more.

    He reveals all the details – and how investors can profit – in a free report.

    You can access it here."

    In other words, here's a report saying you should buy silver, so that it'll drive up the price of silver, and we, the authors, will make a bunch of money, since we already own silver now.

    Sure smells fishy to me…

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