Wall Street Parade reports a lawsuit has been filed charging half the futures sales on the Chicago Stoc Exchange are ‘wash trades.’
For a little foundation, a “futures trade” is a stock market bet that prices of some particular stock will rise or fall. A “wash trade in futures” sounds clean, but is against Federal law and is a very dirty stock market scam.
Essentially, the lawsuit charges people are “selling” stocks from their left hand and “buying” the same stocks with their right hand. This gives the small investors who invest their life savings in some “safe investment” the impression that large numbers of shares of that stock are trading, at an ever increasing price.
And after the market for these inflated stocks has run its course, the manipulator lets the stock drop to its fair valuation, usually a fraction of a penny a share. The investor has been robbed blind, and the sharper has his or her money.
Wash trades were a major factor in running stock prices far beyond fair value before the “crash of ’29,” which brought on the “Great Depression.”
Briefly quoting the Wall Street Parade report linked above:
The conduct alleged in the lawsuit, backed by very specific examples, reads more like an organized crime rap sheet than the conduct of what is thought by the public to be a highly regulated futures exchange in the U.S.
The lawyers for the traders begin, correctly, by informing the court of the “vital public function” that is supposed to be played by these exchanges in “providing price discovery and risk transfer.” They then methodically show how that public purpose has been disfigured beyond recognition through secret deals and “clandestine” side agreements made with the knowledge of Duffy and his management team.
There is a great deal more at the Wall Street on Parade report at the link. If you have money in shares or futures, it would be a really good idea to click on over and check it out.
Because the last time “wash trades” were used to make it seem the market was hopping resulted in the Crash of ’29, and bankrupt investors jumping out of skyscraper windows.