From: Sigmund Lee
     


 Subject: S7-24-99 (naked short sales of securities on OTC BB) 
 Author:  SLee <sllee@ipoline.com at Internet
 Date:    05/23/2000 2:28 PM

 This is a very serious problem NASDAQ has.  And they have done nothing 
 about it. The investing public is fed up with the US GOVERNMENT who has 
 refused to correct the issue!!!  This article was written by a investor 
 and this is not the only stock that has the problem. MOST OTC BB stocks 
 are naked short bu hugh amounts!!!!

   

   Read This....From another board...Interesting This is a post I found 
 on the VALH board.
   It's an investor who is a few days away from having a conference call with the 
 NASDR about MM's shorting stocks into infinity and with no one to answer to about 
 it..... Below you will be able to read his opening statement he will make to the NASDR 

   VERY INTERESTING READING

   Good morning and thank you for taking the time to here our complaints 
 and concerns. I and other investors in VALH have seen our company go from a money losing 
 company to one that is increasing revenue and profits by more than 200% per year for the 
 past two years with no end in sight. But to our utter dismay we watched the stock depreciate 
 since our recent earnings report of a 24.5 million dollar quarter and two significant 
 PRs days afterwards including a new profitable acquisition. We chose to look into the 
 trading activity of VALH as we with level two service saw the stock dropping with increased investor interest or so it looked that way on the streaming ticker of VALH. 

   So we decided to order the T&S reports for VALH for the 2 months before the earnings
   announcement and add them up. We got the reports from the otcbb.com 
 website and were told via email from the help desk that these were accurate reports 
 submitted by the market makers at the end of each day. We set out to count the trade totals 
 and the buys versus sells. It showed a drastic imbalance with buys far outnumbering sells and in February alone it showed them selling 2.5 million more than they bought per week. We 
 then decided to dig deeper and indeed requested and counted the reports back to November 
 of 1999. In doing so we were surprised to see that the reports showed the market makers had 
 sold 26.5 million more than bought as of April 12,2000. This perplexed us and indeed 
 many of us tryed to formulate opinions for reasons for this imbalance. Many myself 
 included said we must not forget that the MMs no doubt had some inventory before they found 
 themselves in the minus column.

   So we chose to contact the OTCBB and ask where we can obtain reports 
 of market maker short positions. We were told there aren't any, market makers are not 
 required to submit any but that a limited few did voluntarily. We asked well how long do they keep these positions, we were told they didn't know but insisted it was more than likely an extremely short time until the MM would cover. They used the ability to naked short to keep the market trading in an orderly fashion. Giving them the ability to sell some naked short until the high volume would subside and they could then recover when normal profit taking took place. We asked well when do you check to make sure that the positions are closed once a year at least? We were told, no.
   We were told there were no rules for the MMs of OTCBB securities had to adhere to except
   in dealing with specific indidvidual transactions. Other than that there was no check system and indeed the amount of public companys that were shorted was completely 
 unkown.

   Well we found this absurd to say the least and wish to have an 
 explanation as to why it is unchecked. Where is the money for these short sold shares till the MMs cover, is it in an interest bearing account? Is it used to trade other securities on the OTCBB or Nasdaq or NYSE or the AMEX. The truth is nobody knows. And why is it with buys 
 outnumbering sells by 1.3 million on the day of our earnings report and following 5 days 
 with continued positive events announced by the company and increased investor interest down by 50%? If indeed they have been shorting the stock since that week or as far back as November which ever the case may be. Where is the money for the shares that Jane and John Doe gave them for their shares?
   Why is it the price has continued to fall by the market makers increasing the public float
   and continually selling short? They John and Jane Doe bought in the .70's .60's and .50's yet there investment sits at .34 with the market makers retaining their short positions and indeed retaining Jane and John Does money. 

   I and over 200 investors from 26 states and 4 countries would like to know if the investors in America and around the world know that the company that they invest in 
 is subject to an increased float and continual short selling allowing the market makers 
 to manipulate the stock, and hold their money till the time they deem it prudent to repurchase the shares they sold short. Are other countries aware that this abuse can take place because the NASDR does not feel the need to make sure abuses in the naked shorting arena are not taking place. Are they aware so as to inform and warn their citizens trading in American OTCBB securities?
   How many investors and how much money is unaccounted for? If you who are here to protect
   the public don't know, who is to know? We are not dealing with a group of nuns here, and we are dealing with massive amounts of money, investors money, the publics money. And to let
   this go unchecked is inviting fraud one can't blindly trust that these people will do the right thing.
   History shows us that this is not a reality, as the literally dozens 
 of MMs last summer were fined and suspended for unfair trading practices. Why is it that you 
 let this go unchecked, I imagine even you have no reality of the magnitude of the short 
 situation. Ask yourselves how much money can we be talking about here? 10's of millions easily, billions maybe. The truth is you don't know and that is a total lack of regard for the investing public.

   We are not feeble minded, everyone understands the risks from investing in startup
   companies and that it is extremely risky because they are indeed startups. The company
   could go broke for a number of reasons and more often than not, they do. But 
 I am 100% certain that they do not know the risk of unchecked short selling of securities on 
 the OTCBB. That for any lentgh of time a market maker has the ability to increase the public 
 float of the company they have invested in and not one check in place to make sure it isn't 
 abused. And that is not accptable.