WHISTLEBLOWER VINDICATED: MASSIVE TRADING FIRM KNIGHT CAPITAL CHARGED WITH ABUSING “NAKED SHORTS”

December 15 2016, 8:53 a.m.

BACK IN SEPTEMBER, I wrote a seven-part series at The Intercept chronicling how former Wall Street trader Chris DiIorio, determined to figure out how he lost a small fortune on a penny stock, came to the conclusion that gigantic market-making firm Knight Capital, now known as KCG, repeatedly violated federal regulations meant to prevent abuse in what are known as “naked short sales.”

It was an explosive allegation. Naked short sales are when you sell a stock you don’t have. That’s illegal most of the time, for obvious reasons. DiIorio found evidence that KCG had illegally conducted nearly two billion dollars’ worth of them.

It was a bit of a mystery story, with two unanswered questions at the end: Was DiIorio right? And if so, why hadn’t any regulatory authority done anything about it?

One regulatory authority finally has, and its action would seem to confirm DiIorio’s suspicions.

Read on.

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