
The SEC has temporarily halted trading of Neuromama Ltd. - peterjliu
https://www.bloomberg.com/news/articles/2016-08-15/a-35-billion-stock-was-just-halted-on-manipulation-concerns
======
Animats
Trading was just halted in Neuromama (OTC:NERO), a startup with a $35 billion
market cap. They have a search engine
([https://neuromama.com/](https://neuromama.com/)), a social network
([http://vica.life/](http://vica.life/)), and claim "heavy ion fusion" and
oceanfront property in Mexico. The CEO got out of prison 6 years ago.

WTF?

~~~
thegranderson
Very helpful explanation from a thread about this on reddit (narrated from the
first person perspective of the scammer):

It's pretty beautiful in an illegal sort of way: So the clever short sellers
borrow and sell 100,000 shares of stock at $2 each, hoping to profit when it
crashes to zero.

By hypothesis, there are no buyers. But we buy. We buy those 100,000 shares
for $2 each, laying out $200,000. Now we own 300.1 million shares, out of 300
million outstanding.

On Thursday we go to our brokers and say "you know what, we changed our minds,
we want our stock back from whoever you loaned it to."

So the brokers call in the short sales.

The short sellers can't borrow the stock anywhere else. We own it all. So they
have to close out their short sales by buying in the stock.

But they can't buy the stock anywhere else either. We own it all. So they have
to buy it from us. How much do we charge?

Yeah, $15. Or $20 or whatever, I don't know. We can charge whatever we want.
If the short sellers don't buy the stock, they're breaking the law. So they'll
pay whatever we ask.

They pay $20 to buy back the shares they sold us at $2, making us a $1.8
million profit.

source:
[https://www.reddit.com/r/investing/comments/4wvlkv/a_scam_wi...](https://www.reddit.com/r/investing/comments/4wvlkv/a_scam_with_354b_market_cap_dafuq/d6absj0)

[edit: formatting]

~~~
ChuckMcM
This sounds pretty amazing but I can't figure out bindings for all the
pronouns.

Who are the short sellers? Who are the brokers? are they complicit? Is one of
them acting as the market maker for the stock? When the con is exploded and
the money gets paid back, where did it come from? The short sellers? the
brokers? thin air?

~~~
thegranderson
Haha yeah the pronouns are not the clearest in this. Let me try:

Let's set up three parties to this scam: 1\. The Scammers - these people start
the company 2\. The Short Sellers - these are the "smart money" who uncover
some fictitious/sketchy company and want to profit 3\. Brokers - these are the
intermediaries through which both The Scammers and The Short Sellers trade

First, The Scammers set up the company and take it public on some sort of
lightly regulated exchange (look up pink sheets, over-the-counter trading,
etc.). These are not the NY Stock Exchange where an IPO has to be somewhat
legitimate.

Second, The Scammers lightly trade the stock up among themselves over time
until it looks overvalued enough for The Short Sellers to notice it in their
quantitative screens and get interested.

Then, expecting the price to drop, The Short Sellers decide they want to sell
short the stock. This would generally mean that they borrow the shares from
someone that has them (e.g., borrow 100 shares at $10 a share), sell them to
someone else (e.g., all 100 shares at $10 a share), and buy shares again when
the price goes down (e.g., buy 100 shares at $2 a share) to repay the person
they bought them from (to whom they owe 100 shares, regardless of share
price).

So, in order for the Short Sellers to orchestrate this, they turn to Brokers,
who match buyers and sellers. Since this company is a scam, only The Scammers
have any shares. So the Brokers go find The Scammers (hopefully not realizing
they are scammers), and ask them to lend their shares to The Short Sellers.
The Scammers gladly do this.

Next, the Short Sellers want to sell their borrowed shares back to someone, so
they are set up for when the price drops. Again, The Scammers are glad to buy
these shares (putting up some cash to do so).

When enough Short Sellers get involved, or when The Scammers feel like it,
they will call up their Brokers and ask for the shares they loaned back. There
are some rules around this, but they can generally call them back. Now begins
an epic short squeeze - the Short Sellers don't have any shares, but they owe
them to someone, not realizing that the person they borrowed from is the same
as the person they sold to (The Scammer in both cases).

So, the Short Sellers go out looking for shares to buy to repay their loan
(again, denominated in shares, not cash). But since only The Scammers have
shares, they can demand any price, and they do. They demand higher and higher
prices, until the Short Sellers finally have to pay up exorbitantly for shares
to pay back their loan. The Short Sellers buy shares from The Scammers at
wildly high prices, and return them (through a Broker) to The Scammers, who
are very pleased with themselves, having both sold their shares for 100s of
times what they bought them for, and having gotten the shares returned to
them.

~~~
ChuckMcM
Ok, that is helpful. I'm still a bit confused though. (where's collida when
you need him?)

So I get the point where the scammer is selling options amongst themselves to
get the stock price to rise. I put out an "ask" and then later come back with
another shell company/identity and buy that stock with my "bid". Brokers are
handling these transactions by connecting the buyers to the sellers (which
happen to be the same people so they can buy an sell at an arbitrary price and
only the brokers are making any money on the transaction fees.)

Now you stipulate this causes the stock to show up as "over valued" based on
pretty standard technical analysis. Sort of "look no revenue but people are
buying this stock for $2? WTF?"

So our short seller (who isn't a scammer right? they are being scammed?) goes
to their broker and says we think this price is too high and its going down,
so we want to sell a put option (that is the promise of a sale) of these
shares at $2 a share, 6 months from now. Since they are an options trader and
they know how these things go, they also buy a call option, to buy shares at
$2.25 6 months from now. This is known as a "butterfly" if the shares go up
you will be able to cover your put options with shares from the call option
and "lose" only 25 cents per share, if the shares go down, the person on the
other side of your put buys your shares for $2 and you sell them for less than
$2 and pocket the difference.

What I don't understand is what broker is going to play the other side of the
short seller's order book?

If our scammers agree to sell a call option at $2 to counter balance the short
seller's put option, they are forced to sell at $2, they can't decide to sell
at $20.

How does the scammer get the short seller's broker to take a bath here? They
aren't some dupe in an investment club who things "its going to the moon!" and
so buying what ever comes out, they are trading options on high risk
securities over the counter (in many ways the highest risk securities).

So the only way I see this working is if the broker in this melodrama is
corrupt and telling someone to short a stock which the broker does not ever
get control over (essentially con them into a naked short).

~~~
rdtsc
But there are no options involved here. Short selling is a separate strategy
that doesn't involve options at all (as far as I understand).

Your point still stands and in respect to broker(s), I wonder if they:

* knew, but could ignore it, because it is legal and they wanted to collect the fees

* didn't know

* knew, and should have done something, but didn't, and thus broke some law.

------
honkhonkpants
"He left prison in August 2010 after being sentenced for five years for
defrauding investors, in a $1.8 million scheme through misrepresentations tied
to the renovation of a Las Vegas casino. The Ukrainian immigrant was sued by
the SEC in the 1990s for orchestrating a $12 million penny stock scam. He was
ordered to pay more than $21.6 million in disgorgement and penalties for
selling unregistered securities from 1993 to 1996."

Why isn't this guy on the bad actors list?

~~~
cloudjacker
club fed is a financial crime postdoctorate

------
ultrasandwich
With the apparent gold mine of batshit footage[0][1][2][∞], horrifying failed
PR stunts[4], pdfs[5], and fake products, I really, really, hope someone with
the right skills picks up the documentary ball here...

[0] -
[https://www.youtube.com/watch?v=ok-8uVR4Pa0](https://www.youtube.com/watch?v=ok-8uVR4Pa0)

[1] -
[https://www.youtube.com/watch?v=tZhI5zRJ8zw](https://www.youtube.com/watch?v=tZhI5zRJ8zw)

[2] -
[https://www.youtube.com/watch?v=hreCQlJB7bE](https://www.youtube.com/watch?v=hreCQlJB7bE)

[3] -
[https://www.youtube.com/watch?v=23C_fKGuSls](https://www.youtube.com/watch?v=23C_fKGuSls)

[4] -
[https://www.youtube.com/watch?v=A1rbxisJGJ4](https://www.youtube.com/watch?v=A1rbxisJGJ4)

[5] -
[https://encrypted.google.com/search?hl=en&biw=&bih=&q=site%3...](https://encrypted.google.com/search?hl=en&biw=&bih=&q=site%3Aneuromama.com+pdf)

[∞] - [https://www.youtube.com/channel/UCbSwch2hCQcgy-
ecz1Z_guQ](https://www.youtube.com/channel/UCbSwch2hCQcgy-ecz1Z_guQ)

edit: spacing

------
chollida1
> The SEC has pushed to keep shell companies out of the hands of fraudsters,
> who manipulate their shares to make illegal profits through a so-called
> pump-and-dump scheme.

So if you wondered what a shell company is, one way to get a publicly traded
company is to buy the "shell" of an existing company that is already public
but wound down operations.

Sort of a take over of just the name, incorporation documents and exchange
documents that let it list. You'd then delist and have your shares only trade
OTC. This helps explain why they haven't filed any financials for the past few
years.

If you look at its trading history, NERO US Equity<HP GO> if you have a
Bloomberg terminal, you can see that it traded a few hundred shares a day and
slowly climbed up each day. This probably indicates that the shares are very
tightly held. So the owners can't really cash out by selling their shares, but
they can possibly use the shares as collateral.

Being so tightly held also eliminates the possibility of shorting the company,
though shorting any OTC symbol is always a bit sketchy.

------
syassami
For comedic gold visit
[http://investor.neuromama.com/](http://investor.neuromama.com/)

~~~
paulddraper
Gold for sure.

[http://investor.neuromama.com/uploads/2/4/6/9/24695823/impor...](http://investor.neuromama.com/uploads/2/4/6/9/24695823/important-
disclosure-.pdf)

~~~
paulddraper
> NeuroMama.com is a large online platform, kind of like a large plaza, which
> has everything you need, and if you will start using NeuroMama, you don't
> need any other sites.

> NeuroMama.com is the best in the world Search Engine and Social Network,
> researched, designed, developed and implemented based on Neural Technology
> and artificial intelligence ..... Developed by the best International team
> of mathematicians, and computer analysts.

~~~
mring33621
Finally! The dream that was Zombo.com has been realized!

------
jonah
What is this[1]?!

"To fully understand the difference between our Business Opportunity ad and
all the other business opportunity ads you've been reading, the first thing
you must know is that we are offering an overflowing profit palette of
business 'opportunities', not just a single business 'opportunity.'..."

Plus 30 more paragraphs of similar madness.

[1] [http://investor.neuromama.com/licensing-
territories.html](http://investor.neuromama.com/licensing-territories.html)

------
gragas
I found this on the "Special Password Protected Area for Original Baja
California Investors" page:

> Why would it make sense for APPLE Computers to acquire NeuroMama, Ltd.

> (1) If APPLE acquired NeuroMama, Ltd. it could potentially generate $100
> billion, by selling advertising, in new revenues per year within 5 years by
> replacing GOOGLE with Neuromama.com’s Search Engine based on Neural
> Technology in APPLE's browser - SAFARI. Of course, it no longer will be
> NeuroMama.com search engine .... it will be APPLE Search Engine.

...what?

~~~
Cyph0n
> Of course, it no longer will be NeuroMama.com search engine .... it will be
> APPLE Search Engine.

Of course.

------
lifeisstillgood
(Sorry bout this folks - just trying to wrap my head around it)

What we seem to know and the unanswered questions:

\- this seems to be an atrociously bad startup (their "search engine" proxies
Google but can be easily tripped)

\- it seems to have been a genuine IPO (2000???) that then failed (see search
engine) and yet the outstanding shares trade OTC (between large institutions
privately - a very common method)

\- the scam that seems to be happening is curious (See good explanation about
Eve down thread). The idea is bad scammers can trap genuine hedge funds into a
short squeeze on this very rarely traded stock. But no sane hedge fund will
short the stock without also buying a call option - and so it seems only
insane hedge funds get ripped off here.

My questions:

Why on earth are these stocks still lying around and being traded OTC. This
seems the sort of thing that would never get allowed on any genuine exchange
(the company could barely fulfill minimum reporting requirements)

Why did anyone take this as a "naked short"? Options trading is risk risk risk
and people do this for a living aren't fools. Are they?

Even if this got public in the dotcom boom, why is such a scammy company still
allowed to operate with outstanding shares ? I mean they have only just halted
trading on a company that proxies Google ... Why give the imprimatur of SEC
over the past few years to such crap?

~~~
PhantomGremlin
_But no sane hedge fund will short the stock without also buying a call
option_

Bill Ackman reads this and says "Oh, shit ... you can do that? Why didn't
someone tell me that before I lost about $1 billion shorting that POS
Herbalife pyramid scheme?"

In other words, sometimes "insane" hedge funds are run by BSDs[1] who are
convinced they are the smartest guys in the room. They're so convinced that a
stock is worthless that they don't bother doing something prudent like buying
protective calls.

And then guys like Carl Icahn buy HLF stock just for the lulz, knowing that
they are giving Ackman a very painful galactic wedgie.

Wall Street is definitely Adult Swim. And occasionally joker hedge funds need
to be reminded of that.

[1] not Berkeley, but Liar's Poker

------
dn95
All their website does is scrape Google and return the results. I found this
by causing an error by accident which shockingly exposes this error page:
([http://i.imgur.com/w0tgNUA.png](http://i.imgur.com/w0tgNUA.png))

~~~
mintplant
Was just about to post the same.

[https://i.imgur.com/pSWLXIx.png](https://i.imgur.com/pSWLXIx.png)

The rotating carousel backgrounds on their homepage are comically bad
Photoshop jobs, and the logo looks like it's traveled here from the early
2000s.

------
ipsin
Why on earth does NASDAQ make it look so much like Neuromama (NERO) is a real
NASDAQ-listed company? If I was trying to fool investors, this is the link I
would use:

[http://www.nasdaq.com/symbol/nero/stock-
chart](http://www.nasdaq.com/symbol/nero/stock-chart)

------
partiallypro
The Business Insider headline (original, and yes Business Insider is terrible)
from today was quite funny.

"This $35 billion company supposedly owns 'a clone of Amazon’ and is
developing atomic fusion — and the SEC thinks something might be wrong."

------
paulpauper
This makes no sense...OTC stocks are almost never bigger than a billion
dollars. This used to be at $28 in 2012, which meant is was still worth over
$20 billion but the SEC didn;t notice then. No information about this company.
not even a wiki page. I think the $35 billion may be a typo and it's only $35
million. There is something missing in the reporting. Maybe it traded at a
penny and went to $55 ,maybe it wound be worth billions but it never got lower
than $10

~~~
kgwgk
There were strange things going on with the numbers of shares outstanding in
2013, I wouldn't jump to conclusions about historical prices/market-caps
without double checking.

------
ElliotH
Read the (Important Disclosure) pdf at the bottom of
[http://investor.neuromama.com/](http://investor.neuromama.com/) \- It's
amazingly crazy.

~~~
hashmymustache
Here:
[http://investor.neuromama.com/uploads/2/4/6/9/24695823/impor...](http://investor.neuromama.com/uploads/2/4/6/9/24695823/important-
disclosure-.pdf)

It's a 68 page, haphazardly stitched mess of documents. Can't say they're not
confident in their product:

From page 37: "NeuroBrowser of NeuroMama.com is the best, easiest to use, and
blocks all kind of viruses and pop-outs on your screen...In 2 years the
NeuroMama stock will be the most popular and will make NeuroMama shareholders
and employees very, very rich. NeuroMama.com is the best Search Engine in the
world."

~~~
pplante
The best description I can find of this "company" lies on page 37:
"[https://neuromama.com/](https://neuromama.com/) \- Search Engine based on
Artificial Technology....."

~~~
duskwuff
"Artificial technology" is an apt way of describing it, too. It's a Google
scraper. :)

------
jondubois
Wow - They don't even bother actually building a realistic-looking product.
Their NeuroMama search engine doesn't seem to work at all and it has pictures
of (Russian-looking) priests and clowns in the background.

I think this is pretty much like gambling though... Not so different from how
most people deal with the NYSE or NASDAQ (most people know nothing and make
decisions based entirely on hype/media). People gamble on horses and lottery,
and they also gamble on stocks... I think if someone can pull this off, they
deserve the money as much as any legitimate company on the NASDAQ or NYSE.

A lot of these NASDAQ/NYSE companies have overinflated valuations (far beyond
their real intrinsic value); it's the same thing except in this case, the
intrinsic value is 0.

------
largote
Who honestly believes this company is worth anywhere near $35B?

~~~
harryh
A couple of suckers who got conned into buying in at that price.

~~~
notahacker
They're not even trying to make it not look like a scam
[http://investor.neuromama.com/](http://investor.neuromama.com/)

I'm reminded of Cormac Herley's theory about Nigerian scammers acknowledging
they're from Nigeria because they prefer to deal with people naive enough not
to see that as a red flag [https://www.microsoft.com/en-
us/research/publication/why-do-...](https://www.microsoft.com/en-
us/research/publication/why-do-nigerian-scammers-say-they-are-from-nigeria/)

Unlike your average Nigerian scammer, these guys also presumably had the
ability to afford a web designer and someone to write copy that looked vaguely
legitimate if they'd wanted to. Trouble is, investors that aren't ludicrously
unsophisticated are more likely to ask awkward questions and get lawyers
involved...

------
eggy
Tiajuana, Mexico? Siberia? Sounds like the makings for a 'Red Dawn 2: Putin
and El Chapo" where Trump is holed up with the NRA as patriotic rebels
protecting Hillary, the POTUS ;)

The 2012 film remake of Red Dawn made China the bad guys compared with 1984
original Red Dawn where Russia and Cuba were the bad guys.

But seriously, could this be used to launder money, or the scam wouldn't allow
for it based upon the setup of the short squeeze? Could money be put in the
system this way and cleaned and turn a profit at the same time?

------
executive
NeuroMama, LTD. is a development stage company which designs and implements
the Internet Platform containing all of the popular components used by
majority of population. NeuroPlatform offers its users more search relevancy,
privacy and FSR - Frequent Search Rewards. NeuroPlatform consists of
NeuroMama.com search engine, based on Neural Technology (Artificial
Intelligence), secure e-mail service - Neuro-Mail, NeuroBrowser with a special
version for children, NeuroMania social network with multitude of features
such as Video management system, marketplace and auction, TviMama.com Video
On-Demand and Live Broadcasting Infrastructure, functioning as the next
generation Internet Content Distribution Platform (CDP). The NeuroZone online
shopping mall is in implementation stage that will offer its users and vendors
unique online shopping experiences, provide its e-commerce merchants with
ability for instant integration to NeuroZone platform, and reward users for
shopping at NeuroZone merchants. The flagship store for NeuroZone will be
NeuroMania Department Store with large variety of products sold under the
NeuroBrand such as NeuroPad, NeuroPhone, NeuroBook, etc. The company is
currently in the process of establishing its presence in China to sell
advertising and to establish Joint Ventures with manufacturers in China in
order to deliver large profit margins in NeuroMania online store and brick and
mortar store locations as part of its licensing program. NeuroMama, Ltd. is in
the process of researching, designing and implementing its licensing program
to accelerate growth of revenues worldwide. NeuroMama, Ltd. is currently
implementing revenue generating infrastructure to sell advertising on its
Internet Platform.

[http://seekingalpha.com/symbol/NERO](http://seekingalpha.com/symbol/NERO)

------
ryporter
I trade this market professionally, and it is quite easy to massively elevate
your stock price if you control most of the floating shares. These sorts of
price run-ups happen very regularly, but, to their credit, the SEC normally
stops them before they get this far. They are typically able to halt trading
by the time it's worth a billion dollars, two tops. :/

------
singularity2001
TL;DR (DontRead)

Some con artist gets expelled from US after spending 6 years in prison for
investment fraud. Tries new pump and dump gig from Mexico called NeuroMama,
deliberately hilariously crazy stupid.

Issues some 650M shares, sells 200 for 50$, probably to himself, gets stopped
by SEC. Holds the remaining 650M-200 shares, that's where the trillion dollar
figure comes from.

Time to stop calling virtual shares 'market cap' or even 'worth'!

That's pretty old and boring, the 'new' attempted twist is called short
squeeze, see and thank @thegranderson for explanation.

Shun the Neuromama meme.

This gives a whole new dimension to the word 'pump and dump con artist':
[https://www.youtube.com/watch?v=A1rbxisJGJ4](https://www.youtube.com/watch?v=A1rbxisJGJ4)

------
haddr
I got very nice error from their search engine, revealing a bit where they get
results from :)

[http://pastebin.com/RnsB33Ea](http://pastebin.com/RnsB33Ea)

------
DON1
WHY WOULD THEY JUST SUSPEND THE STOCK TRADING, WHAT IS THE ILEGALITY HERE?
THAT THEIR STOCK TRADES AT $56DLLS AND THEY HAVE LOW VOLUME? OR THAT THEY HAVE
NOT FILED THEIR FINANCIAL DOCUMENTS? I HAVE READ ON ONE OF THEIR CONTRACTS
THAT THEY PERFECTLY STATE THAT THEIR COMPANIE USES INVESTORS CAPITAL SEED TO
FUND PROJECTS. WELL LETS JUST WAIT AND SEE WHAT HAPPENS ON THE 26TH OF THIS
MONTH

------
ekiara
That "search engine" looks like it was never really build to be used. I
searched the term "blender" and got this:

`ErrorException in getResults.php line 45:`

[https://neuromama.com/get/web/blender](https://neuromama.com/get/web/blender)

------
dzlobin
[http://investorshub.advfn.com/boards/read_msg.aspx?message_i...](http://investorshub.advfn.com/boards/read_msg.aspx?message_id=124531379)

This forum post has links to some of their financials which are just comical.

------
tlrobinson
$35 billion market cap, but it looks like the daily volume is never more than
~$200,000...

------
adamontherun
Screenshot of a search for "8 billion" on neuromama.com
[http://imgur.com/a/Y1Ior](http://imgur.com/a/Y1Ior)

------
gruez
>To read more about the saga of Cynk, click here.

...with no link to click on

------
walrus01
This is like watching a flaming dumpster fire.

------
davidgerard
Bloomberg's headlines are _infuriatingly_ clickbaity these days.

~~~
jokoon
How so? That article is amazing, and I think the title reflects it.

~~~
notahacker
Blatant penny stock scams /= "a $35 billion stock"

~~~
paulddraper
...hence the halting on manipulation concerns

