The New York herald., 1922-02-23


finds himself short of cash with whi,
that the broker" is no. making his
payments. A lot of investors become
uneasy and anxious. A run results,
and bang! goes the bucket shop. The
receiver takes charge.
But the bucket shop operator also
recognizes the value of increasing
prices on some particular stock for
his own purposes, and often takes ad-
vantage of a boom in some security.
In such cases, however, the boom is
usually of lbs own making. That
method of boosting the price of GER
tain security is known as wash
| sales
Fits In with Buclketing.
| A wash sale transaction cannot be
ing, but it Is just as disastrous to the
victims who get caught by it, and is a
common resort Of bucket shop, par
ticularly a broker handling SUBJ
scription issues.
| Bucketing an order consists of fail
ing to buy and hold for delivery stocks
ordered by customer, meanwhile ap-
propriating the customers money
| for unauthorized use. The fleeing
through the wash sale process is ac-
complished by the actual delivery Of
the stock, but only after it's price has
been fictitiously boosted to many times
its real value, so that the customer
in reality pays out good money and
| 20 . 60
| less stock.
1t usually takes an understanding
or conspiracy among several indi-
| viduals or firms to carry out wash
sales. The process is simply that A, 3
and G, say, agree to sell back and
forth between themselves shares of
the security with the idea of boosting
its price fictitiously. A sells to B at a
certain price. B turns around and
sells to c at a slightly higher price.
! c, in turn. sells back to A or to B with
a few points more added to the figure.
| All the time the same stock is being
used and the same money, if, indeed,
any money actually passes hands. In
that manner, the price is sent up a
few points at the time through ap-
parent market activity, VIXEN as a
matter of fact there has been not a
single actual bona fide sale of the
stock in any of the transactions which
have increased the price.
Agents Sell on Crest.
The advantage to the broker" is
that while tEis is going on he has his
agents and statesmen in New York and
scattered about the country selling
stock to suckers" These agents
daily are informed OF the price in
creases of the stock and these in
creases are used as argument to con-
vince victims that the price is going
right on up, and if they buy now they
will be able to sell later at big profit
In fact. such a broker" not infre-
quently will guarantee that the stock
will reach a certain figure by a certain
| day. He is in position to make that
guarantee because he is the chap who
Is making the price go up and down.
A common custom, when "broker"
thinks he has not fieeced a victim OF
all the money he can get, is to allow
the victim to sell a few times at in
creased figures and take down his
profits. Thus having established in
the victim the confidence that his
broker" is on the square, that he is
looking out for the interests of his
customer, and that his tips" on the
market are reliable and profitable, the
broker" eventually is able to pur-
suade the victim TO entrust every cent
he can spare for some Investment"
bottom Drops out.
Now, after the price of such a stock
has been washed up and up until il
is six, eight or ten times par. and
either the supply Of stock or the sup
ply OF victims is exhausted, what hap
pens?
The washing" process stops, no.
body hears any more about the stock
which n week before appeared to be
in such tremendous demand and TO
have such brilliant prospects. There
is not person to be found anywhere
who wishes to trade in the stock; the
balloon of prices Is punctured and
collapses. The holders of the stock
then, instead of having the valuable
security which they thought they had
bought, find that the stock is hardly
worth the paper it was printed on. and
are lucky to get so much as par for it.
Jerome Simmons, Assistant District
Attorney, recently has had under in
vestigation a swinde which was
achieved through the wash sale"
method. He said IL was as clear cut a
washing" proposition as has been
found i'm the financial district in some
years.
Mr.. Smmons's investigators were
able TO trace certificates of stock from