I bet you have heard about the arrest of Martin Shkreli the failed hedge fund manager of MSMB Capital and later Biotech CEO, that was recently arrested on charges of fraud and operating a Ponzi-like scheme. Martin Shkreli is better known as the AIDS drug douche bag because he raised the price of the drug Daraprim, which is used to help manage AIDS patients’ symptoms, from $13.50 to $750 per pill!
Martin Shkreli’s Scheme
Last month he bought up more than 50% of the outstanding shares of Kalobios (KBIO) and manipulated the price of this small biotech penny stock causing a massive short squeeze from $.80 all the way to $40. Martin Shkreli got his start working at Jim Cramers Hedge Fund when he was 17 years old. He learned how to use the media to manipulate the price of stocks, which is exactly what Jim Cramer still does today with CNBC.
I traded this stock numerous times both long and short but mainly for just short-day trades. Fortunately one of my students, an 18-year-old kid from the Caribbean, shorted this stock at $28. He held the stock short for a swing trade and when the news broke about Martin Shkreli last week the SEC halted KBIO’s stock. Shkreli was the CEO of KBIO but was later fired after getting arrested and the stock dropped to $11 before the halt.
Game Over for Martin Shkreli!
Just the other day Nasdaq said they were going to be delisting KBIO to the OTCBB since the auditor of the company had resigned. What this means is KBIO will be investigated and when it opens up it probably will trade for less than $1.00 (my best estimate from the experience of seeing these situations play out in the past)!
My student is short 535 shares at $28 and will most likely end up profiting $15,000 if this opens around $1.00. The fact is fraud cause havoc to stocks even if it turns out the guilty are innocent. In this case, Shkrelli looks pretty guilty but only time will tell.
Check out this chat log from my conversation with him. He is Cuckolder (lol). He’s had an amazing year growing his account.
Discord Chat Log – December 23, 2015
Cuckolder: KBIO to be delisted 4:24 PM
Cuckolder: Finally 4:25 PM
Mac joined the chat 7:28 PM
Cuckolder: What a year 7:30 PM
Dan: 7:31 PM
Holy crap Cuckolder. Since you are short this from $28 you are gonna clean up!
Cuckolder: And trader thanks for what you’ve taught me over my 1 year period in here 7:31 PM
Cuckolder: Yeah I’m short 7:31 PM
Cuckolder: How do I cover? 7:31 PM
Cuckolder: I haven’t called my broker yet 7:31 PM
Dan 7:31 PM
You have to wait until it opens again.
Dan 7:33 PM
In a statement Wednesday, KaloBios said that Nasdaq wrote that it will be removed from trading on Dec. 30 if KaloBios doesn’t appeal. The company has not yet decided whether it will appeal.
Dan: 7:33 PM
No matter what happens when it opens it will trade for probably less than $1.00 most likely.
Dan 7:35 PM
Don’t mess around when it opens. Just get the f out immediately because it could spike some since some other shorts are gonna want to cover.
Cuckolder: Well I only got $15k short at $28 7:35 PM
Cuckolder: I couldn’t get my $40k filled 7:35 PM
Cuckolder: And I’m very glad 7:35 PM
Cuckolder: Alright so I’ll cover immediately thanks 7:36 PM
Dan: 7:37 PM
So you could still make like $15k profit. That’s a nice win!
Dan: 7:37 PM
Also Monday, it’s an independent registered public accounting firm, Marcum resigned as the independent accounting firm for KaloBios, less than two weeks after being retained on Dec. 8.
Cuckolder: Everything just fell apart there 7:38 PM
Dan: 7:38 PM
That’s really good news. That’s gonna cause people to run for the hills since the accountant obviously knew that Martin Shkreli was up to no good.
Dan: 7:39 PM
This is a pump and dump 2.0
Dan: 7:40 PM
Chances are they won’t protest the delisting because they are guilty
Cuckolder: I mean I didn’t predict this but damn was good to get in there a couple of days before 7:41 PM
Dan: 7:41 PM
Yeah, you never can predict this stuff but it just happens occasionally when you trade day in and day out, and just look for the patterns.
Cuckolder: You saved me a lot of money this year haha when u said don’t short stocks like that on the first day 7:41 PM
Dan: 7:42 PM
Unless you are some HF trading on inside info like Steven Cohens fund it’s not worth it.
Dan: 7:42 PM
Yeah they can go so much further than you think
Cuckolder: so what’s gonna happen to Shrekli? 7:43 PM
Cuckolder: 20 years? 7:43 PM
Dan: 7:47 PM
I don’t know. They could make an example of him as they did to Martha Stewart. He is pretty hated right now.
Cuckolder: But anyways trader enjoys your holidays. I won’t be trading till the next year 2016 7:45 PM
Cuckolder: And thanks for all the awesome 2015 trading tips 7:45 PM
Cuckolder: They made me a fortune this year! 7:45 PM
Dan: Yeah no problem. I am glad your trading is going so well. Enjoy your holiday as well. 7:46 PM
Dan: That’s why I created my books. Take care and have a happy holiday man.
Update” This kid made a $14,043 profit on the trade.
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