The Silver Short Scam

February 18, 2000

The following letter to the Chairman and President of the New York Mercantile Exchange is self-explanatory. While I did not get a response, I did not expect one. I've learned that from writing to and about Barrick, the CFTC, and the financial institutions who have manipulated the price of gold and silver. In another time, that non-response would have been the end of the matter. But we're not in another time, we're in the time of the Internet, where uncensored communication is unstoppable. I don't care if they respond, as long as they react (like Barrick).

If the gold and silver manipulation is to end sooner, rather than later, it will likely be due to specific observations, and not repetitive generalizations of wrong-doing. I think this matter goes right to the heart of the manipulation. I don't understand how it can be allowed to continue. Here's my latest offering of specificity:

February 14, 2000

Mr. Daniel Rappaport

Mr. R. Patrick Thompson
The New York Mercantile Exchange
One North End Avenue
New York, NY 10282-1101

Dear Sirs;

I am writing to you about a most serious matter involving a dangerous situation in the silver market on the Commodity Exchange Inc. (COMEX). It is my hope that you will resolve or explain this situation in a timely manner.

The Commodity Futures Trading Commission (CFTC) released on Friday, February 11, 2000, their Commitments of Traders report (COT) for positions held, as of February 8, 2000. This report indicated that Four (4) or less traders in the commercial category held a net short silver futures position of 42.5%, of the total open interest of 85,895 contracts, or 36,505 contracts. This is the equivalent of 182,525,000 ounces of silver, or twice as much as Mexico, the world's leading producer, by far, produces in an entire year. That the possibility exists that this net short position is held by fewer than 4 traders is alarming to the extreme. Since the COMEX has reported silver warehouse stocks in the range of 75 million ounces for the past year or so, and it is widely accepted that the COMEX is the world's largest repository of silver inventories, it would appear that there is a mismatch of epic proportions in the size of the concentrated naked short position of these un-named traders and available supplies. I would doubt that these traders control more than 10 million ounces of the COMEX inventories.

That these big naked shorts also appear to fall into the dealer category, rather than producer category (since no publicly held mining company has disclosed such a short position on the COMEX), is most alarming. After all, banks and insurance companies do not produce silver as part of their normal business functions, thus raising the question of how they could possibly satisfy delivery requirements if called upon as the contract demands. It should be noted that in no other commodity, does the situation exist where a small number of traders are naked short the equivalent of what the leading countries produce in an entire year.

I have participated in COMEX silver futures and options on the long side for over 15 years. It appears that, based upon this report from the CFTC, that these dealers have rigged the game by their uneconomic concentrated short-selling. People who buy COMEX contracts have a reasonable expectation of their contracts being fulfilled. This COT report suggests otherwise. A reasonable person would conclude that a financial institution has no business being naked short such an outsized amount of a physical commodity that they don't possess or produce. Therefore, I am calling upon you to explain or rectify this situation.

It is important that participants in your silver contract have confidence that those contracts will be fulfilled and honored as called for. This COT report undermines that confidence. Therefore, I call on you to do two things. First, identify publicly just who these concentrated naked silver shorts are. Second, publicly announce that you are aware of this situation and that the COMEX, as a result of that awareness, guarantees that these contracts will be fulfilled and honored as called for. As a result of this notification, it is my intention, that if a market emergency develops in which the rights of long contract holders are compromised, I will hold you and all directors liable for damages on a personal and corporate basis.

In order not to inflame this dangerous situation, I will give you until Thursday, February 17, 2000, noon EST, to notify me of your intentions of dealing with this situation. At that time I will pursue a public effort (including making this letter public) in the hopes of ending this clear manipulation. I must confess that I have very little confidence that you will police and rectify this situation, based on your exchange's history. However, to be fair, I will afford you the opportunity to police yourselves.

Spanish Conquistadores invaded the Inca Empire in 1528 to steal their silver and gold.

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