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Presentation at the New York Academy of Sciences on Final Results of Phase 3 DCVax-L Trial Showing Impressive Efficacy (Part 3) Analyzing Hedge Fund Stock Manipulation Techniques


This note describes why I believe that the sharp downward price movement yesterday resulted from stock manipulation by a group of hedge funds that I call the wolfpack. It was a bold and frightening effort to make investors fear that the very positive news from the presentation at the academy was actually negative, In the short term they have succeeded, but over time I believe that the market will come to the belief that DCVax-L is a major advance in the treatment of the most aggressive form of brain cancer, glioblastoma multiforme.

My wife was a social worker and is one of the most caring and compassionate people I know. She pays only passing attention to stocks but has taken an interest in Northwest Biotherapeutics because of my long time involvement. She has been somewhat skeptical because of the long delay in releasing the data. Her common refrain was why don’t they just release the data? What is taking so long? Are you sure there isn’t something wrong? On May 10th, she was passing by my home office and I told her about the New York Academy of Sciences presentation and she listened in.

She is not experienced or particularly interested in the process of developing drugs. I was curious as to how a lay person would respond to the presentation. She was very impressed by the view of the presenter that the phase 3 trial was a landmark success, that DCVax-L promised to be a major advance in the treatment of glioblastoma multiforme and that it might give desperately ill patients hope of extended survival in this dread disease. She had also listened to a presentation in 2008 that featured patients whose lives had been saved through compassionate use programs. See this link for detail. At the time, she cried when she heard their stories. So with the new data from the presentation her view was that this looked to be a life- saving drug.

Throughout the day, the stock price crashed. She was perplexed by what was going on and I explained how I thought that a group of hedge funds -the wolfpack- were acting in concert to create the impression that the trial had failed. She asked a question that I think most of us are asking. Why would anyone given the promising data not hope that this drug will extend the lives of desperately ill cancer patients? Even if they believe there are reasons to be skeptical on some points, a lay person can see that there is every reason to hope that the drug will work and want it to work.

She next asked who was behind the manipulation and what were they thinking. From long experience I know many of the hedge fund managers involved in the manipulation of Northwest and many other small companies. This type of stock manipulation is pervasive on Wall Street. They were using well established stock manipulation practices like illegal naked shorting backed by negative blogs by hedge fund employees to afford plausible reasons for the aggressive shorting. In many situations, in the short and intermediate term they can actually control stock prices, even for much larger companies than NWBO.

So who are these people? As I just said, I have dealt with many of these managers in my career as an analyst. I can say this. They are very smart people deeply skilled in biotechnology who have enormous resources in terms of money, people and political influence. Importantly, their funds have built massive short positions in NWBO and they feared that they could suffer the same experience as the hedge fund Melvin Capital in the GameStop experience if the phase 3 data was perceived positively.

Her final question was why sophisticated people do this? The answer is insatiable greed in which right or wrong does not matter. Life is determined only by how much money you make.

Suspicious and Consternating Stock Price Behavior on May 10

Many investors were bewildered that before, during and after the May 10 presentation on phase 3 results for the DCVax-L trial, the stock behaved inexplicably. You can view the You Tube presentation at this link. It is crystal clear that the results were highly encouraging and would have been expected to give a strong upward impetus to the stock instead of the crushing of the stock price that occurred. Here is a summary of the stock price behavior on May 10.

May 9

Stock closed at $1.80

May 10

9:30 am   Opened at $1.27

11:10 am  Price was $1.24 as the presentation began

11:40 am  By the end of the presentation the price was $0.75

12:40 pm Low price of the day was $0.38

4:00 pm Stock closed at $.75

My sources suggest that the shorts probably committed about $30 million of capital to create the impression that the data presented was disappointing and drive the stock price down. In looking at the above price behavior, it is clear that the stock manipulation scheme kicked into gear at the market opening before anyone had any idea of what was going to be presented. Then as the presentation went on the stock was consistently under pressure. This was even though the presentation can only be viewed as extremely positive.

After noon, the usual cast of hedge fund bloggers writing anonymously under pseudonyms lit up the chat rooms claiming that the trial was failed to reach the primary endpoint of median progression free survival. This was just an outright falsehood as mPFS was not the primary endpoint. A Kaplan Meier analysis showed that DCVax-L met the median overall survival primary endpoint in newly diagnosed GBM with a strong p value of less than 0.002. In recurrent GBM, DCVax-L met the median overall survival primary endpoint with a p value of less than 0.001.

The survival tail in ndGBM showed 13.0% of patients alive at five years versus 5.7% in control group. This is every bit as impressive as survival tails for the checkpoint inhibitors in recurrent non-small cell lung cancer and recurrent melanoma, cancers which are roughly equivalent to glioblastoma in terms of survival. Note that it was the demonstration of the survival tail that made Merck’s Keytruda and Bristol-Myers Opdivo multi-billion drugs. The survival tail for DCVax-L in recurrent GBM showed that at 30 months 11.1% of GBM patients were alive versus 5.1% in the control arm.

Jim Cramer Gives Us an Insight into the Heads of the Hedge Fund Managers

I have been positive on DCVax-L and the technology used to develop it for several years. Hedge funds have attacked me, sometimes savagely, scoffing at my belief that there is a wolfpack manipulating stock prices as I have described. They portray me a biased stock pumper. Clearly, I have a bias toward my viewpoint so is there some third party who can validate my beliefs? Yes, there is. That person is Jim Cramer. Side note, Adam Feuerstein is the most vocal naysayer on Northwest Biotherapeutics.  Cramer hired him in about 2007 to cover biotechnology for He is Cramer’s protégé. Adam and Cramer worked side by side for many years and each has expressed high regard for the other.

Cramer of CNBC is well known for his show Mad Money and CNBC has spent millions positioning him as a nearly infallible stock guru. With the staggering CNBC platform behind him, Cramer has created a brand that he is a friend of the small investor that can help them navigate through bull and bear markets. However, it hasn’t always been the case that he portrays himself as  a benign caring investment adviser. Before joining CNBC, he was a no holds barred hedge fund manager who would gladly rip your face off to make money. In 2007, he inexplicably gave a lengthy in-depth interview that described how he routinely manipulated stock prices to his advantage and urged other fund managers to do the same. Here is a link to that conversation.

I think that you can learn a lot more about what Cramer said by looking at a transcript in which we can linger over parts of his presentation. I found a nearly verbatim transcription on the internet which I will now share with you. This was published in March 2007 by an organization called Corporate Crime Reporter. It does an in-depth analysis of Cramer’s interview that can only be described as jaw dropping. While this interview was done over 15 years ago, it clearly describes key elements of how stocks were manipulated at the time.

Over the subsequent 15 years, the scheme has become much more sophisticated and powerful. This is because the development of DTCC, which controls all trading and clearing of stocks, has made the practice of illegal naked shorting much, much easier. This coupled with high frequency computer trading and dark pools makes short selling attacks on stocks much more powerful. See my series in illegal naked shorting if you want to spend a couple of hours to understand this.  Here is the link.


MARCH 21, 2007

Jim Cramer Comes Clean



Corporate Crime Reporter dissected Cramer’s presentation in a very informing way. They start by summarizing his comments as follows:

  • Finally, Jim Cramer has come clean.
  • The market is fiction, upon fiction, upon fiction.
  • Stock fundamentals don’t matter.
  • It’s all about lying and manipulation.
  • Lie, spread rumors to reporters, including to the bozos at the Wall Street Journal.
  • Price fixing is needed in certain industries–and don’t worry, the shareholders will demand phony lawyers to cover up the crime.
  • No need to worry about the Securities and Exchange Commission (SEC)–they don’t have a clue.
  • No need to worry anymore about Cramer’s Harvard Law School buddy Eliot Spitzer–he’s in Albany now.

They went on to say that Cramer–the former hedge fund trader and current host of the popular CNBC show “Mad Money”–was interviewed in December 2006 by Aaron Task on television. it is riveting television. Raw, unadulterated, Jim Cramer. Spilling the beans on corporate criminals on Wall Street. Cramer talks openly about how hedge fund managers manipulate the market. To drive stocks down. Or up. To profit from their short or long positions. {emphasis added} Hedge funds manipulate the stock market by dumping $10 million to $15 million in the market, to move the stock one way or another.

Cramer as case in point–Research in Motion (RIM)–the maker of Blackberry. His direct quote is.

“A lot of times when I was short at my hedge fund, and I was positioned short, meaning I needed it down, I would create a level of activity beforehand that could drive the futures,” Cramer said. “It doesn’t take much money. Of if I were long and I would want to make things a little bit rosy, I would go in and take a bunch of stocks and make sure they are higher–maybe commit $5 million in capital and I could affect it. Now, you need maybe $10 million in capital to knock the stuff down. But it’s a fun game. And it’s a lucrative game.”

If you are short on RIM, “you can’t let it lift.”  { Substitute Northwest Biotherapeutics for RIM] “When you get a Research in Motion, it’s really important to use a lot of your firepower to knock that down,” Cramer said. “Manipulation by buying and selling stocks–that’s legal”, Cramer says. “Then if you need help, you engage in some illegality–what he calls fomenting.”  “You can’t foment,” Cramer says. “That’s a violation. You can’t create yourself an impression that a stock is down. But you do it anyway because the SEC doesn’t understand it. {emphasis added} That’s the only sense that I would say that it is illegal. But a hedge fund that is not up a lot really has to do a lot to save itself. This is blatantly illegal. But when you have six days and your company may be in doubt because you are down, I think it is really important to foment. If I were one of these guys, foment an impression that Research In Motion isn’t any good.”

“Get people talking about it as if something is wrong with RIM,” Cramer advises. “Then you would call the (Wall Street) Journal and talk the bozo reporter on Research in Motion and you would feed him that Palm has got a killer it is going to give. These are the things that you must do on a day like today. And if you are not doing it, maybe you shouldn’t be in the game.” Remember, you can’t take any chances with the truth. { emphasis added}

What’s important when you are in that hedge fund mode is to not doing anything that is remotely truthful, because the truth is so against your view–it is important to create a new truth to develop a fiction,” { emphasis added} Cramer advises. “You can’t take any chances.”

How do you drive Apple stock down to profit from your short position–especially when the company is just about to announce its new IPhone?

“Apple–it is very important to spread the rumor that both Verizon and ATT have decided they don’t like the phone,” Cramer says. “It’s a very easy one to do. You also want to spread the rumor that it’s not going to be ready for MacWorld. And this is very easy, because the people who write about Apple want that story. And you can claim that it is credible because you spoke to someone at Apple. It is an ideal short. If I were short Apple, I would be working very hard today to get that. And the way you would do that is pick up the phone and call six trading desks. And say, listen, I just got off the phone with my contact at Verizon. And he has already said–we’re a Samsung house, we are a Motorola house. There is no room for Apple. They want too much. We are not going to let them in. We are not going to let them do what they did to music. And that’s a very effective way to keep a stock down.”

When interviewer Task tries to get Cramer to talk about the fundamentals of the stocks in question, Cramer brushes him off.

The mechanics are much more important than the fundamentals,” Cramer says. “Who cares about the fundamentals? {emphasis added} Research in Motion just blew out the quarter. Look what people can do. That’s a fabulous thing. The great thing about the market is that it has nothing to do with the actual stocks. {emphasis added} Maybe two weeks from now the buyers will come to their senses and realize that everything they heard was a lie. But then again, Fannie Mae lied about their earnings for $6 billion. So, it’s just fiction and fiction and fiction. It’s important for people to realize that the way that the market really works is to have that nexus of–hit the brokerage houses with a series of orders that can push it down, leak it to the press, and get it on CNBC–that’s also very important. And then you’ll have a vicious cycle down. It’s a pretty good game. It can be played for a percent or two.” {emphasis added}

What about the cell phone market?

Too much competition, Cramer says.

They’ve got to get in a room and fix prices.

“The problem with the cell phone market is that these guys are all killing each other,” Cramer says. “Someone has to take a dive. Motorola and Nokia have to get in a room and just fix price. They have been reluctant to do that because of the various Justice Departments.”

And it’s illegal, Task weighs in.

“Well, that hasn’t stopped a lot of other companies,” Cramer says. “This seems to be a case where they seem to be directly worried about the authorities. It’s almost as if they have a lawyer that matters, say like the Bristol Myers lawyers. What eventually happens is that the shareholders demand that you get phony lawyers and you sit in a room. It will happen soon.”

Cramer said that the Federal Reserve is looking for ways to cut interest rates without looking foolish.

“The Fed has obviously got to cut,” he said. “The Fed is desperate to try to figure out how quickly they have to cut without looking like dopes that they raised rates. You don’t want to raise in May and then cut in January. You’ll look like Mexico for heaven’s sake. This is a distinguished group of people who went to really good schools. They don’t want to look like dopes.”

Not only doesn’t the SEC have a clue, but Eliot Spitzer is off the Wall Street beat. So, other illegalities are possible now.

Here’s Cramer’s take on how to manipulate Ford Motor stock up, despite a questionable balance sheet.

“Ford went and pledged all of that investment banking to all these guys,” Cramer said. “Ford may be the big client of 2007. So, if I were in the corporate finance room, I would say to the research guy–listen, I have the inside–the plan works. Then you are the research guy. What do I do? It’s bonus time. I’m not going to be a total idiot. Spitzer is going to Albany. Let’s get back in the game.”



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