Hi Gang,

First and foremost, sorry for the delays between these podcasts and blog entries. A lot goes into each production, and as I become more and more sophisticated with this stuff, it begins to take me more and more time to finish.

Custom images, custom branding, custom hashtags and keywords, custom SEO, etc. All of this is really time consuming. Plus I have a serious OCD complex, so it doesn’t make sense for me to ask someone else do blog this stuff, so here we are. Lol.

Anyway, as an introduction—if there was any one guiding principle here at Miletti Law is that the free market, should remain the free market. Individuals and businesses alike are all guaranteed 4 freedoms in our world.

  • The freedom to try;
  • The freedom to buy;
  • The freedom to win; and
  • The freedom to lose.

Following these 4 guidelines, in our view, will bring you to the right conclusion 90% of the time.

When left to a free market, where individuals can pick and choose what to do with their money and their property, you will find that whether it be businesses or individuals, those that choose to act nefariously will not survive very long in the free market. If someone lives to simply hurt people (probably most lawyers), the free market will not tolerate it for very long.

Hell, and here is a controversial statement, but historically—slavery was on its way out LONG BEFORE a civil war.  Forcing people into involuntary servitude, who will do everything they can to resist, or at least work as slow as possible, would be a death knell for any business, as they would spend all their time and resources driving those to work, as opposed to actually producing long term value.  The free market, on its own, in my opinion, killed the actual notion of actual slavery.

Now, before I lose about 50% of you because of that statement—let me draw you back in.

The story with Gamestop, GME, Reddit, Robinhood and WallStreetBets, is a delightful story of how Big Brother’s regulation, no matter what its intent, will do nothing but (a) take freedoms, rights and property from people, and (b) always serve as a fantastic fallback for those who can afford to hire the best attorneys to defend themselves.

So we go into it, but first, a little background.

First, what is a SHORT SALE.

A SHORT SALE is a short-term acquisition of a security to sell after it falls in value. A short sale is an arrangement by which an investor borrows a security from a broker and sells it subject to its being bought back at a later date, when the investor expects it to be at a lower price. Thus, the investor accurately forecasting the price decline can profit from the falling price of the security.

short sale is actually a defined term in the law. A short sale is defined as any sale of a security which the seller does not own or any sale which is consummated by the delivery of a security borrowed by, or for the account of, the seller. 17 C.F.R. § 242.200(a).

This is defined in the Exchange Act, which is the principle set of laws as it concerns regulation by the SEC.


Vinny is an investor wants to SHORT a stock. CuomoCorp is doing really shitty—and expected to fall from $500 to $1 by a set future date. Vinny will “borrow” the CuomoCorp stock from a broker, which is currently at $500 a share, will be contractually obligated to close the agreement on the expiration date, and paid a $10 fee. Vinny sells the stock at $500 to someone, and gets $500 in pocket. CuomoCorp goes down $400 and is now worth $100.  Vinny will close on the short position at $100 and buys back the CuomoCorp for $100. Thus, Vinny’s profit on the dismal, shitty CuomoCorp stock is $399 (the $400 spread, minus the $1 fee).

Of course this is risky—and someone who wants to short a stock could potentially see unlimited losses, lose on interest, and suffer from “short squeezes,” but with big risk comes big reward.


A “short squeeze” is defined as a rapid increase in the price of a stock owing primarily to technical factors, favorable news, or simply an excess demand of the stock being purchased.


So as I understand what is happening. As of December 2019, GameStop Corp. (GME), basically flatlined at $19 per share. GME, which is a videogame retailer, all but has been decimate during COVID. Aside from the fact that streaming technology has slowly killed them, suffice it to say that Big Brother shutdowns of basically anything anyone enjoys (yet another industry destroyed by the Emperor) was the death knell in the industry.

It appears that there was some good news in the industry for GME: (a) a large, well known asset manager and hedge fund had a large and influential position within GME and (b) other large eCommerce retailers began investing into GME and getting involved in the day to day business, resulted in the industry having some excitement on GME.

However, retail traders took notice that the GME stock was heavily shorted.  As I understand this, there is a community on Reddit known as “WallStreetBets (WSB),” which is home to about 6 million members as of 1/29/2021. Fueled by conversation and drive on WSB, these retail traders began flooding money into the GME stock, driving up the price from $20 to $483 per share at some point.

It also happens to be that the largest investors with short positions of GME are the large hedge funds. I am reading that the largest short seller here is Citron Research, who operates under CGV Capital, and has funds totaling $7.8 billion dollars[1].


Okay, so to be clear—while I know they are saying David v. Goliath here, I’d like to be clear that if you are someone who is in a financial position to dump money into the stock market, potentially losing all of it, you probably aren’t living paycheck to paycheck—so you are probably in a better position generally than most people, but with that said— if life was a chess board, and we all lived in The Queens Gambit (great show by the way) is isn’t the Pawns versus the Kings, but rather, probably the Horses or Bishops versus the Kings.

Regardless, Big Brokerage, which is unbelievably regulated by Big Brother, wants to make sure they take action, and they do what any giant entity with tons of political friends and influence does — takes a shit all over everything and asserts its dominance and control over everything going on, and of course within moments:

  • The Discord server for WBS was shut down for “hate speech” – however this was overturned once many users formed similar servers elsewhere.
  • Charles Schwab Corporation and its subsidiary TD Ameritrade immediately began disruptions and limitations on trades.
  • Robinhood outright halted purchases of GME. In the end, Robinhood outright halted purchases of about 50 different companies overall.

So, while this seems like a bunch of bullshit, seems like they are just taking steps to protect their heavy handed hedge fund friends, and just more downward pressure from large firms on small, average investors, there is some rhyme and reasoning behind it.


The story is that the restrictions were due to “clearing houses” having rules in place, which require proper collateral for executing trades.

First, CLEARING HOUSES, are the designated intermediaries between the investor, and the seller of the stock. Robinhood is a clearing house.

Second, “proper collateral” means that the “clearing house” is required to have proper liquid funds to ensure the transaction taking place.  This means that if a trade goes through a clearing house, that clearing house must have enough funds on hand to ensure the obligation to the customer. If there is a trade for value, the clearing house needs to have enough liquid collateral on hand to ensure that trade occurs as expected by the customer.

In addition, there is a 2-day lag between the moment when investors purchase a security and the moment cash and securities are actually exchanged, brokerage firms have to post collateral at clearing houses to guarantee the proper settlement of their clients’ orders by the closing date.

NOTE. While I am not a securities attorney, but it may be a 3-day rule.

The text of the statue says that with exceptions, generally, a broker or dealer shall not enter into a contract for the purchase or sale of a security that provides for payment of funds and delivery of securities later than the second business day after the date of the contract unless otherwise expressly agreed to by the parties at the time of the transaction. See 17 CFR 240.15c6-1(a)

However, the case law speaks of a 3-day rule.

In Mishkin v. Ensminger, the Court pointed out that there is a universal three-day settlement rule supplanting the settlement rules that varied from market to market, provides that a broker or dealer shall not effect or enter into a contract for the purchase or sale of a security that provides for the payment of funds and delivery of securities later than the third business day after the date of the contract unless otherwise expressly agreed to by the parties at the time of the transaction[2].

It certainly seems like this was overruled in the text, but whatever.. suffice it to say, either T+2 or T+3.

The rule, in laymans terms, is that clearing houses must have enough collateral on hand by the closing date, whether it be 2 days or 3 days, to settle a member’s outstanding transactions in the event any particular member firm fails—to prevent cascading failures of other members—and can demand additional collateral (i.e., margin calls) from members if market volatility starts to increase.

The Brokerage firms claimed that the increased collateral could not be provided in time, and, as a result, trading had to be halted. They cited to 1 instance in which the total industrywide collateral requirements from $26 billion, shot up to $33.5 billion, overall, and that these large trading volumes in specific stocks “generated substantial risk exposures at firms that clear these trades … particularly if the clearing member or its clients are predominantly on one side of the market”.

That is a $7.5 billion increase over just a few days. Keep in mind that while Robinhood had reported their ability to raise an additional $1 billion to protect the company from the financial pressure asserted as a result of the increased trades through clearing houses, still—the industry would be $6.5 billion shy.

I mean, they do have a point, and it could be argued that there is nothing nefarious going on other than this just falls in that bucket that rules are designed to always protect the heavy hitters and largest companies. The regulations exist, so it isn’t difficult to understand their position, and it is always the largest, most complex, best funded companies that always prevail in these instances, especially when the law is designed to protect those who can afford to take the best steps.


But again, while it seems like this reasoning makes sense, there are still some questions such as (a) why is Robinhood still imposing limits when they are better funded; (b) why did Robinhood select 50 companies in particular, to put the restrictions in place to protect from a short squeeze, as opposed to just doing it fairly and equitably across the board; and (c) what prompted the particular selection—was it a call from someone powerful, someone influential?

But of course, while there are real questions to be asked, we have no time for that—and our moronic politicians, who wouldn’t know the difference between the stock market, chick stock, and a Christmas stocking, decided that they MUST COMMENT.

Let’s take a peek at these intelligent comments, and just bask in their wisdom:

Alexandria Ocasio-Cortez 

Preferred Platform – Twitter

This is unacceptable. We now need to know more about RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit. As a member of the Financial Services Cmte, I’d support a hearing if necessary.

RESPONSE. Seems like there was no decision to block retail investors and leave hedge funds freely. It seems that there genuinely was a block for anyone who wanted to invest in certain stocks. You are an idiot. Please go home. Finish your tide pods.


Preferred Platform – Twitter

“Fully Agree” (with AOC). 

RESPONSE. Certainly, you wasted no time riding on the coat tails of popular opinion. Please eat the tide pods with AOC and go back to eTrade. Thank you.

Senator Elizabeth Warren (D-MA) (Recall, the Senator who was “Native American” from 2012-2019, when she got called out on her shit)

Preferred Platform – 1/29/21 Letter To The SEC

To summarize, she held both the short sellers and the buyers at fault, and more regulation was needed. She focused on the large investors and hedge funds who were criticizing the rally have treated the stock market like their own personal casino while everyone else pays the price (which seems weird because the only ones who got hurt here were the large short seller hedge funds). At the same time, she suggesting that WSB and its investors were manipulating share prices for some reason — as with every single piece shit politician in 2020 and 2021 — this is just furthering the pandemic-related economic collapse.  She argued that working families suffer while investors work to outmaneuver each other in search of short-term profits.

She recommended an “investigation” asking (a) who violated securities laws here, was it the large investors, like Melvin Capital, or was it social media; (b) are there systemic concerns; (c) the stock market should reflect fundamental value; and (d) more rules please.


What a useless response. Just more division between classes and industries. Just another opportunity to dump in more regulation. And what was the fuc*ing point of driving COVID into this? Why does everything have to be COVID?? The only thing you can pull from this is a sound bite and a call for more regulation. Go home Ms. Warren, you are drunk.


First and foremost, can the political class shut up? Just shut up. You people have no idea how the stock market works. What do you mean by “fundamental value”? The stock market seeks to attract investors, it is not focused on promulgating the fundamental value of a company. 99.9% of the time, what happens on the floor of a company, where they earn their day-to-day income, value and sales, is NOT reflect in a stock ticker price. The stock market is predicated on consumer confidence. The market is measured by the largest companies. It is NOT designed at all to reflect a pure dollar value from a company. I will tell you from personal experience, there is a tremendous difference between what needs to be done to increase investor confidence, to drive up sales prices, and what needs to be done to continue day to day operations.

Second, it would appear that Robinhood did nothing wrong from a legal perspective. They seem to have been under funded, and didn’t have enough collateral for the large influx of trades. They got the funding they needed, so a SHORT-TERM RESTRICTION made legal sense in light of their legal obligations which we supported above by finding them in the statutes — and of course, this goes to the point we always make here at Miletti Law, GOVERNMENT INTRUSION IN ALMOST ANYTHING THAT SHOULD BE GOVERNED BY THE FREE MARKET IS NOT GOOD. The citizen will always lose in the end, period.

Third, if you ask me, the questions we need to be focused on is what happened after they were legally required to implement temporary restrictions, and then the decision to who they will impact with those restrictions. It seems to me that I do not know enough yet about the decision to select 50 particular companies, as opposed to doing it objectively, through the market overall… that is where the questions should be asked.


  • Political class should shut up and back down.
  • People who do not know how the markets work should not opine on it.
  • People who do not know how to attract investor interest should not speak—this includes every single member of congress and the senate.
  • From a legal perspective, it appears that the clearing houses did nothing wrong, and a short-term restriction was required under the Exchange Act. The beef here is really with the Government for imposing the restrictions and regulations, and not the clearing houses.
  • The questions that should be asked really should be directed toward the rational basis of why the clearing houses choose the companies they choose to restrict purchasing. If there really is a concern with “manipulating stock prices” I see this as right on its face, and this is the question to be asked.

Regardless, just another example of how everything Big Brother touches they destroy—and no matter what, there is always a little safety net to protect those who can afford to power through the regs.

Your line up of case law and reference material is as followed.  Please stay UNUSUALLY MOTIVATED my friends. 😊

Yours in love, law and lifts.

The Most Jacked Attorney in NYC.