How The Finance Regulatory Authority Allegedly Protecting Retail Investors Is Screwing Them Over
You may be familiar with the GameStop and AMC fiasco that happened in 2021 when Robinhood, a stock trading app, halted investors’ ability to buy or sell their stocks while those stocks were significantly rising in price. This was a clear and criminal way for Robinhood to protect their hedge fund buddies on Wall Street and screw over their investors. Investors started asking themselves, “If brokerages and the regulator agencies allowed this to happen, can they get away with anything?”
That question was answered with a resounding yes a year and a half later when the Financial Industry Regulatory Authority (FINRA) halted the buying and selling of a Series A Preferred Dividend for Meta Materials Inc. ($MMTLP). We’ll get into what happened shortly, but it’s important to understand who FINRA is and how they have a direct role in what happened to $MMTLP and its investors.
FINRA’s mission is “To protect investors and ensure the market’s integrity. We work every day to ensure that everyone can participate in the market with confidence.” As we dive into what happened to Meta Materials Inc. and $MMTLP this year, the keyword to keep in mind is “everyone.”
Shorting Torchlight
It started with Torchlight Energy Resources Inc., a small-cap company listed on NASDAQ. They own 97,500 acres of land in the Orogrande Basin in Texas. This land was presented as one of the largest discoveries of oil and gas on U.S. soil since the 1970s. It has an estimated 3.2 billion barrels of recoverable oil, as well as a surplus of natural gas. Despite all of the positive news coming out of Torchlight, their stock price was seeing unusual trading patterns from heavy shorting. This caused the price of their stock to drop to $0.20/share. They then struggled to raise the capital needed to continue drilling wells and meet their drilling quotas.
Due to the heavy shorting, Torchlight CEO John Brda had to do something major to save their company and ultimately their gold mine of oil and gas. They decided to merge with Meta Materials Inc., a Canadian developer of high-tech materials and nanocomposite products.
With this merger, Torchlight shareholders received a special, non-tradeable dividend that would be converted to cash when the Torchlight oil and gas assets are sold. There was a total of 165,472,241 special dividends distributed. That is an important number to remember. Since the stock was heavily shorted, the short positions that caused Torchlight’s stock to drop to $0.20 did not close out their positions when they were supposed to. There were an estimated 30 million short shares not closed out. The illegal, naked shorting only got worse from there.
Torchlight shareholders started to see a temporary, non-tradeable dividend placeholder in their brokerage accounts ($MMTLP) following the legal structure of the merger approved by the SEC. In October of 2021, Torchlight CEO John Brda said he got a call telling him to take a look at his brokerage account. Brda discusses the entire situation in a 48-minute YouTube interview.
FINRA Approves Illegal Trading
Much to Brda’s surprise, the non-tradeable dividend placeholder was trading on the OTC (over-the-counter) market without the company’s consent. One to two market makers illegally made this ticker tradeable (using outdated company information), despite the merger documentation stating that this dividend placeholder will not be tradeable, just so they could close out their illegal naked short positions. Later in October of 2021, FINRA and OTC markets approved the registration of $MMTLP to start trading, despite illegally making this tradeable without the company’s consent.
Meta Materials announced that the Torchlight assets will be spun into a private company called Next Bridge Hydrocarbons. This is important because there can be zero short shares in a private company, essentially trapping all short positions. The only way they can get rid of their short shares is to buy back shares which will cause the price of $MMTLP to rise significantly in price. After multiple revisions to the documents needed to make this type of move, the SEC and FINRA both approved all of the dates and the transition to a private company. Although there are a lot of similarities to the short squeezes GameStop and AMC experienced, the thing they never had was an end date. This earned it the nickname “MOASS,” or Mother of All Short Squeezes.
$MMTLP’s last day to purchase shares (and be eligible for the dividend) was Dec. 8, 2022. The final trading day was Dec. 12, 2022. The distribution date of the private Next Bridge Hydrocarbon shares was Dec. 14, 2022.
After retail investors got screwed during the GameStop and AMC fiasco, they have become an educated and powerful group of individuals who are sick of synthetic shares and naked shorts. They realized how valuable $MMTLP was due to the amount of excess short positions, as well as the ticker having an end date. What naked shorts didn’t anticipate was retail investors holding their positions to the very end of those dates.
On Dec. 8, the naked shorts dropped $MMTLP’s price from $12.90 to $2.90 with only two days left to close out their estimated 300-plus million short positions. What this told retail investors was that there had to be 300-plus million shares purchased when legally there was only supposed to be 165 million. It was a “name your price” situation with only two days left of trading.
On Dec. 9 (with an incoming short squeeze), FINRA halted the selling of $MMTLP “due to extraordinary events.” Yes, the same crooked organization that approved these dates halted the selling of these shares with two trading days left. This illegally forced every single retail investor that held $MMTLP into a private company when they were expecting two more days to choose whether they wanted to sell their shares or take them into Next Bridge Hydrocarbons. FINRA stole that choice from 65,000 honest investors. They stole life-changing money from teachers, single mothers, police officers, nurses, and everyday people who were counting on that money just to bail out some of the richest people in the world. Remember FINRA’s mission? “To protect investors and ensure the market’s integrity. We work every day to ensure that everyone can participate in the market with confidence.”
Enough is enough. We demand a free and fair market.
All investors and non-investors in the U.S. stock market should be fed up. We are in a system that does not allow you to win. The rich are protecting the rich. The organizations that are supposed to be protecting their investors and ensuring a fair market are working backdoor deals with hedge funds and doing anything they want, even if it means screwing others over.
Hedge fund CEOs sit on FINRA’s board of directors, the same organization that allegedly exists to ensure the market’s integrity. The same organization allows naked shorting which has destroyed thousands of promising companies with zero repercussions including promising pharmaceutical, technology, and health care companies — companies that could save millions of lives and change the world. Enough is enough. This is our time to stand up and fight for a free and fair market.
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