This post, called the PFOF proxy scam was posted on Reddit by user u/Blanderson_Snooper on September 19, 2021. Apes Army do not endorse any of this information, nor is it Financial Advice. Do your own research. Always.
Advanced Fuckery I – The PFOF Proxy Scam – Robinhood, Say Technologies, Acorns, and Point 72
Nothing in this post should be assumed to accuse anyone of anything.
Blanderson here, with a quick bit of regulatory fuckery that just got shut down in August.
I’m doing a deep dive double down into the Federal Register, looking for any new laws, rules, and regulations related to our beloved stonk. I found one implemented on August 19th that sheds more light on all these PFOF apps’ role in the criminal conspiracy to destroy U.S. companies and the U.S. economy. Here’s the title in all its glory.
Self-Regulatory Organizations; New York Stock Exchange LLC; Order Granting Approval of Proposed Rule Change, as Modified by Amendment Nos. 2 and 3, To Amend Its Rules To Prohibit Member Organizations From Seeking Reimbursement, in Certain Circumstances, From Issuers for Forwarding Proxy and Other Materials to Beneficial Owners
tl;dr – Until August, Gamestop had to pay Robinhood and other PFOF investment apps an annual fee for every “free share” they gave out as a signup promotion; a new rule ended that the same week Robinhood acquired Say Technologies, giving a glimpse into the next phase of their trickle-up tricks.
This is not a long or expansive DD, just a little piece of the puzzle for education and reflection. I draw some speculative conclusions, but mostly I’m just thinking through this as I type because I just found this earlier today. It’s one of those WouldYouLookAtThisShit DDs.
I want to start with some opinions, so I’m clearly calling them out as such so you know my biases. First, a quick definition of Payment for Order Flow (PFOF):
What Is Payment for Order Flow (PFOF)?
Payment for order flow (PFOF) is the compensation and benefit a brokerage firm receives for directing orders to different parties for trade execution. The brokerage firm receives a small payment, usually fractions of a penny per share, as compensation for directing the order to a particular market maker.
For options trades, the market is dominated by market makers since each optionable stock could have thousands of possible contracts in existence. Payment for order flow is basically ubiquitous for options transactions and averages less than $0.50 per contract traded.
Opinion 1: PFOF apps were designed by criminals as a form of technological pocket picking, using a combination of regulatory loopholes/blind spots and widespread shill manipulation on across ALL social and traditional media. In fact, as my research has shown in the past, it’s possible there is close to ZERO legitimate sentiment in some of these communities, and I’ve traced Citron’s Twitter shilling as far back as 2015.
Seriously, Financial Times caught one of T212’s co-founders anonymously shilling on a competitor’s forum. (Ivan, are you here too?)
Opinion 2: PFOF itself is a form of phishing, in which the user gives personal information (trade details) to a benign looking app, the app then sells that personal information to someone who uses it to steal value from the user.
Opinion 3: PFOF apps are a technological extension of the criminal enterprise at the heart of bust-out schemes, cellar boxing, the bankruptcy and post-bankruptcy jackpots, zombie stocks, and the transfer of trillions of dollars of value from shareholders into the pockets of shady executives and the financial criminal syndicate of which they are a part. The goal is to funnel retail money into the Voltron Fund’s shadow economy.
I’ll tag some knowledgeable Apes in the comments for review, feel free to do the same.
💎🙌🦍🚀🌜Part 1: The Non-Fuckery Basics
Think back to before the annual meeting when we were all trying to get our proxy materials through our brokers. That’s a service the brokers provide to their clients (us), who are beneficial owners registered in street name.
The companies that issue the shares pay brokers for this service. Not a lot, but it still comes out their pocket. Here’s the fee structure, but it’s basically 40 to 50 cents per shareholder on average.
If a broker has 10k GME hodlers, Gamestop would pay the broker $5,000 that year to deliver proxy materials and facilitate voting.
If a PFOF app (e.g. Robinhood) has 200k GME hodlers, Gamestop would be forced to pay the app $86,300.
This may (partially) explain why Fidelity and other non-PFOF brokers seem glum about losing your shares. This is just another way they make money off clients’ holdings.
If you call to transfer to Computershare after reading this and they assure you that they aren’t lending your shares, please (politely) ask them to detail all the other ways they profit from your shares in their accounts before you make a decision. I suspect you will get your transfer put through without another word from the rep.*
*Not financial advice.Part 2: The Fuckery and the New Rule
We already know how PFOF clearly plays into Kenny’s schemes, through a combination of HFT arbitrage, dark pool manipulation, and pairing shorts with buys to suppress the price. But there’s a larger aspect to it, because it gives criminals direct access to everyday investors like never before. PFOF apps increase the range of crime possible, as well as the reach of said crime beyond Wall Street into the pockets of millions of individual investors targets.
PFOF is the 21st century Boiler Room…they’re still using our phones to scam us.
This new rule, though not a large amount of money in the grand scheme of things, exposes yet another way PFOF apps were designed to harm both companies and investors. When paired with what we know about the other facets of the scheme, it shows how PFOF apps may have been the cartel’s Death Star – they thought they had an invincible superweapon, but somebody stole the plans and found a weakness that only Apes could exploit.
The Fuckery
PFOF apps are known for giving a free share on signup, but they distribute them like lootboxes. The (hidden but posted) odds are similar to what you find on microtransaction-based phone games: 99% garbage.
For example, in 2020 Robinhood offered a free stock “like Microsoft, Visa, of Johnson & Johnson” for signing up, but the odds of getting one of those stocks was 1%. 98% of the time you were going to get a cheap stock like, well, what we now call meme stocks. GME was a big one, I think I even got one a long time ago, immediately sold it, and never touched Robinhood again. Or maybe I just imagined that, either way I was aware of it even though I was not an investor-type kniggit.
We know that these were companies being shorted out of existence, and Citadel was profiting and shorting every single transaction on these stocks. So by giving new investors one of these stocks they were:
- Advertising the manipulated stocks that they wanted retail to pay attention to, a push-notified, slickly designed entry into their poisoned media ecosystem
- Simultaneously creating negative sentiment against the stock, which is framed as a disappointing alternative to the blue chip you could have won
- Creating artificial liquidity that could be exploited by Citadel in numerous ways
- Forcing these struggling companies to pay hundreds of thousands of dollars in proxy fees for investors who often forgot they even “owned” said stock, essentially turning new GME stockholders into liabilities without Gamestop’s consent
It would be interesting if investigators with access to the data could correlate which free stocks were given when. Let’s say GME’s date of record is Apr 15 and another shorted company’s date of record is June 15, then an app can churn its proxy payments by simply allocating “free signup shares” from each company in the weeks leading up to the date on which the payment will be calculated.
$86k from Gamestop might not seem like much, but now add in every single company being cellar boxed and future swapped and an app can syphon millions per year from struggling companies literally by giving away their stock and creating new investors. That’s not even counting the added liquidity crimes made possible by simply having a share of GME sitting in a dormant account, or the devaluation inherent in counterfeiting shares.
Remember the strange fractional shares and super high cost basis from all the Robinhood transfers in the Spring? There was a theory floating around that this allowed them to short without reporting it, which would be really meaningful only if individual orders were small. Turns out Robinhood was sending single-share trades through dark pools for all of its trades around that time.
P.S. If you “kept a fractional share in RH for the inevitable lawsuit,” you actually cost Gamestop money to do it. Luckily, this new rule means that at least that won’t be true in the future. No doubt they are committing all sorts of crime with those fractionals, though, just sayin’.
The New Rule
Self-Regulatory Organizations; New York Stock Exchange LLC; Order Granting Approval of Proposed Rule Change, as Modified by Amendment Nos. 2 and 3, To Amend Its Rules To Prohibit Member Organizations From Seeking Reimbursement, in Certain Circumstances*, From Issuers for Forwarding Proxy and Other Materials to Beneficial Owners*
Those “certain circumstances” boil down to a ban on the “free stocks for proxy dough” scheme I outlined above, which I think is good. Basically, if a user didn’t actively put a stock in their portfolio, either through purchase or transfer, then companies aren’t on the hook to pay for those proxy materials.
That’s actually all I have to say about it. What it revealed is much more interesting to me.Part 3: Crime Never Sleeps
Is it legal for my broker to sell data about specific holdings in my account? I actually don’t know, but I would guess it is not legal.
Is it legal for me to voluntarily divulge that information to a non-broker app, who can then package it for sale? Based on the following headlines from 2018 and last month, I’d guess that it is!
Yeah, Stevie looks real “rock n roll”
Wonder who the mods on their forums will be? lol
We all know Say Technologies as the proxy service recently used by another meme stock company to conduct a shareholder forum. That link explains that once Say links to your broker, it will take all of your personal information and portfolio from that broker on an ongoing basis.
Say Technologies is the Facebook of fintech, and they can’t even describe their own company without it sounding like a scam. Keeping in mind the PFOF Proxy Scam detailed above, think about this quote from the 2018 article:
“SAY aims to ’empower’ shareholders by making proxy voting more accessible.”
Barron’s can’t even write empower without adding quotation marks. They artificially make the process of proxy voting seem onerous in the article, and retail too tired and dumb to understand it, but this is a service (U.S.) brokers offer automatically to shareholders. The app must have another reason for existence.
Here are some other quotes from the article to dissect.
“SAY’s co-founder and CEO, Jeffrey Cruttenden.He had earlier co-founded Acorns, which funnels users’ spare change into exchange-traded funds.”
So this guy’s first company was also a retail pickpocketing app that fed directly into Citadel’s ETF arbitrage schemes.
Completely. Fraudulent. System.
“Starting with those investors shepherded into the market by their spare change: SAY is partnering with Acorns to “empower” those investors, giving them access to the ownership rights they already have.”
Of course, the article goes on to say that Acorn investors don’t actually have voting rights via ETF exposure, but who cares about that complete and utter contradiction, because they have an answer.
Ok, so they are basically making their own Reddit, with all information filtered through their “need to know” department and each sub’s membership restricted to verified owners of one company’s stock.
Oh, and shills no doubt, many many many MANY MANY FUCKING SHILLS THEY NEVER STOP MANIPULATING EMOTIONS AND FEEDING MISINFORMATION PSYOPS COINTELPRO SAD SAD MAD PUMP DUMP…
Sorry, I have a bit of PTSD from April.
Anyway, so now what we have is Acorns on one side and Robinhood on the other, passively draining people’s money into Citadel’s shadow economy while commodifying the people themselves and using their own data and investments against them.
This is Office Space meets Brave New World. Acorns syphons your pennies and “invests” them in ways they can profit from. Robinhood gives you a free stock that’s worth $3 (now $50 million) to you but worth much, much more to them for all the things they can do with that stock in your account. Say Technologies demands 24/7 access to your financial accounts in exchange for “private access forums” for “elite” retail investors.
All of them lure you into a psychologically and emotionally manipulative media ecosystem honed from decades of COINTELPRO, propaganda studies, and the psychology of being scammed.
When Gary Gensler talks about protecting retail from online bad actors, this is what he means I think. It’s not us, it’s literally everyone else that doesn’t know what we know.
The U.K. study on the psychology of being scammed notes that it’s not just the vulnerable or uneducated that get caught in scams, particularly financial scams, because a little education tends to make people overconfident and susceptible to manipulation.
Say Technologies, Robinhood, and Point72 are planning to exploit that.Some Thoughts To End On
Point72, Say Technologies, and Robinhood have replicated the psychologically addictive and emotionally manipulative technologies of Facebook, Instagram, and mobile games in a trio of fintech apps all owned, founded, or funded by the same group of people.
Additionally, these apps syphon money, time, and attention from struggling and middle class investors for the benefit of a wealthy cartel.
They offer misinformation under the guise of education, shilling under the guise of fellowship, and parasitism under the guise of financial control.
They take retail money, turn it into 5x leverage (and then figure out how to multiply that again), and then short the asset down. No wonder the vast majority of retail traders lose money in the market, while that money just trickles up to the banks and hedge funds. That’s why I say these apps are designed as tools for digital pocket-picking. They are syphoning money from our wallets and our communities and leaving both as dried out husks.
On the plus side, we know that proxy vote totals were unilaterally altered by apps and brokers to avoid overvoting, but based on this rule I believe we can also assume that Gamestop received an accurate number of shareholders from each app and broker because they have to remit payment to each broker or PFOF app. Did it tell them anything useful? I dunno.
What I do know is that Gamestop found out the exact number of shareholders on each platform sometime after market close on Apr 15.
On Apr 16, RC tweeted this.
Love you Apes, keep being awesome to one another.
💎🙌🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀
Blanderson
P.S. Burry just tweeted about the leverage problems in the market caused by passive ETF investment, which is how Acorn connects into all of the above. I have some DDs in the works about leverage and collateral, and it looks like we have solid evidence of a hedge fund being filled with shit and sacrificed to protect the Voltron Fund! There’s so much going on this week!
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