The MMTLP Debacle: Market Manipulation and Regulatory Corruption

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Call for the resignation of Robert W. Cook President and CEO of FINRA

    The tale of Torchlight Energy Resources is a cautionary one, a warning about the murky world of finance where retail investors are often left at the mercy of market makers and regulatory bodies. It all began innocuously enough in early 2020, with the company seeking to raise capital for drilling projects on their main asset, 97,500 acres of oil-rich land in Orogrande, Texas. However, as is too often the case when a company is targeted by aggressive and predatory short sellers, things took a dark turn.

    Short sellers have a vested interest in the failure of a company, and the reasons for this are straightforward. When shorting a stock, the investor is betting against the success of the company and stands to gain from a decline in the stock price. If the company goes bankrupt, the stock becomes worthless, and the short seller profits greatly. Even better, when a company goes bankrupt the short seller doesn't have to close their position. Furthermore, short sellers don't pay taxes on their unclosed positions, making the potential rewards of bankrupting a company even greater. This creates a perverse incentive for short sellers to actively work to harm the companies they bet against, rather than investing in healthy businesses and betting on their success.

    By December of 2020, Torchlight was in trouble, with Covid lockdowns negatively impacting the price of oil, it didn't take much for heavy short selling to cause their shares to plummet to a mere twenty cents. That's when CEO John Brda stepped in, proposing a merger with Canadian tech firm Metamaterials to sell off their oil assets. Shareholders were promised shares in the new Metamaterials company, $MMAT, as well as a special dividend that would convert to cash if the $TRCH assets were sold or spun out into a new company.

    The merger was completed in June 2021, and shareholders received their dividend. However, the short positions were not closed as they should have been. According to FINRA's data, there was a short volume of 30 million shares worth around $150 million. While $TRCH stopped trading, $MMAT began trading, and the dividend appeared as a non-tradable placeholder.

    Then, months after the merger, $MMTLP—the symbol containing the special dividend—started trading on OTC markets without the knowledge or consent of Metamaterials or its shareholders. Market makers had created the symbol using false information and fake identities to register $MMTLP on The Over-The-Counter (OTC) Market. They had hoped people would panic and sell. Instead, informed investors who knew the real value of their positions held onto their beloved stock and bought even more, knowing that one day short positions would be required to cover. Meanwhile, market makers doubled down by increasing their naked short positions until the very last day of trading.

    The situation is unthinkable: market makers can create symbols for non-tradable securities and trade them on OTC markets without anyone's knowledge or consent. This had left many shareholders feeling betrayed by market makers and regulatory bodies. When former CEO John Brda informed FINRA that his information was illegally used to create a tradable symbol for $MMTLP, their response amounted to little more than a resounding "Oh well."

    In November 2022, there was a glimmer of hope when Metamaterials announced that Torchlight's assets would spin off into a private company called Next Bridge Hydrocarbons. Shareholders were thrilled, with many estimating the value of a Next Bridge share to be between $40 and $75 due to the dramatic rise in oil prices at the time and the vast reserves of oil discovered in Orogrande. $MMTLP had a legal float of 165M shares, and shareholders would receive a 1-1 distribution of $MMTLP for $NBHC.

    MMAT's S1 document for the spin-off underwent four revisions before finally receiving the green light from the SEC. The finalized S1 document stated that:

  • MMTLP would be trading until December 12th
  • Shares purchased after December 8th would not be entitled to a Nextbridge share
  • Designates December 14th as the distribution date for the Nextbridge shares
  • Clarifies that MMTLP shares will be "canceled" after the distribution date.

    The document also includes a statement from MMAT to investors regarding the potential for a short squeeze due to the need for all short positions to close before the spin-off's record date. Because Short positions from the TRCH-MMAT merger were never closed out and had been carried over into MMTLP, investors remained excited about the possibility of a significant return on their investment.  After a lengthy delay FINRA finally approves the S1 on December 6th. 

    Jeff Mendl, VP of OTC markets, stated in an interview that $MMTLP would be "deleted" soon, and that the last trading days would be volatile. True to his word, things got pretty wild. On the last day of trading, the volume reached a staggering 13M, which was by far the heaviest trading day for $MMTLP EVER.

    Despite strong buying pressure from retail investors, the stock had been taking a beating for weeks. On December 8th, it hit a new low, dropping to just 23% of its 52-week high. This significant drop raised suspicions among retail investors who believed they knew the reason. It appeared that the massive short interest in the stock was to blame, and FINRA seemed to agree. On December 9th, three days before the December 12th date approved in the S1 filing, FINRA marked $MMTLP Caveat Emptor (a warning that the stock may be a risky investment, and buyers should exercise caution) and halted all trading activity citing Rule 6440 (a) (3).

    This move by FINRA appeared to confirmed what retail investors had suspected all along - that there was a significant short interest in the stock that would ultimately require settlement. And yet, by shutting down trading and preventing the possibility of a short squeeze, FINRA had effectively protected those in the short position at the expense of retail investors.

    According to FINRA's data, $MMTLP remained on the OTC Threshold List for a solid 40 days. During this time, 10,000 shares failed to deliver each day, thanks to the nefarious practice of naked shorting. This is a clear indication of deceitful practices that continue to plague the securities market.

    Under Regulation SHO Rule 203(b)(3) and FINRA Rule 4320, "any clearing firm or participant of a registered clearing agency must purchase shares of the same kind and quantity in a Threshold Security. This is to close out a fail-to-deliver position, should they have one at a registered clearing agency like the National Securities Clearing Corporation, after 13 consecutive settlement days."

    Despite being on the OTC Threshold List for 40 consecutive days, it appears that no action was taken to address the fail-to-deliver position in $MMTLP, raising questions about the regulatory bodies' effectiveness in protecting investors' interests in the securities market.

    It's a classic case of regulatory capture - where the regulators tasked with protecting the public are actually acting in the interest of the very people they're supposed to be regulating. This is hardly surprising given the incestuous relationship between Wall Street and Washington, where money talks and the public interest is ignored.

    The implications of this story are vast and far-reaching., revealing a corrupt system rigged against small investors. Regulatory bodies that should protect investors, complicit in market manipulation. The $MMTLP symbol's creation without the knowledge or consent of Metamaterials and shareholders is clear evidence of corrupt practices in the securities market.

    This story also highlights the need for greater transparency. Shareholders have a right to know what is happening with their investments, and they should be able to trust that the regulatory bodies that are supposed to protect their interests are doing their job!

    The retail investors who have been holding onto their $MMTLP shares through thick and thin are not going down without a fight. They're organizing on social media and other platforms, sharing information and strategizing on how to force the shorts to close their positions but more importantly how to force the regulators to fix this injustice and hold those responsible accountable. 

Follow up story:

Regulators Knew About MMTLP Manipulation More Than a Year Before Delisting

For more information on their ongoing fight please visit: 

Contact information for members of the: House Financial Services, Senate Banking Committee, And Senate Committee on Finance are listed on the website. It couldn't be easier to find them and give them a call. Let them know what you think about this story and FINRAS roll in it. 

Sign the Petitions:

Other Resources:

*special thanks to @Cyntaxed007 

The author of this article holds no stock in any of the companies mentioned in the above article.


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