As you may or may not already be aware, the SEC has recently filed a lawsuit against the former CEOs of Meta Materials and Torchlight Energy Resources. The complaint, filed in New York, alleges misconduct during the merger between the two companies, including allegations of defrauding investors. While I don't want to litigate the SEC's allegations in an email, I do want to point out that there are some glaring inconsistencies in the complaint that I am certain will be addressed during the course of the litigation.
More importantly, I would like to vehemently stress that the events at the center of these allegations predate the creation, trading, and subsequent halt of the MMTLP security. These issues are the focus of the Congressional inquiries related to this situation, and the charges filed by the SEC have absolutely nothing to do with, nor do they address, these matters. In fact, the MMTLP security is not mentioned once in the complaint.
On a personal note, I find it abhorrent and insulting that the SEC spends countless millions of taxpayer dollars on filing suits like this, and yet, when an act as simple as a broker to broker share audit would serve the public interests, restore market confidence, and prove the SEC's commitment to protect investors at the highest level, they have not only cowered away from it, but for over a year have refused to perform this audit in direct defiance of requests from over 100+ Congressional representatives.
Additionally, I would like to provide further information on this matter, highlighting several recently developed key points as I continue to urge you to request a hearing with the Oversight Committee to thoroughly investigate this issue.
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Inaccuracies in FINRA's FAQ: The FAQ from FINRA and its supplements have been proven to contain numerous inaccuracies and misrepresentations. For instance, FINRA claimed that no participants or market makers were informed of the trading halt in advance, however this has recently been contradicted by evidence showing that members of the Uniform Practice Code Committee (responsible for U3 Halts), includes representatives from Robinhood, Fidelity, and Hilltop Securities, and that they were indeed aware.
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Issuance of Corporate Actions: The corporate action instructions provided by the issuer were submitted well in advance for review. However, FINRA rewrote these instructions at the last minute, an action they claim they have no authority to perform, and they are barred from performing under Rule 6490. This rewrite is what created significant confusion among the impacted parties (as you will note below), including the DTCC, and FINRA failed to attend a scheduled meeting intended to clarify these issues.
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Suspected Fraud and Lack of Transparency: Email correspondences between FINRA and the SEC from late November 2021 to December 5, 2022, suggest that FINRA was aware of potential fraudulent activity in the trading of MMTLP. Despite this, FINRA has not publicly acknowledged these concerns in any of their communications or FAQs.
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Counterfeit Shares and Share Count Audit: FINRA has acknowledged the existence of open short and naked short positions in MMTLP. However, they have refused to provide a certified audited share count, which is essential to understanding the full extent of the share discrepancies. This refusal undermines investor confidence and contradicts FINRA's mission to protect investors.
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Manipulation and Investor Impact: Investors have faced significant difficulties transferring their MMTLP shares to Next Bridge Hydrocarbons' transfer agent. Many have encountered conflicting instructions, exorbitant fees, and outright refusals from broker/dealers. There have been documented instances of brokers terminating customer relationships and closing accounts when investors requested the transfer of their MMTLP shares.
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TradeStation Admissions: TradeStation Securities (whose Chief Compliance Officer, Nicole Brinkerhoff, is ALSO on FINRA's Uniform Practice Code Committee referenced above), has admitted that a large amount of the MMTLP "shares" held by their clients are not in fact backed by physical stock certificates, effectively admitting that a large number of their clients are holding "counterfeit shares". TradeStation has also informed clients of their inability to recall lent-out shares, thus failing to fulfill requests to register and record ownership with the issuer’s transfer agent, Equiniti. This admission supports the existence of the counterfeit shares at the brokerage level, and highlights significant regulatory failures.
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Unresolved Questions and Congressional Inquiries: FINRA has not adequately addressed numerous questions posed by investors and Congressional representatives regarding the circumstances of the MMTLP situation. This lack of transparency and accountability continues to fuel suspicion and concern among the investing public.
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Current Short Positions in Next Bridge Hydrocarbons: Additionally, FINRA has stated to Congress that there were 2.65 million short positions currently in Next Bridge Hydrocarbons. However, recent press releases from Next Bridge Hydrocarbons indicate that representatives for short sellers have approached the company with requests to buy many multiples of that number. Furthermore, TradeStation has made stunning admissions to their clients that they do not have enough shares allotted to them to provide each of their clients with a physical share of Next Bridge Hydrocarbons. This issue has arisen in the context of TradeStation customers seeking to participate in the non-transferable subscription rights offering for NBH shares. Participation requires NBH holders to register and record ownership with AST within 60 days from the effective date of a Form S-1 Registration Statement filed by NBH with the SEC on July 26, 2023. However, under the guise of their "inability to recall lent-out shares," TradeStation has informed clients of their inability to fulfill customers' requests to register and record ownership with AST. This confirms the existence of counterfeit shares.
In addition to the foregoing, Next Bridge Hydrocarbons, in a press release dated Feb 8th, 2024, refuted and disagreed with many of the points that FINRA has put forward, both in their FAQ's and their response to Rep. Ralph Norman and the 76+ Congressional representatives that co-signed a letter sent by his office. Of note, I ask you to see the below snippet from that PR:
"Third, we believe there is an onus on FINRA to help resolve ongoing investor concerns due to the role it played in the events that led to the U3 halt, and the subsequent confusion resulting from the halt itself. FINRA stated that it determined the U3 halt was 'necessary and appropriate to protect investors and ensure a fair and orderly marketplace.' Unfortunately, many investors continue to communicate great frustration that the halt accomplished quite the opposite and could have been avoided. We do not intend to litigate FINRA's decision-making in this release, but we also would like to ensure that we clarify certain points on which we have a divergent view from FINRA in regards to the corporate action announcing the NBH spinoff and subsequent U3 halt, since the issues are actively being discussed in public releases to our investors and publicized letters to Congress. As an initial matter, we take issue with FINRA's repeated assertion that 'FINRA's role is limited to reviewing and processing the (corporate action) submission and announcing the corporate action to market participants (unless the corporate action documentation is found to be deficient under Rule 6490, in which case FINRA may determine not to process the corporate action).' We do not believe this describes the role that FINRA played in the MMTLP corporate action submission process, nor does it offer a complete recitation of FINRA's authority under Rule 6490. First, FINRA drafted the initial and revised corporate action notices on December 6th and 8th of 2022, with an instruction that the issuer was not to edit or interpret it, and included language that we believe itself became the source of market confusion. For example, while FINRA describes the notice to Congressman Norman as 'consistent with the information provided by Meta Materials,' it is notable that the notice actually introduced a new instruction that MMTLP shares would be 'deleted' on December 13th – a date never before contemplated or referenced by the issuers, and which many found difficult to reconcile with Meta's announcement that the distribution of Next Bridge shares would take place the next day- on December 14th. Indeed, it was never proposed to FINRA to add a December 13 cancellation date or deletion date, and adding such a date created an unnecessary restriction to the corporate action and shareholders of MMTLP. In addition, FINRA's Rule 6490 allows it to refrain from processing requested corporate actions altogether if it 'determines not processing is necessary to protect investors and the public interest and to maintain fair and orderly markets.' In other words, the justification FINRA ultimately used for issuing the U3 halt was available to it at the outset of the process, when any concerns could have been addressed by the issuer. Instead, they evidently did not discern a compelling reason to reject the processing of the announcement, crafted a different announcement, and allowed trading to continue through December 8th, 2022, then initiated the U3 halt shortly thereafter when the markets were closed and all participants, short and long, were frozen. Since nothing regarding the corporate action and the issuers' contemplated record or distribution dates changed between when the corporate action was submitted to FINRA for review, and when the U3 halt was issued (aside from the introduction of FINRA's own announcements), we remain confused as to why FINRA did not simply reject the corporate action announcement at the outset rather than issuing a halt for 'extraordinary circumstances' to the great surprise of the issuer and retail investors. The end result was mass confusion that persists to this day amongst our investor base, many of whom feel they were unnecessarily and unfairly denied two days of trading, and which would have also given parties with millions of short positions an opportunity to cover or close."
References to the above points are available upon request. However, I have noticed that including website citations in emails to Congress triggers a spam filter, so for this reason, I have omitted those references.
Given the seriousness of these issues and the potential impact on market integrity and investor protection, I urge you to contact the Oversight Committee (and/or FInancial Services Committee) to request a hearing on this matter. A thorough investigation is necessary to not only help resolve this matter, but ensure that all parties involved are held accountable and that appropriate measures are taken to prevent similar occurrences in the future. At this point, I am simply asking for you to reach out to those committees of jurisdiction, and request this hearing take place on behalf of your constituents. I wish to stress that other congressional representatives have reached out to the committee with this request, and I trust that you will do the same on my behalf and on behalf of the other constituents in your district that have been devastated by this situation. Please provide a written assurance confirming that this request will be made.
Thank you for your continued support and attention to this matter. I appreciate your anticipated action on my behalf.
Best regards,