Cites Rampant Failures to Deliver, Naked Short Selling, 'Phantom'
Shares MUNDELEIN, Ill., May 1 /PRNewswire-FirstCall/ -- Circle
Group Holdings, Inc. (AMEX:CXN), announced today that it is mailing
the following letter to all shareholders of record. April 28, 2006
To All CXN Shareholders Dear Loyal Shareholder, THERE IS A CRITICAL
NEED FOR YOU TO CALL THE BROKERAGE WHERE YOUR CXN SHARES ARE BEING
HELD AND INSTRUCT THEM TO PROMPTLY DELIVER TO YOU ALL OF YOUR
SHARES IN PHYSICAL CERTIFICATE FORM. THE CONSEQUENCES OF NOT
GETTING ALL OF YOUR SHARES IN HAND COULD HAVE A SIGNIFICANT,
NEGATIVE EFFECT ON YOUR INVESTMENT. Why do I need to request my
shares in physical certificate form? It has come to our attention
that a significant number of "phantom shares" of our Company's
common stock has been sold into the market during the past 24
months. It appears the sellers are acting within and through major
brokerage firms in the capital markets, with their primary goal
being to damage the Company and our stock's value, while illegally
profiting at our expense from any price decline. We have seen no
evidence that the sellers plan to buy any shares to cover their
illegitimately created positions. These manipulative actions are
preventing you and all real shareholders from experiencing the
value that a fair, balanced and orderly market could provide. The
"shares" you believe you own in the Company are "securities
entitlements", and are either backed by genuine stock certificates,
or backed by IOUs lacking any corresponding stock certificates to
support them. These IOUs are commonly referred to as counterfeit
shares, phantom shares, and naked short sales. What is a naked
short sale? Short selling is a bet that a company's stock will
fall. In a legitimate short sale, a real investor sells stock they
borrowed, hoping to buy it back at a lower price to replenish the
lender. They take the risk that if a stock goes up instead of down,
they must buy back in at a loss. In a naked short sale, the seller
sells stock they have not borrowed, and does not intend to borrow,
and then pockets the proceeds from the sale. Naked short sellers
have built an elaborate infrastructure they use to manipulate
stocks -- achieving spectacular gains at the expense of honest
investors. The players are corrupt, well-organized industry
insiders who often combine anonymous blogging, phony research
reports, and crooked financial news reporters into orchestrated
attacks to "short and distort" targeted companies. Company facts
are twisted, skewed, and re-invented as a series of half-truths,
creating the illusion that the companies and their management are
unfocused -- the intent is to create fear and doubt about the
Company's prospects, and to generate an endless need for management
to respond to attacks, rather than tend to their business. Billions
of dollars in trades are left "unsettled" (undelivered) daily in
the US capital markets. This is called 'Failure to Deliver' (FTD).
The investor's account is debited the cost of the stock they wish
to buy, their account statement is updated to show that they bought
it, but the underlying stock is not delivered -- it "fails to be
delivered." The average shareholder has no idea this has taken
place, as their account statement (really just a piece of paper
generated by their broker) assures them they "own" genuine
"shares." This is a kind of fraud. Naked short selling accounts for
a large amount of 'Failure to Deliver' positions, and it's a
disgraceful commentary on just how badly corrupt Wall Street
insiders have abused investors' trust. It really is a case of "the
fox guarding the henhouse." Consider this: how do you think the
legal system would treat you if you sold something you didn't own,
and decided to never deliver it? Another way to describe this is to
call it what it is -- premeditated stealing. Worse, the problem of
FTDs calls into question the issue of market integrity. FTDs
represent an attack on the fundamental fairness of the market. At
the heart of a fair market is a respect for 'supply and demand'.
Once the supply side of the equation has been artificially
manipulated, all bets are off as to the fairness of the
marketplace. When there is no cap on the supply of shares --
because market participants are able to sell stock that they don't
have, and which doesn't exist -- prices are subject to downward
manipulation. Increased supply overwhelms buyers and crushes the
stock price or hampers appreciation. In the past, our Company has
successfully fought against many such onslaughts, marshalling the
intestinal fortitude and management team necessary to prevail. Many
firms, however, aren't as fortunate, and have succumbed to these
attacks, leading to the loss of jobs, income, investor gains, and
the innovation that is a fundamental of the American economy.
"Attack of the Blogs" is a controversial cover story in last fall's
Forbes magazine, featuring our battle with this sort of shadow
threat. Small-cap companies like Circle Group Holdings are targets.
This attack is not perpetrated exclusively on our stock. According
to some estimates the problem has reached epidemic proportions in
the public markets, and it has the abovementioned negative effect
of diminishing the equity value of legitimate investments. To be
clear, what we are describing is real, widespread and receiving
increasing visibility, culminating most recently in a series of
anti-trust lawsuits by hedge funds against their prime brokers for
precisely this practice of naked short selling -- a move
unprecedented in the history of the public markets. Further
dramatizing the suits is that they are seeking "class action
status." Recently, 60 Minutes covered the allegedly doctored
negative reports issued by a hedge fund-friendly research firm on
Biovail Corp. In another high profile case, Overstock.com Inc. has
had recent success in its claims against prominent hedge funds.
Skewed stories containing false information issued by major
financial publications have led to SEC subpoenas of journalists.
The NASD fined a broker at Citigroup on Wednesday for naked short
selling. Senator Bennett of Utah made it the primary topic of his
testimony with SEC Commissioner Christopher Cox in this week's
Senate Banking Committee hearings. The scope of the problem is
becoming more evident with each passing day, and we are hopeful
that this new visibility will result in an environment where we can
work together to correct the system, and insure a future level
playing field for all honest participants. Why is Circle Group
Holdings fighting back? We'd like you to understand more about our
motivation to confront this challenge, versus maintaining the Wall
Street status quo. When a company's value is destroyed by these
secretive and illegal methods, funding can dry up, investors can
lose faith in their investment, and companies can be driven into
bankruptcy or be de-listed. This is the ultimate goal of many of
these types of manipulations, because once a company is bankrupt or
de-listed the culprits have no liability to ever cover their short
position, and they also have no taxable event with the Internal
Revenue Service. This is free money -- and a lot of it -- for those
industry insiders who have figured out how to steal investor
dollars by utilizing serious flaws in our capital markets system.
We are sickened by these abuses, and have begun our own campaign to
protect the value of your investment in CXN stock. We believe in
the fair, fundamental principals of free trade and the
entrepreneurial spirit upon which our nation was built, and we have
committed to working to restore what has been taken from all of us.
We are forcing this problem out into the open and will be exposing
the wrongdoers and manipulators. What is Circle Group Holdings
doing to address this situation? The only way to correct the
problem is to root out the phantom shares and create an environment
where the unscrupulous players cannot continue their abusive
trading. We are implementing several steps to make this happen: 1)
In order to ensure success in our mission and adequate future
protection from market abuses, we have engaged legendary attorney
John O'Quinn, and his Consortium, led day-to-day by Wes Christian.
O'Quinn and his network represent Overstock.com, and many other
companies facing these problems, and have one of the most
successful track records in the world of fighting and monetizing
injustices arising from abuses of power and trust committed by
large, influential special interests. 2) We are requesting that you
contact your broker at this time, and request that your physical
certificate of CXN shares be sent to you. 3) Our pending name
change (which shareholders will have the right to approve via the
special meeting we recently announced) will provide an opportunity
for everyone to find out whether they own genuine or phantom
shares. If the name change to Z-Trim Holdings, Inc. is approved, we
will simultaneously change our trading symbol to AMEX: ZTM, receive
a new cusip number, and issue new physical certificates. A new ZTM
share with a new cusip number will replace the old CXN share, on a
share-for-share basis, upon presentation of a legitimate CXN
certificate. We have received our Transfer Journal from our
Transfer Agent documenting all issued certificates. With this
accurate record in-hand of all share issuances and transfers to
date, we believe phantom shares will be unable to transfer to
legitimate shares in the future. Holders who deliver genuine shares
with proof of ownership will receive the new ZTM share under a
'Mandatory Exchange' program that the American Stock Exchange
provides. We believe the program allows the market to trade our
stock without interruption but can prevent settlement without
physical delivery of genuine shares. 4) In the near future, we
intend to issue a non-cusip dividend share known as a "D-Share", on
a one-for-one basis for each genuine ZTM share presented directly
to the Company within a designated period of time. Holders of the
D-share will receive a pro-rata cash dividend from 10% of the
after-tax profits from future licensing of the Z-Trim process to
global food manufacturers for as long as the shares are held by the
original holder - but the D-share dissolves immediately upon sale
or transfer of the associated ZTM share. D-shares WILL NOT be
issued to nominees. Likewise, IOUs and illegitimate phantom shares
in circulation will not be honored. What is the purpose of the
D-Share? The D-Share is intended to provide future rewards to
current legitimate shareholders of record who retain their
ownership interest. It will also have the additional effect of
allowing shareholders to ascertain whether they own actual shares,
or mere entitlements wholly lacking in the parcel of rights
represented by a legitimate share. The D-Share is one of the rights
a genuine share will carry in the future; hence in addition to
providing you a legitimate item of potential future value, it will
also ultimately provide a public integrity test of the system, in
full view of Congress and the investment community, with none of
the usual deception available to the malicious parties. Management
is bringing this ZTM and D-share program forward in a manner that
ensures: -- There will be no way for any broker to simply credit a
customer account with the new shares; -- Every shareholder has the
opportunity to exercise their right to claim a physical
certificate; -- As many legitimate shareholders as possible are
able to claim ownership of ZTM shares while causing as little
disturbance as possible to the market for ZTM shares. Isn't this
distracting to Circle Group Holding's management team? Some of you
may be concerned as to whether or not our actions represent a shift
of focus from our business, towards an emphasis on legal action and
market valuation. Oftentimes management teams are forced to choose
between running the business, and protecting their shareholders'
interests. We believe that is an unacceptable choice to have to
make, and so instead we've retained the O'Quinn Consortium as an
experienced, seasoned team to deal with that specialized area. An
apt analogy is a large store -- it has to be well run, well stocked
and well marketed - but it also can't ignore shoplifting, shipment
hijacking, employee theft and embezzlement. Building and managing a
great business won't stop robbers, but a few well armed and trained
security specialists will. Please rest assured that we are
intensely and fully focused on our business. At the same time, we
seek to protect our shareholders' equity value from abuse. What if
I cannot obtain my stock certificate from my broker? Ten trading
days should be a reasonable timeframe to receive your physical
delivery of shares. Those of you who are unable to receive genuine
shares from your broker in a timely manner have likely been victims
of abuse, and are entitled to recourse and protection - you
believed you purchased a legitimate, genuine share, and through no
fault of your own, you are now unable to obtain it and get your ZTM
share and your D-share. That is where the Consortium led by John
O'Quinn and Wes Christian will come into play. This Consortium of
attorneys and law firms can provide to shareholders who cannot get
their shares useful information about actions to take, what
documentation to prepare, and how best to present their complaints.
Shareholders having any difficulty receiving their physical
certificate from their broker may contact - James 'Wes' Christian -
Attorney Christian Smith & Jewel 2302 Fannin, Suite 500
Houston, TX 77002 Phone: (713) 659-7617 What about the wrongdoers?
This correspondence shall herewith serve as notice to those who
have sold our stock illegally, never delivering the underlying
stock -- and creating a "phantom float" of fraudulently
manufactured IOUs. The O'Quinn-led Consortium is now fully
reviewing the key elements of activities engaged in by our market
participants, and documenting the scope and liability of those
actions, as well as the cost to the Company, and to our
shareholders. All efforts by participants to redeem phantom shares
in CXN will be closely monitored, and any such attempt will be met
with swift and vigorous action. Consider this fair warning that we
intend to defend our organization and our shareholders against any
further abuse, and have the resources necessary to do it. We, as
the issuer, have an exclusive right to control the number of
outstanding shares issued into the market. If you have been tricked
into believing that you actually own the shares in your account,
and instead there are IOUs represented to you as shares, you have a
legitimate complaint. The system cannot create shares of CXN --
only the Company is authorized to do so. The market and its broker
participants are not a casino where the house can create as many
aces of spades as it likes to rig the game. Our intention is to
reward all genuine shareholders of record, and provide a mechanism
allowing those who have been defrauded to seek redress against
those who have defrauded them. So here is your call to action ...
Demand your CXN shares, and if you are given any explanation or
excuse other than the prompt tendering of your shares, assume the
worst, and contact the aforementioned attorney, as well as the
regulators listed at the end of this document. Our intent is to
restore the integrity of the system's trading in our stock, and
protect our investors' interests. We remain totally focused on our
business, and have every expectation that the upcoming corporate
events related to this stock issuance will be adequately handled by
the O'Quinn Consortium, while we concentrate on the operations of
the Company. Thank you for your attention and continued support.
Best regards, Your Management Team At Circle Group Holdings Where
else can I get assistance if it appears I won't get my shares?
Illinois Securities Commission 69 West Washington, 12th Floor,
Suite 1220 Chicago, IL 60602, (312) 793-3384, (312) 793-1202 (Fax)
and/or NASD Investor Complaint Center 1735 K Street, NW Washington,
DC 20006-1506 Phone: (240) 386-HELP (4357) Fax: (866) 397-3290 Web
site: complaint.nasd.com Or Contact the State Securities Regulator
in your state. You can find contact information for your state
regulator at the Web site, http://www.nasaa.org/ For more
information about the Failure to Deliver and Naked Short Selling
situation, go to - http://www.thesanitycheck.com/
http://www.ncans.net/ Congressmen and Congresswoman are invited to
contact any of the parties listed above or the Company
representatives listed below regarding this issue. Contact: Steve
Cohen - President Circle Group Holdings, Inc. 1011 Campus Drive
Mundelein, IL 60060 847-549-6002 About our Company Z-Trim is the
Company's solution to obesity originally developed by the USDA,
which was first offered for licensing to the commercial marketplace
in 2000. Obesity is the biggest health problem in the world today,
in terms of cost, and declining quality of life. In 2002, the
Company acquired the global rights to all fields of use for Z-Trim
-- a zero-calorie, all natural fat-replacement that can reduce up
to 50% of the calories from fats in most foods without affecting
taste, texture, appearance, or digestive health. We spent nearly 10
million dollars over the past four years building a
commercially-viable, licensable manufacturing process, the first
ever Z-Trim manufacturing plant, a powerful marketing plan, and a
substantial intellectual property portfolio. We recently raised
several million more dollars to market Z-Trim, which was one of the
last steps we needed to complete prior to being able to establish
our important role in solving the fast growing global obesity
epidemic. Z-Trim is currently being sold internationally to small
and large manufacturers for pilot production and laboratory
formulation in many different food applications. Additionally,
Z-Trim is market-testing in domestic school lunch programs. And the
Z-Trim formulation team 'Amazing Food Creations' is creating a line
of emulsified products for many nationally and regionally known
brands. Our Company is debt-free, we own all of our assets, the
'Going Concern' was recently eliminated from the financial
statement of our annual report, and we truly believe we have a
critical breakthrough in weight control and obesity reversal.
Investors in the Company own part of this, and we are proud to have
you as one of our owners. You share in our success with the many
people at our company headquarters in Mundelein who work diligently
every day to build a future that honors the tremendous persistence,
resources and capital that went into Z-Trim over the past several
years to make it a reality. For Public relations requests related
to the issues raised above -- Contact Wes Christian - Attorney at
(713) 659-7617 For Investor Information related to the ZTM - CXN
Mandatory Exchange Program - Contact Steve Cohen - President of CXN
at (847) 549-6002 For Public relations requests related to Z-Trim,
our solution to obesity - Contact Phil Versten - V.P. of Public
Relations at Z-Trim at (847) 549- 6002 or Visit http://z-trim.com/
Forward-Looking Statements and Risk Factors Statements made in this
letter that relate to future plans, events or performances are
forward-looking statements. Any statement containing words such as
"believes," "anticipates," "plans," or "expects," and other
statements which are not historical facts contained in this release
are forward-looking, and these statements involve risks and
uncertainties and are based on current expectations. Consequently,
actual results could differ materially from the expectations
expressed in these forward-looking statements. Reference is made to
the Company's filings with the Securities and Exchange Commission
for a more complete discussion of such risks and uncertainties.
[End of letter] About Z-Trim Z-Trim is a natural zero calorie
fat-substitute made from the hulls of corn, oat, soy, rice, barley
that lowers 25% to 50% of calories from fats in most foods without
affecting taste or texture. Z-Trim generally can't be detected by
consumers when formulated correctly in dairy, dressings, dips,
sauces, baked goods, processed meats, snack foods, cookies, pies,
cakes, icings, brownies, bars, ice cream, milk shakes and many
other foods. It improves texture significantly; makes meats
juicier, baked goods moister, dips creamier. Z-Trim lets you to eat
more of the foods you love without fear of weight gain and allows
you to lose weight without giving up the foods you love. Z-Trim
adopts the flavor and mouth feel of most recipes and reduces
aftertaste in most foods and has been proven in studies that a
majority of consumers prefer Z-Trim foods over their full-fat
counterparts. Z-Trim can substantially reduce harmful trans and
saturated fats and adds healthy insoluble and soluble dietary fiber
which can be beneficial to heart patients and diabetics. Z-Trim can
improve digestion without any negative side effects sometimes
associated with other fat substitutes. Invented over many years by
Outstanding Senior Research Scientist Dr. George Inglett
http://www.thesoydailyclub.com/Research/ars2132002.asp at the
United States Department of Agriculture, Z-Trim is protected by
three issued U.S. and International patents with more than 50
additional patents pending. Forward-Looking Statements and Risk
Factors Statements made in this news release that relate to future
plans, events or performances are forward-looking statements. Any
statement containing words such as "believes," "anticipates,"
"plans," or "expects," and other statements which are not
historical facts contained in this release are forward-looking, and
these statements involve risks and uncertainties and are based on
current expectations. Consequently, actual results could differ
materially from the expectations expressed in these forward-looking
statements. Reference is made to the Company's filings with the
Securities and Exchange Commission for a more complete discussion
of such risks and uncertainties. Contact: Steve Cohen Voice:
847-549-6002 Email: DATASOURCE: Circle Group Holdings, Inc.
CONTACT: Steve Cohen of Circle Group Holdings, Inc.,
+1-847-549-6002, Web site: http://www.crgq.com/ http://z-trim.com/
http://www.nasaa.org/ http://www.thesanitycheck.com/
http://www.ncans.net/
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