SECURITIES TRADING AND ONLINE ROBBERY: 1999-2000
Bullying and harassment, being it sexual or not,
is not about sex. It is about power and control.
Unknown
By early 1999, not only was my professional career essentially destroyed, my effort to build up a sales business was also sabotaged by the defendant. However, I found that the barrier to enter the securities markets had dropped considerably for small investors. Still interested in financial markets, I decided to get into the business of trading securities.
This chapter was about how my online trading, a business of minimal human contacts, was destroyed by the defendant.
BEFORE THE INCIDENT
A central figure surrounding the securities incident was Mr. Hanxin Lin, a high-school classmate of mine turned agent for the defendant.
Mr. Hanxin Lin (林汉新)
For many years I had not had any contact with Mr. Lin until we ran into each other at Vancouver International Airport at the end of 1999. We happened to take the same flight to China.
We generally did a lot of catch-up during this chance meeting. – Due to heavy fog, the flight was postponed for a day and all the passengers stayed at the Executive Airport Plaza in Richmond for the night. -- He had been doing fairly well in China before immigrating to Canada. But he did not have a job here in Vancouver at that time, a situation not uncommon with many new immigrants.1 Regarding him as a potential client, I focused my part of the conversation on my work, i.e., trading and investment. In particular, I told him that I had been in the Ph.D. Program in Finance at UBC. I also mentioned casually, without naming name, one particular senior professor there. Among the things I talked about this well-known professor were that he had written several books on gambling and horse racing, and that he had been consulted by (a) foreign government(s)2 on lottery issues. I did not mention anything related to Statistics or SFU. It would have been too unpleasant for me to do so. And it did not have much to do with trading or investment. Besides, I became very cautious from my earlier experience with people like Mr. Heng Sun who later was targeted by the defendant because of my contact with him.
After coming back to Vancouver, I continued communicating with Mr. Lin in China, mostly on setting up his brokerage account with me, through cell phone and email. I believe that some or all those communications were intercepted by the defendant3.
A “Business Proposal”
On or around Monday, May 8, 2000, Mr. Lin called me at my brokerage office from his home in Beijing about a “business proposal”. I offered to call him back.
It was in this conversation that he told me about a “business proposal” and asked if I would be interested. According to him, it was basically an idea that he, together with some other people that he knew, had for an Internet business. The key components of his “business proposal” were as follows:
To build a website on shipping or ship brokering, the industry in which he had been working; somehow obtain some critical information and put them on the website; then make money on those information, presumably by selling them, although he did not actually use the word “sell”;
The key to his “business proposal” was the backing or signing-up of a reputable senior professor and he asked me specifically to contribute in this regard, in an apparent reference to our earlier conversation at the end of 1999;
To start this business requires 500,000 dollars or 500,000 Yuan4. But once we got it started, there should not be any problem in “raising money” as he already knew some wealthy people. And then [we/I] “would have money to use”5. (When he said those words, it sounded as if he already knew I did not have much money, which was, of course, very true.)
Mr. Lin was my former classmate and my then client. I trusted him then. It would take me a long while to figure out the hidden message in his “business proposal”. And when I did, I felt that my trust in him had been compromised. And I believe that the defendant turned him into their agent to deliver the “business proposal” after intercepting our Internet and/or wireless communications.
On that day, however, I was predominately excited at the prospect of working on another project. Of course, there was a lot of murkiness in Mr. Lin’s proposal. In particular, I did not see how a business could be a good one just by selling information. And I certainly was not aware that the UBC professor, whom I had mentioned to him earlier, would be interested in an Internet business6. So at the end of our conversation, I said that I would do some research on his “business proposal”. And he told me that he would come back to Vancouver sooner than originally planed and we could talk more about the project.
Soon after he came back from China, on or around June 5th, 2000, Mr. Lin and his wife invited me to dinner at their residence. Having spent some time researching on his “business proposal”, I suggested that a business-to-business (B2B) model would be economically more viable. He insisted that his original business structure based on making money on information was potentially “very big”, as if I did not get his message7.
Dinner at Lin’s
Some other things happened at that dinner meeting:
His wife, Ms. Hailing Zhang told me of a very good friend of hers without naming name. She said that he or she8 lived in a huge downtown apartment – apparently she was quite impressed. I did not pay much attention to this part of her conversation at the time. I though she was talking about somebody in Vancouver. I only realized that she was talking about Mr. Yanxiu Li after I found out his address in Manhattan in 2001.
Despite my telling them that I did not drink alcohol, they brought out a new bottle of wine before dinner. Mr. Lin told me that he just had a visit to doctor’s and could not drink. They then asked me to drink with Ms. Zhang. In the end, Ms. Zhang insisted on a toast with me while Mr. Lin looked on. I felt a little weird.
As part of our chat, I told them that I was looking to buy a computer9 so as to start trading soon on my own. They pointed to a computer package box and told me that they had bought a computer. “It’s not expensive now to buy a computer”, Mr. Lin said suggestively, sounding like an invitation to use their computer. -- I saw my trading as a one-man operation. Besides, I wanted complete privacy; I did not want to reveal my trading techniques or the brokerage I used.
Both of them told me suggestively that they planned to move to Montreal. – Since early 2000, I had been using email and cell phone to communicate affectionately with a lady in France whom I had met earlier in Vancouver. Among the things we talked about in our private communications was her plan to apply for Quebec immigration.1011-- But I was not alarmed by their casual comments about moving to Montreal. Given the fact that both of them were not working, it was quite possible that they wanted to moved around, besides the benefit of learning French for free.
Ms. Zhang told me suggestively that she knew a lot of people. I later would realize she was implying that she could lead me to Mr. Weldon’s daughter(s).
Mr. Lin only stayed in Vancouver for a brief period of time before he came back to China again. I got the feeling that the purpose of his short trip was, in fact, to present to me in person all aspects of the so-called “business proposal”.
Ms. Hailing Zhang
I had two separate dealings with Ms. Zhang after Mr. Lin presented the “business proposal” and went back to China.
The first meeting with her was on June 29, 2000. I had already started online trading at home by then. To ensure privacy, I tried not to let anybody come to my apartment. So I offered to meet her near Broadway SkyTrain Station. But she insisted on coming to my apartment.
After she called to announce her arrival at my apartment building at around 10:30AM, I minimized and hide all the window programs on my computer. (The apartment I was living in was a bachelor’s suite.) So I do not think that she gained any knowledge of my trading activities by coming in to my apartment.
After finishing up the brief business on behalf of her husband, she commented: “your bed is so high” on her way out12.
I was in the middle of a trade when she visited me the first time. I did not really think too much of her comment until the second meeting in the evening of July 11, 2000. This time I offered to meet her at the Killarney Community Center, which was closer to her residence than my apartment was, as I was to attend a badminton session there in the early evening. But she declined, saying that she would be out around that time.
So around 8:00PM that night, she came to my apartment again. This time she asked how much my rent was. After I told her, she commented: “that’s very cheap”13, the same comment I made to Mr. Yanxiu Li in late 1995, except in Chinese. She then repeated her comment about my bed, i.e., “your bed is so high”, on her way out.
I feel I have to write these incidents down. I do fear for violence against me and my family because Mr. Hanxin Lin later threatened me when things did not go according to their “business plan”. But it’s obvious that Ms. Zhang wanted to tell me that she was sent by Mr. Yanxiu Li or his agents and she was willing to sleep with me, with the knowledge of her husband Mr. Lin. Because of seemingly unrelated incidents on June 15, 2000 as detailed in the next section, I think that her task was to lead me to Mr. K. Laurence Weldon’s daughters, as she had told me suggestively that she “knew a lot of people”.14
A Stalking Incident
A couple of weeks after I had dinner at the Lin’s, a pair of incidents occurred on June 15, 2000, whose significance I did not realize until much later. Neither did I realize at the time that the defendant paired incidents together to make sure I got the message.
The first leg of the incidents was a strange phone call to my cell phone at around 8:35AM that morning. I was on the bus to SFU downtown campus at Harbor Center to attend the Securities Program I had registered earlier. The call was from (604) 599-9229, a number from which several strange calls were made to me both before and after this incident (see Chapter 2 for a summary). On that day, the male caller said suggestively that he was looking for “Michael”. I thought he had called a wrong number, except that his number, which showed up on my display, looked familiar (because somebody had called me from that number before).
The second one occurred at around noon. As I normally did while in downtown, I went to my favorite restaurant, FM Classic Pizza at 589 West Pender Street, to have lunch that day. There were not a lot of customers in the store when I walked in. So the following four people easily stood out, because they did not seem to fit in that place, which is an economical restaurant selling primarily 93 cent pizza slices.
One of the four people was a tall Caucasian male, well dressed, clean shaven. The other three were all young females, the youngest one barely the height of the store counter. Judging by their body positions and the fact that they shared food, these girls appeared to be very close to each other. Not long after I came in the store, the tall guy gave the girls an inconspicuous nod before going out – I did not see him eating at all. The three girls remained there.
After I bought some pizza and sit down on the stool by the window, I noticed there was another guy looking over at the store from across the street.
I had no idea who these four people are at the time15. Actually I did not really think much about them. My only impression was that these girls did not seem to fit into that place because they all dressed very well. The tallest one was fairly slim. The middle one wore a low-cut top, revealing her cleavage. She was also the only one who initiated eye contact with me. The youngest one later bought a can of soft drink which was also fairly rare among patrons of the store. (That’s how I knew she was barely of the height of the store counter.)
I later realized that the three girls were Mr. Weldon’s daughters. The fact that those girls and their body guards were waiting in my favorite pizza shop out of several ones in that area suggested physical stalking by the defendant. The call on that morning looking for “Michael” suggested that Mr. Michael Stephens was somehow part of the “plan”, or the “business proposal”, as Mr. Lin emphasized the importance of signing-up some senior professor.
How did the defendant know my lunch routine? I have a couple of leads:
Earlier that year (2000), I met someone in that store during a lunch. We later exchanged emails with each other in which we recounted how we met. -- My email was monitored by the defendant.
Another stalking incident in summer of 2002, which is detailed in the next chapter, suggested the possibility that the defendant may have used my cell phone as a tracking device. So it is not unreasonable to deduce that defendant had used the same technique to find out my lunch routine in 2000.
In a conversation with a couple of acquaintances in late 2001 or early 2002, they asked me casually if I ate pizza for lunch when I was in downtown, or questions along that line. I told them yes. I think the defendant was trying to create the appearance that it was those acquaintances of mine that had passed on this information to them. Unfortunately, it just did not work because this conversation occurred long after the stalking incident of June 15, 2000.
Mr. Yufeng Qin (秦宇峰)
In late summer 2000, Mr. Yufeng Qin, a high school classmate of mine and Mr. Lin’s, called me from Toronto. In my conversations with him, two things stood out.
He told me of somebody he knew. He said that this person was “also” very smart, very nice and very handsome and that he was a Mormon.16
He told me that “I have a friend who just bought a house worth five hundred thousand. Isn’t that shocking?!”17
Similar to Mr. Lin, prior to his call, I had not had contact with him for many years.
Message in the “Business Proposal”
When all the pieces came together, it yielded the hidden message in Mr. Lin’s “business proposal”:
With the help of Ms. Hailing Zhang, I need to sleep with Mr. K. Laurence Weldon’s daughters to obtain the evidence of the professors’ false sexual comment about me. Since that comment affected my applying for employment with various companies over the years, I then could press those companies to compensate me. – That’s why Mr. Lin said that this “business” was very big. That’s also why he never said that the revenue in his business proposal would come from “selling” the information.
I need to get the support of Mr. Michael Stephens to fend off the perceived nepotism, or (maybe) other low-bar remarks in the letter, since Mr. Stephens was a senior professor.
500,000 dollars (in Canadian fund, as it became clear later) was the money I would get initially to “start the business”. (But, really, what purpose do the 500,000 dollars serve? Buy my silence? Buy my love? To placate me? To compensate me? And from whom does the money come from exactly?)
THE SECURITIES INCIDENT
The money I used in my securities trading I borrowed from my sister. With her knowledge and permission, I also opened bank and brokerage accounts in her name. This way, I thought I would have better privacy and be able to stay away from the defendant’s intrusion. And during that period of time, I rarely used my home phone to make calls - I mostly used it for Internet connection – because of many intrusive or harassing calls I experienced with residential telephones before. I thought my cell phone would be more secure, especially since I had virtually cut off contacts with old friends after starting the use of my cell phone.
The defendant, and later my broker and the exchange, knew all along that it was me who was doing the trading. Specific clues included the following:
Some strange phone calls to my cell phone that I felt had connections to my trading activities;
A person by the name of “Randy” came to an almost-empty chat room (in a data broadcasting software) after I went in and asked: “What is the symbol for NASDAQ 100 Index?” – I used the index quite often when I traded stock index futures so I was very familiar with the subject. Also, this person’s name roused my suspicion18;
After the securities incident, the brokerage company sent two letters to my sister in China. Although the letters came from the same person, they were apparently signed by two different people;
In a meeting with Mr. Hanxin Lin on January 18, 2001 (after the incident), he bullied me suggestively19, apparently referring to the fact that I used my sister’s name to trade. – I did not tell him that information. He probably knew that I borrowed money from my sister.
Exchange Ruling or Robbing Order?
On Friday, October 20, 2000, I traded several series of options on the stock of Copper Mountain Networks (CMTN). All the trades were executed smoothly and I got the position that I intended for – 40 long call spreads, i.e., 40 long December 17.5 calls and 40 short December 20 calls. The account statement I received from my broker Interactive Brokers, LLC (“IAB”) on Sunday, October 22, confirmed that these trades produced a profit of $227.10 after commission and my resulting options position, i.e., the 40 long call spreads, was valued at $500. In other words, they were arbitrages.
However, in the evening of Monday, October 23, 2000, more than one business day after the trades and their confirmation, IAB made adjustments into my account based on a supposed “ruling” by International Stock Exchange (“ISE”). IAB informed me of such a “ruling” in an email sent specifically to me at 6:33PM Eastern Time Monday evening.20
IAB’s email to me at 6:33PM Eastern Time
Monday, October 23, 2000
RE: ISE executions for CMTN
On trade date, 10/20/00, the ISE made a mistake by switching the 17 1/2
Strike with the 20 strike for CMTN in all months. When you were trading the 17 1/2's the ISE knew you trading the 20's and vice versa. The ISE ruled that the trades the ISE knows are the trades that will stand. Therefore, we will be adjusting your accounts to reflect what the ISE knows as the correct executions.
If you find the logic of letting customer pay for “exchange mistake” ridiculous, that’s because it’s the logic of bandits. And if you find the wording of the email ambiguous, that’s because it’s intended to create confusion.
Over the next few days, there would be numerous adjustments made into my account. These adjustments or “corrections” created many discrepancies in the daily account statements and IAB’s Trader Workstation (TWS) records or logs. But one thing remained the same: after each successive adjustment, my account balance would remain negative.
An Earlier Failed Attempt
In retrospect, this supposed ruling from ISE and its resulting forced liquidation of all my securities was the second attempt by the defendant, ISE and IAB to rob me on that day. What I initially thought as a software glitch with respect to IAB’s TWS earlier that day was in fact their first attempt to do so. Here is a description of their first attempt:
Based on Friday’s statement, my 40 long call spreads were valued at $500.00.
Soon after the markets opened on Monday, I noticed that quotes from ISE were not updating on TWS. And my securities position was marked with a constant value of -$500.00 all the time21, despite the fact that TWS did display the correct securities positions in my account, i.e., 40 long call spreads I obtained on Friday.
I phoned IAB Help Desk and Chris [last name unknown] took my call. After I reported what I perceived to be a problem with ISE quotes, he said he would tell their programmer to deal with it.
About 30 minutes later, quote problem was corrected as reflected by the constantly updating quote on TWS. My positions were marked correctly with positive values and updated in real time for the rest of the trading day.
Thinking that the glitch was simply TWS “not marking the position in real time” due to stalled quotes, I sent IAB an email and raised my concern at 11:30AM.
My email to IAB at 11:30AM Pacific Time
Monday, October 23, 2000
RE: option margin/marking-to-market
I am concerned with the ways TWS marks my option
positions to market intra-day.
I am currently holding 40 LONG call spreads on a
stock. This is a risk free position thus requiring
no margin. But this moring [sic] TWS marked them with
a NEGATIVE value.
It appears that TWS is not marking the position in
real time. I was very worried that TWS might liquidate
my position automatically.
By the way, what does TWS use as “market” -- bid,
ask or last sale?
Thank you very much for your attention.
About 15 minutes later, Melissa at the IAB Help Desk answered my email with a lengthy discussion of a totally unrelated subject, i.e., market order. IAB is a technologically sophisticated brokerage company. I don’t believe that its personnel don’t know the difference between marking-to-market in option margin and market order in order execution. It was probably another smoke screen.
IAB’s reply to my above email at 2:46PM Eastern Time
Monday, October 23, 2000
| RE: option margin/marking-to-market |
When you are referring to "market" I am assuming that you want to know
how a market order is executed. Under normal market conditions, a market
order is hitting the bid, and lifting the offer. However, under certain market conditions, it may not be possible for Interactive Brokers to liquidate a Customer's position at all, or at the then prevailing market price, and the position may continue to lose value in excess of the equity in the account. The customer will be responsible for such losses.
Such market conditions include fast markets, illiquid markets, and
locked limit markets:
Fast Market: In the event prices are moving rapidly, the
exchange may declare a "Fast Market". In this market condition, a
broker may not be able to execute a limit order.
Illiquid Market: If there are not enough buyers or sellers in the
market, it may be difficult or impossible to execute an order.
Locked Limit Market: A limit move is a price move in either
direction equal to the price limit at which the exchange has
declared that trading must cease for a period of time at prices
beyond the limit move. If a market reaches the limit it is said
to be locked limit. The limits are set out in the contract
specifications set out on the Retail Products Page. If a contract reaches the
limit on the upside, the contract is said to be "limit up". If it
reaches the limit on the down side, it is said to be "limit down". If
it reaches the limit on the down side, it is said to be "limit down". The
Chicago Mercantile Exchange has determined that if the S&P 500
Index Futures Contract reaches its price limit, then the E-Mini
will cease trading.
Any further questions, please contact.
Their first attempt to rob me failed because I was vigilant in my work. If I had not phoned IAB in time to report the “quote problem”, the negative balance would have remained for an extended period of time and consequently, my account would have been automatically liquidated without the “exchange mistake” excuse of their second attempt.
CHAPTER REMARKS
Initially, I did not realize that it was yet another sabotage work by the defendant, with the collaboration of the ISE and IAB. So I took my grievance sequentially to my broker IAB, the exchange ISE, and the US Securities and Exchange Commission22.
I would later find out other similar arbitrage opportunities, even taking into account of the transaction costs. For example, Appendix 5-1 showed a couple of screen shots of Trader Workstation (“TWS”) on November 21, 2000. As can be seen from those screen shots:
At 12:52PM, there was an arbitrage opportunity for January 60 calls on stock AMAT (bid at 1 and offer at 15/16);
At 12:53PM, there was an additional arbitrage opportunity for January 50 calls on AMAT (bid at 2 11/16 and offer at 2 5/8).
The screen shots also showed that the bids and offers came from different options exchanges. The arbitrage opportunities were merely a fact of trading in multiple markets.
What can also be seen from the screen shot was the negative liquidating value of -$3,977 in my account. In total, I suffered a loss of roughly $7,800 based on the closing prices on Monday, October 23, 2000. After a lengthy complaining with IAB, ISE and SEC, IAB restored my account to a zero balance without explaining their rationale to do so on December 21, 2000.
The real intention of the defendant was to stop me from working. They succeeded. And I became jobless again.
1 When we spoke on July 15, 2001, he was doing quite OK. He told me that he was doing “hundreds of thousands” (tons or dolloars) business on ore (not clear if he was trading it or shipping it); and he was also arranging for people to come here from China. – I suspect agent Ms. Wen Qin, another high-school classmate of mine, might have come here in September/October 2002 through the collaboration of federal government (see Chapter 6).
2 Original conversation was in Mandarin.
3 My gut feeling was that the defendant started gathering information about my cell phone or intercepting my conversations after my visit to New Jersey in September 1999. (1) On this trip, I visited Mr. Malcolm Rosenthal as a friend. Besides feeling a little uneasy on his part in meeting me, I was asked to show him my cell phone. He remarked on my service provider, whose name was on the phone. But he did not ask for my phone number. (2) Soon after coming back from the trip, I received my first strange call on the cell phone from somebody looking for “Randy”. – And I had been very careful not to contact old acquaintances for fear of the defendant’s targeting on them.
4 The conversation was in Mandarin and it can be translated both ways. The defendant later made it clear to be in Canadian dollar.
5 He said in Mandarin:“那就有钱用啦”.
6 Of course, the defendant meant Mr. Michael Stephens, as I came to realize much later.
7 He said in Mandarin:“一旦拿到那个information，把网站建好，以后这个生意有多大，那就不知道了”. Apparently the key to his proposal is to get “the information”.
8 In Mandarin, he and she sound the same.
9 I now know that, since the defendant had been listening into my cell phone, they knew already that I was shopping for a computer.
10 Six months later, agents Gu and Hou made similar “suggestion” to me about going to Montreal. See Chapter 6.
11 I also suspect deliberate sabotage of our relationship. During the period of time when I sent her frequent emails, she received a lot of anonymous emails with porno links.
12 She said it in Mandarin: “你的床这么高阿”.
13 She said it in Mandarin: “那很便宜啊”.
14 The significance of the incidents on June 15, 2000 did not come to my mind at all when I dealt with Mr. Lin and Ms. Zhang.
15 I did not think too much of this whole incident only after the incident involving Messrs Hou and Gu on December 15, 2000. The reason is that, before both incidents, I received an unusual call from the same phone number (604) 599-9229. See next Chapter.
16 He said those in Chinese except the word “nice”.
17 He said it in Mandarin: “我有一个朋友最近买了一栋房子，花了五十万，该吓人吧”.
18 (1) In the fall of 1998, I received a strange call looking for “Regis Lisandi”. Lisandi is the phonetic for Chinese 李三弟 , or “Li’s 3rd kid brother”. (2) Then in the fall 1999, I received the first strange call on my cell phone from a “restricted” number, looking for “Randy”. The name Randy rhymes with Chinese 远弟, or “a distant kid brother”. The caller sounded so suspicious that I kept his voice in my memory for a long time. And I suspect he was the same person who called on my second cell phone on June 9, 2002 from (604) 219-2240 (see Chapter 6).
19 He said in Chinese: “做事不正规，出了事怎么办呢?”—I need help on an appropriate translation.
20 I do not believe there ever was an “exchange mistake” as claimed by ISE and IAB.
21 It was no coincident that the defendant, ISE and IAB fixed the value of my securities at -$500.00, the exact negative of the correct value ($500.00), although the 80 contracts in my position came from different exchanges. From the start, their objective had been to switch the market value of my securities from a positive one to a negative one.
22 My contact in SEC was Carmine J. Zeccardi, an Investor Assistance Specialist. Because I communicated with him through email and telephone, I suspect that he knew the defendant’s motivations and I felt that he treated the incident as a bad joke of sort.
