CMKX Shareholders Coalition for Market Reform encourages United States Senators to take action on systemic market risk, electronic stock counterfeiting, unregulated Hedge Funds On June 28, 2006, the US Senate Judiciary Committee will conduct a hearing to examine short-selling activities of hedge funds and independent analysts. This comes on the heals of a well concealed Bawag backed Refco implosion, and a recent duo of lawsuits filed by Overstock.com Inc. and Bioval Corp. alleging manipulation of company stock via issuance of biased research reports in connection with corresponding short positions. Recently, the state of Utah passed a law targeting the epidemic of naked short selling in our securities markets, the electronic counterfeiting of company stock. You may review information on UTAH Senate Bill 3004 here, http://www.le.state.ut.us/~2006S3/bills/sbillenr/sb3004.pdf We commend the honorable leaders of Utah for their unmatched ethical leadership on this issue. At the same time, we are disappointed with the apparent obstructionist conduct that permeates the Securities and Exchange Commission with respect to investor protection in connection with illegal naked short selling and alleged mass criminal conduct by unregulated Hedge Funds. We highly recommend that all investors review the following letter from former SEC Senior Counsel Gary J. Aguirre to SEC Chairman Christopher Cox. http://www.thesanitycheck.com/Portals/0/Let.pdf We believe the above letter, from Mr. Aguirre, further corroborates our own research on unchecked criminal securities fraud throughout our US Stock Market system. We believe this fraud has been allowed to persist, both neglected and unaddressed intentionally, creating a systematic risk to our securities market. The improper conduct of the entire upper brass of the Securities and Exchange Commission is nothing less than blatant disregard for Constitutional law, as they have been found to be both prejudice and politically motivated by their gross dereliction of duty. We encourage all shareholders to voice their concern about these matters to their elected officials, and appropriate state and federal law enforcement agencies. As reported by Dow Jones, A spokesman for Sen. Orrin Hatch, R-Utah, a US Senate Judiciary Committee member, recently stated "Naked short-selling is against the law, and we're concerned about it". We encourage Senator Hatch to review the following letter addressed to his colleagues Chuck Hagel and Christopher Dodd, from former SEC Senior Counsel Gary J. Aguirre. http://www.faulkingtruth.com/Files/aguirre_congress0623.pdf In addition, we encourage all Senate Judiciary Committee members to review the following paper from Vodia Group LLC, ?Lawsuits in Securities Lending, A Primer on the Current Hedge Fund Legal Action against the Major Prime Brokers?. http://www.vodiagroup.com/pdfs/seclending1.pdf The CMKX Shareholders Coalition for Market Reform is encouraged by the US Senate Judiciary Committee hearing scheduled for June 28. We implore our elected representatives to address several matters of grave concern to thousands of US Stock Market investors. We believe so-called "naked short selling" is nothing less than electronic counterfeiting of commercial securities. Naked short selling creates an artificially increased supply of shares accompanied by a corresponding reduction in share price. We encourage the US Senate Judiciary Committee to provide immediate relief to investors that continue to lose their retirement and discretionary investment capital at the hands of securities manipulators. Individual investors have sought relief from the manipulative practices of illegal naked short selling predating the 1999 SEC Concept Release No. 34-42037; File No. S7-24-99 on Short Sales. Our research indicates the resultant Regulation SHO to be an utter failure with respect to investor protections and categorically fails to curtail manipulative naked short selling practices throughout the industry. We find it appalling to find dozens of securities listed on the Regulation SHO Threshold lists, some for more than a year, with no relief from regulatory agencies sworn to protect investors against such manipulation. The CMKX Shareholders Coalition for Market Reform is hopeful the US Senate Judiciary Committee will address matters that the US Senate Committee on Banking, Housing and Urban Affairs has failed to address for nearly a decade. Having oversight responsibility for the Securities and Exchange Commission, the Committee on Banking, Housing and Urban Affairs is apparently unwilling to take action on our concern about illegal naked short selling, the electronic counterfeiting of commercial securities. Our fellow shareholders have written thousands of letters, and met personally with our federal representatives over the past several years. Our appeals have apparently fallen on deaf ears. We are hopeful the Senate Judiciary Committee will see through, and look beyond, the multi-million dollar campaign contributions from the same Wall Street firms we believe to be facilitators of naked short selling. We request that the Judiciary Committee seriously pursue our concerns and respond with appropriate criminal prosecution to violators of all relevant laws that may include, but are not limited to: RICO Act under 18 U.S.C. ? 1961(1) The Martin Act Title 18?Crimes and Criminal Procedure Sherman Antitrust Act U.S.A. PATRIOT Act Securities Act of 1934 Section 20 -- Liabilities of Controlling Securities Act of 1933 Section 17 -- Fraudulent Interstate Transactions Securities Act of 1934 Section 17A - National System for Clearance Securities Exchange Act of 1934 Section 8 -- Restrictions on Borrowing Securities Exchange Act of 1934 Rule 15c3-3 -- Customer Protection Securities Exchange Act of 1934 Rule 15c6-1 -- Settlement Cycle Finally, we would like to take this opportunity to share a letter from one of the 39,000+ shareholders of CMKM Diamonds Inc. In response to the scheduled June 28 US Senate Judiciary Committee hearing, our fellow shareholder penned the following letter to his/her US Senator. We think the following letter encapsulates many of our collective thoughts, as investors in the US stock market system. START SHAREHOLDER LETTER "Washington DC Office xxx Hart Building Washington, DC 20510 Re: Judiciary Committee Inquiry into Naked Short Sales Dear Senator, I respectfully offer my thoughts regarding the upcoming Judicial Committee inquiry into the murky matter of naked shorting. It is my belief that your inquiry will reveal the terms "failure to deliver" and/or "naked shorting" to be a mere euphemisms for blatant electronic counterfeiting of market securities. Inordinate "profits" gleaned from illegal short selling by unregulated Hedge Funds (and cohorts) are untaxed and unaccounted for, certainly bad enough in itself. However the more immediate and insidious danger is the likelihood that certain shrouded offshore hedge funds have anti-American ties and that an untold amount of untraced money from illegal shorting may be funding terrorist organizations. Our enemies are quite forthright in their stated goal to drain/ruin the American economy as part of their "holy war" against the West. What better way to proceed than to shuffle some ownership papers, set up a series of hedge funds, find a blind prime broker, hire a "financial journalist" or two, pay a compromised market research firm to issue adverse "commentary" and collect money selling short what you don?t own and never intend to deliver. The end game for these pariahs is to dilute and bad-mouth targeted companies into bankruptcy thus rendering any uncovered short moot. Central to the whole topic of naked shorting is the DTC's "Stock Borrow Program" however the SEC is either unwilling or unable to facilitate DTC transparency. The DTC simply refuses to open their books and exactly who is short how much of any stock remains a mystery known only to the DTC and SEC. And they aren't talking. The Judiciary Committee inquiry will likely find the SEC to be either stunningly inept and/or fatally self-conflicted judging from their inability (or refusal) to enforce securities law in respect to illegal naked shorting. In any event, the SEC sadly provides the only "legal" oversight to our largely "self-regulating" financial markets and for whatever reason(s) the SEC has allowed this cancer to metastasize. The Senate Banking Committee did hold a token hearing on the phenomenon last year but didn't learn a thing about naked shorting from the appearance of then Chairman William Donaldson (who was unfortunately without a clue). The latest newcomer/apologist, Chairman Chris Cox, is also highly unlikely to have any salient information or answers at this early stage of his stewardship. Although I understand James Brigagliano is on tap to appear, newly appointed Commissioner Annette Nazareth, the former SEC Top Cop, is in my view the precise SEC official to testify before the Committee. While Brigagliano worked with Nazareth for many years the indisputable fact is that electronic counterfeiting blossomed during Nazareth?s long tenure as Regulatory Director. She is moreover on record as considering the practice "good for market liquidity" and dismisses critics as "simply those who want their stocks to go up". Nazareth also defends (and perhaps helped draft) the now infamous Grandfather blanket pardon in Regulation SHO, arguing that to call in the shorts would produce an "unhealthy, volatile market". Unhealthy for whom? The counterfeiters? Now that Nazareth is a SEC Commissioner the miscreants are likely to care even less about any legal nuisance of having to actually deliver what they sell. In the years leading up to SHO, Nazareth strongly denied any "short" problem existed in the first place and ignored or belittled those with the temerity to even broach the subject. If the Chief Regulatory Officer of the SEC (now a Commissioner) doesn?t care about illegal shorting why should the Hedge Funds, or the Prime Brokers, or the Central Banks, or the Market Makers, or the Institutional Bankers, or the Specialists? Or for that matter why should the DTCC or Cede & Company care, two other links in the odious chain that benefits financially from every trade/transaction, legitimate or otherwise. It?s essentially a daily boatload of free money for certain well-connected participants at the expense of the average American investor who naively believes he?s playing on a level field. Incomprehensibly (to complete the outrage), "Get Out Of Jail Free" cards and "Keep the Stolen Money" cards were presented to the counterfeiters via the "Grandfather" clause in SEC?s Regulation SHO. The SEC unilaterally forgave, pardoned and/or legitimized (pick the word) all prior failures to deliver (read counterfeit shares) without so much as a token fine, a slap on the wrist or the naming of any individuals or organizations involved. Is the SEC empowered to unilaterally pardon wholesale counterfeiting of market securities? Well, apparently so because no court or governmental body to date, that I know of, has questioned the SEC's authority to do just that. Millions (some say Billions) of counterfeit shares remain in the market while the conspirators are able to keep and stash all the cash they received for selling securities they failed to deliver. It may also be instructive to note that not one SEC action has been taken against illegal short sellers as a result of the passage of SHO some 18 months ago. One must wonder precisely who the SEC is protecting. As an average small investor and fledgling student of the market, I personally don?t feel protected at all. Suggested reading to perhaps spark your own due diligence: http://thesanitycheck.com/Blogs/tabid/81/Default.aspx http://www.investigatethesec.com/MediaLinks.php It is gratifying that the Judiciary Committee will be inquiring into the phenomenon of illegal naked shorting. All participants in this egregious abuse need to be tracked down and held accountable, no matter what his or her "position". Thank you for reading this rather long letter from a rather small investor. Also, thank you in advance for your personal attention to this critical matter. Yours truly, xxxxxxxxxxxxx" END SHAREHOLDER LETTER The CMKX Shareholders Coalition for Market Reform is a non-partisan group dedicated to creating market wide awareness of the systemic problem of stock manipulation. It is not affiliated, in any way, with the CMKX Owner's Group, the CMKM Task Force, or CMKM Diamonds Inc. We are comprised of CMKM Diamonds (formerly CMKX on the Pink Sheets) Shareholders dedicated to restoring confidence in the US Stock Market. We are deeply concerned that many CMKM Diamonds Shareholders have been unable to obtain physical possession of their stock certificates, nearly eight months after we began requesting them. http://www.cmkmtaskforce.com/nasdcomplaint.php We feel this disturbing behavior is directly related to unethical securities lending practices and illegal naked short selling, the highly leveraged sale of electronic counterfeit securities for profit. Sincerely, CMKX Shareholders Coalition for Market Reform