"Devastated" Trader Crushed By Soaring Biotech, Starts Online Begging Campaign To Fund $106,000 Margin Call

Tyler Durden's picture




 

And now, what may be the craziest story of the day.

Less than a week ago, one of the countless fly-by-night biotech pennystocks, drug developer KaloBios Pharmaceuticals said it would wind down its operations and that it had engaged restructuring firm Brenner Group to help liquidate its assets. The company said it was "highly unlikely that exploring strategic options could generate a viable transaction within the time frame, given its limited cash resources."

At that moment the stock was trading between $1-2/share, representing a market cap between $5 and $10 million, or in other words, liquidation value.

And then, last night, America's "most hated person", Martin Shkreli, whose price-gouging antics were the catalyst that unleashed the biotech rout over a month ago, decided to get involved.

As KBIO announced after the close, the company "has been informed that an investor group comprised of Martin Shkreli and associates together have acquired more than 50% of the outstanding shares of KaloBios, and that the company is in discussions with Mr. Shkreli regarding possible direction for the company to continue in operation. Mr. Shkreli is the founder and chief executive officer of Turing Pharmaceuticals, a privately held biopharmaceutical company.

"We have received communications from Mr. Shkreli informing us of his group's ownership position, and a proposal to continue the company's operations," said Ronald Martell, Executive Chairman of KaloBios. "Our board of directors is prepared to entertain any constructive proposal, which we will act upon promptly. Addressing short-term cash needs is our first priority, and we continue to be open to further dialogue," he concluded.

As a result, the stock exploded higher, and has since hit a whopping $16/share in the pre-market, an increase of over 650%.

 

Blatant manipulation? Perhaps - after all, this is not much different from what Oprah Winfrey did with Weight Watchers stock which jumped simply because the media diva had bought sizable stake in WTW stocks. Ultimately, it will be up to the SEC to decide.

However where this story gets abusrdly entertaining, or woefully tragic, depending on one's perspective, is that one trader, Joe Campbell, was on the wrong side of last night's massive surge. As the RutRho blog, which noticed it first explains, a "dummy" E-trader, Joe Campbell, decided to go $35,000 short KBIO "and now owes $ETFC a wonderful $106K."

But it was Campbell's decision what to do next, that is perhaps a first in the history of the market place.

The "faily new trader" decided to give online begging a try, and has launched a GoFundMe campaign seeking to "crowdfund" the $106,445 margin call.

From his just Gaunched GoFundMe website:

Hello to all you traders out there.  I'm starting this page out of the recommendation of other traders in the community.

 

I hesitated on doing this but I literally owe Etrade $106,445.56 as of this moment what would you do if you were in my situation?  I'll do whats needed and sell what I have to get them paid but if someone feels my pain and is willing to help out---who am I to say no?

 

If you don't want to donate I understand, at least read my story of what happened today and protect yourself from the same happening to you!  This is a terrible lesson for me but if this helps just one person than I'm happy I wrote this.
I'm a fairly new trader, been trading since about March of this year.  I have learned alot about the community and trading...well not enough about trading as you will soon hear. 

 

I have a fairly small account, but its over PDT.  As of this morning it was $37,000.  I keep it small because I wanted to manage risk, the most I can afford to lose is what I have in the account....$37,000.  When I get some profits I take them out of the account because I wouldn't want to lose more than $37k.

 

I was holding KBIO short overnight for what I thought was a nice $2.00 fade coming.   At the close of the bell I saw the quote montage clear out and figured today there was no action after hours in the stock.  So I went to my office for a long meeting.  I got out of the meeting and saw a message from one of my buddys, he asked if I was ok since I was short KBIO....my heart dropped.  "Shoot did I blow up my account, everything I worked for?   I don't want to lose all $37,000 that would be terrible."  ---It was much worse.

 

The stock was at $16 and my account was negative over 100k.  I figured it was a mistake, Etrade would never let that happen, they must have cut the position when my account got to $0....nope.  I immediately called them and they confirmed I still owned all the shares.  He says that it got out of hand too fast for them to cover me, he says that all he can do right now is cover.  I was devistated.  I asked him to cover at $16 and he waited trying to find me a good exit.  I told him to do it asap and the fill was around $18.50 avg.

 

At the moment not only is my $37k gone, but I now owe ETrade the negative balance of over $106k.  I always knew I could blow up an account and I was financially able to "afford" to lose the $37k.  Never in my wildest dreams did I imagine that Etrade would NOT have some sort of stop or circuit breaker in place that would automatically cut a position if the account went to $0.....how could they ever let it get to -$144k loss on a account that small!  Also, why did I have to call them to find out what was going on, why did they not alert me or call me when it went neg???

 

I'm never one to ask for a handout and honestly I'm kinda not sure if I should post this but here we go.   I'm sure it will cause lots of controversy on whether or not I deserve even a $1 donation but it doesn't hurt to ask.  Anything you traders can do to help me get a little out of this hole would be a blessing for me.  Anything donated will go 100% to simply paying Etrade some of this $106,445.56.

 

My plan moving forward is to liquidate mine and wife's 401k's and try work out a payment plan with Etrade.  I'm also going to ask them to help out in some way...thats a longshot.  I will pay them and be back trading....only with set stops this time.  What an expensive lesson that was.

 

I hope my story helps someone else from the same.

 

Here are screenshots of the damage.

 

An expensive lesson indeed.  The Rut blog is less than friendly in its assessment:

The dummy puts in $35K on a short and now owes $ETFC a wonderful $106K.

 

Let's give this American Youth a round of applause for being smart enough to open a website trading account and dumb enough to buy KBIO.  This stupid shit who can't handle responsibility needs to be offered advice, not get a bailout from us.  Stupid people.

 

So please, email Joe Campbell and tell him to take responsibility.  The "fairly new trader" Who started in March.  You think he'd be donating that cash to all the other people who might now be starting GoFundMe pages to subsidize their horrible trading choices?....Ackman might take note.

We on the other hand have some sympathy: as we have been warning for years, the market is not only broken (thanks to HFTs), and manipulated (thanks to central banks), but is an all-out unregulated wild west, as the SEC is seemingly hell bent on cracking down on Indian and Russian "spoofers" when the real manipulators walk around not only free but with millions.

That said, we do hope that Joe's rookie mistake is a wake up call for anyone who hopes to get rich quick on whatever levered "lottery ticket" du jour is, be it biotechs, retail stocks, commodities, or whatever else the HFTs are momentuming at any one millisecond.

As for Joe, good luck: as of this moment he has raised $141.

He only has $106,304 more to go.

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Thu, 11/19/2015 - 09:57 | 6812849 FireBrander
FireBrander's picture

I wonder, if he raises the money, if he'll use it to buy a new car instead of making the margin call?

 

Thu, 11/19/2015 - 09:58 | 6812854 VinceFostersGhost
VinceFostersGhost's picture

 

 

what would you do if you were in my situation?"

 

It's called......BK.

Thu, 11/19/2015 - 10:01 | 6812866 Save_America1st
Thu, 11/19/2015 - 10:02 | 6812871 Tom Servo
Tom Servo's picture

Martin Shkreli gave the kid $5... he does have a heart!

 

Thu, 11/19/2015 - 10:06 | 6812885 Haus-Targaryen
Haus-Targaryen's picture

He should be talking with a securities attorney.  

Thu, 11/19/2015 - 10:08 | 6812895 VinceFostersGhost
VinceFostersGhost's picture

 

 

Call 1-800-BAD-BROKER

 

Have you been prescribed something recently by your doctor.....if so.....even better.

Thu, 11/19/2015 - 10:11 | 6812903 BobPaulson
BobPaulson's picture

Crowd sourced begging. Nice. We need to monetize this and turn it into a hedge fund.

Thu, 11/19/2015 - 10:36 | 6813000 Alive or Just B...
Alive or Just Breathing's picture

And hopefully the ensuing 3x leveraged short fund....

Thu, 11/19/2015 - 10:41 | 6813025 Save_America1st
Save_America1st's picture

send him 1/300th of a BTC which is currently trading around 330 bucks.  lol

Thu, 11/19/2015 - 10:45 | 6813050 I am more equal...
I am more equal than others's picture

 

 

 

I can't stop laughing.  This is ridiculous and shows the whining of America runs deep and wide.

A fool and his money are soon parted; it was a miracle how they got together in the first place.

 

Thu, 11/19/2015 - 10:59 | 6813110 coinhead
coinhead's picture

Joe Campbell if you buh one Bitcoin and sit on it, it will pay off your debt.

https://localbitcoins.com

Thu, 11/19/2015 - 11:06 | 6813154 rccalhoun
rccalhoun's picture

go the fed disocunt window...borrow a large amount at 0% , pay the margin call, keep the rest of the fed loan and pay the 0% interest forever

Thu, 11/19/2015 - 11:26 | 6813280 mayhem_korner
mayhem_korner's picture

 

 

Do you think he is former Amaranth, or former Metallgesellschaft?  Inquiring minds want to know...

Thu, 11/19/2015 - 11:47 | 6813378 Harlequin001
Harlequin001's picture

I know a guy who went to the toilet whilst trading uranium back in 2012, when gold was bouncing by $100/day.

He still refers to it as a $40,000 shit.

Never again he says. Yeah, right...

Thu, 11/19/2015 - 11:50 | 6813407 Deathrips
Deathrips's picture

The NEW ETRADE BABY!!

 

RIPS

Thu, 11/19/2015 - 12:06 | 6813498 blackholes
blackholes's picture

I guess this guy isn't "too big to fail".

 

That was mistake #1.

Thu, 11/19/2015 - 12:15 | 6813542 nope-1004
nope-1004's picture

There are no markets.  There are publicized price changes in a government controlled banking system called a market, meant to create confidence in a horribly rotten casino where the house never loses.  Even when the house admits loss (TBTF banks), the losses are socialized by the taxpayer.

This poor young fella watched too much CNBC thinking gambling is normal behavior.

Expensive lesson indeed.

 

My only question to him would be:  Would you have given away your gains had you had a 3x positive return?

And that's why I won't support your bailout.

Thu, 11/19/2015 - 13:17 | 6813780 Anonymous User
Anonymous User's picture

If he were a girl, he could sell some ASSets.

But since is not the case, he will have his fair share of ASSets taken from him in prison. Kinda like this:


http://www.thepornster.net/video/67/

 

Lets be happy for him.

Thu, 11/19/2015 - 13:36 | 6813865 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

I have had shorts go bad like this before. The simple thing to do is keep the short small (less than $1000.00) and money in your accound in case you get sodomized. Looks like this guy not only shorted the fraud, he did so on leverage. IDIOT!!

Thu, 11/19/2015 - 13:43 | 6813910 TruxtonSpangler
TruxtonSpangler's picture

Pucker up buttercup, time to pay the piper

Thu, 11/19/2015 - 14:12 | 6814045 TheRedScourge
TheRedScourge's picture

Damn straight. Shoulda used proper risk management and entered bracket orders. No excuse for getting that deep in the shit in one day. Shorting on leverage is just asking to get raped by GoldmanBot.

Thu, 11/19/2015 - 14:13 | 6814051 Stainless Steel Rat
Stainless Steel Rat's picture

If he just BTFD he'd be sitting pretty with a cool half mil!

Thu, 11/19/2015 - 14:41 | 6814208 The9thDoctor
The9thDoctor's picture

Why would e-trade give such a huge credit line to someone who isn't an accredited investor?

This "retail" level is little kids playing a big boys' game.

I blame the institution for lending to people who are completely clueless about finance.

This Joe Blow guy better get on the phone with a securities lawyer pronto. Minimum security is in this little boy's future if he doesn't resolve this correctly.

I facepalmed at the part where he asked etrade if he could do a "payment plan". lmao. too funny. Then this little boy does his gofundme campaign. This "online begging" will violate something in the millions of pages of securities regulations.

This goes back to Robert Kiyosaki's main premise that we need financial education in the schools. Our society wouldn't be so screwed up if people actually understood how finance actually works. I know the top .0001 something percent love the 99.99% of masses being financially illiterate so they can play them like fiddles and take advantage of them, but it results in the nation falling apart.

Thu, 11/19/2015 - 14:58 | 6814292 MagicHandPuppet
MagicHandPuppet's picture

Someone give him the money... so he can double down!  Lol.  He's bound to get rich off someone else's money, one way or another, lol

Thu, 11/19/2015 - 18:05 | 6815147 Stackers
Stackers's picture

Turn those machines back on !

Turn those machines back on !

Thu, 11/19/2015 - 18:17 | 6815191 ACP
ACP's picture

Up to $2631 as of now? Really people??

Fuck it, I'm going to start a GoFundMe panhandling page!

Thu, 11/19/2015 - 19:48 | 6815609 Stainless Steel Rat
Stainless Steel Rat's picture

Lol, +1 for Mortimer

Thu, 11/19/2015 - 18:40 | 6815285 Boozer
Boozer's picture

E-Trade allows him to short a low float, sub 5 dollar stock...perfect recipe for

"Joe" to napalm himself.

Thu, 11/19/2015 - 19:31 | 6815541 fedupwhiteguy
fedupwhiteguy's picture

doc IX, greenie for you in re the financial edumacion of our kids. It should start in grade school and mandatory in H.S.

Thu, 11/19/2015 - 16:49 | 6814885 misesthecat
misesthecat's picture

indeed. moral hazard doesn't apply to the house! silly wittle muppet

Thu, 11/19/2015 - 14:03 | 6814003 SILVERGEDDON
SILVERGEDDON's picture

The only satisfaction Joe will ever get out of Bitcoin while sitting on it - is if the Bitcoin is long, hard, and battery powered.

Buh a dildo, JOE, JUST TO REMIND YOU OF THE OTHER TIME YOU FUCKED YOURSELF REAL GOOD.

Thu, 11/19/2015 - 16:43 | 6814848 Chapulin Colorado
Chapulin Colorado's picture

My Goldfish, Nemo, is very old and sick and needs a triple by-pass that is going to cost me $106,000.  Please GoFundMe.  #GoldfishLivesMatter!

Thu, 11/19/2015 - 19:56 | 6815529 Fidel Sarcastro
Fidel Sarcastro's picture

FUCK THIS LOSER!  If you can't stand the heat, get out of the kitchen...bitch!  And who the hell SHORTS a $2.00 stock?  There is little-to-NO reward.  Beginner? "Kind of new to trading?" No, he's a rank beginner!  FUCK THIS BEGGING PIECE OF SHIT LOSER.  

Someone please forward this asshole my comments.

Thu, 11/19/2015 - 19:42 | 6815530 Fidel Sarcastro
Fidel Sarcastro's picture

oops, double post

Thu, 11/19/2015 - 15:33 | 6814489 T.Gracchus
T.Gracchus's picture

I just don't buh teh coinhead's solution a tull

Thu, 11/19/2015 - 11:01 | 6813121 RafterManFMJ
RafterManFMJ's picture

Uh, I'm just gonna go find a cash machine.

Thu, 11/19/2015 - 11:52 | 6813420 greenskeeper carl
greenskeeper carl's picture

I'm not a day trader, so forgive my ignorance of o am wrong, but for a 37k account to go to negative 100k he would have had be be using a lot of leverage right? Borrowing money to gamble on? So he thought he had a 'sure thing' and borrowed money to increase his gains and now lost his money and the money he borrowed?

Thu, 11/19/2015 - 12:53 | 6813699 Whitmore
Whitmore's picture

Yep. He used his $37k as collateral to "borrow" the shares from eTrade. He then sold shares for ~$2/share. If the stock bottoms out he can buy them back cheap, return the borrowed shares and pocket the extra cash.

The guy doesn't understand what "risk" is. Without any loss protection his upside risk is unlimited if the stock rises. 

Thu, 11/19/2015 - 13:01 | 6813727 MicroSecession
MicroSecession's picture

If you buy a stock, your downside is limited to your investment.  However, if you short a stock, you have unlimited downside.

People short stocks where they think it will go down.  The way this works is that you borrow stocks from your broker, sell them for market value, and buy them back later to give back to the broker.  He borrowed $37k worth of stock and sold them @ $2/share.  It then went to $16/share.  So now he has to buy them back @ $16/share.  (numbers not exact).  Anyway, so now he is in the hole.

Short story - selling short is usually not the best way to go.  In fact, using the markets to make bets is generally bad both for you and the market.

 

Thu, 11/19/2015 - 17:02 | 6814943 misesthecat
misesthecat's picture

even e-trade n00bs know there's a buy-to-cover tool that closes your position and stops your losses at a trigger price you set in advance. this way you don't lose your ass

Thu, 11/19/2015 - 17:37 | 6815059 greenskeeper carl
greenskeeper carl's picture

Ya I understand how shorting stocks work, I just can't understand how this guy was able to do that. Irresponsible as hell not only on his part but on etrades part as well for allowing him to do it. And can't you set a stop loss on the upside as well? Like trigger a buy order at, say, 3 dollars? What a fucking tard.

Thu, 11/19/2015 - 18:53 | 6815341 MicroSecession
MicroSecession's picture

From what I understand there were two problems: (1) is gapped up, and so there was no place to do that, and (2) it happened in after-hours, and this stuff only works during trading hours.

Thu, 11/19/2015 - 18:58 | 6815366 DirkDiggler11
DirkDiggler11's picture

Yea, and that works great until the bots stop you out while sniffing about. How many people do you think got stopped out of trades when the Dow swung over 1000 points intraday back in September ? Stop loss orders are not always the nest protection.

Thu, 11/19/2015 - 11:02 | 6813128 AGuy
AGuy's picture

"A fool and his money are soon parted; it was a miracle how they got together in the first place."

He never had money. That's why he used margin (borrowed money) to trade with. Actually the greater fool is eTrade for lending him money to trade stocks.

 

 

Thu, 11/19/2015 - 14:15 | 6814066 Mr. Schmilkies
Mr. Schmilkies's picture

Can he wait to see if the stock price goes back down, to reduce what he owes?  If he can't pay, do they send the eTrade baby to break his legs?

Thu, 11/19/2015 - 14:36 | 6814176 Automatic Choke
Automatic Choke's picture

no, you can't wait to see if the price goes back down, unless you deposit sufficient $$ in your account to bring the balance to zero (or nearly so).  generally, they are more civilized than breaking your legs.  with a liquid and fair market, they will issue a margin call, meaning they call you asking you for instructions.  you will generally add more money to the account, or instruct them to liquidate some or all of the position, recovering what you can (and locking in your loss).  they have the right to liquidate without calling you.  in this case, the market moved significantly between close and open, giving him no chance to get out with some skin left.

Thu, 11/19/2015 - 14:49 | 6814246 CPL
CPL's picture

The interest rate is usually based on a daily rate of return, not yearly, so it can get very expensive very fast to hold the position until it 'gets better'.  If you look at your brokerage agreement you'll find it in the tiniest, microscopic print buried in the middle of the phone book everyone signs when they sign up for a trade account.  Fact is he misread the que, didn't properly measure his expectations...AND...most importantly...this one is so often overlooked.

SET HIS STOP LOSS.

Thu, 11/19/2015 - 18:30 | 6815249 Loismustdie
Loismustdie's picture

In what world are you guys setting stops that help you get out when a stock gaps up 800% between sessions.

How?

It's impossible.

Thu, 11/19/2015 - 20:22 | 6815742 CPL
CPL's picture

You.  Don't.  Be.  Greedy.  That's how.  Same rules apply to blackjack, dice or dominoes.  You plan your in and out at the table.  You plan what you can afford to lose before you plan on your profit.  If you don't plan.  You don't play very long. 

For newbie trader, he should have placed his stop loss on his short to 2% if the risk was high.  If playing with pharma's on the short ticket rides no one in their right mind would chase a pop on the chart in the beginning without establishing that the ride might not end.  When a stock goes apeshit, down or up, you're are then no longer looking at a reason to be in that stock under fluffy news.  The only sensible position to be in then is first ratcheting a trade by a 2% trailing stop loss that follows the price action.  OR pounding the sell button as fast as you can.

Any trader that survives longer than their first trade dismisses the myth of 'maximizing profits'. 

The reality is invest where it's needed.  Unless someone invented and passed a drug that is a pancea of all things, the fact is most of what's sold on the PINK/OTC is garbage.  What mystifies me about this type of day trading is the complete and total lack of patience to first practice the idea with paper and pencil.  It's not like there isn't a shortage of OTC crap to daytrade another time.  Not taking the time to test a theory, that's just dumb.  99.99% of the publicly traded market space is compromised solely of craptacular investments that are all backed with pigshit and unicorn futures.  The smartest position to be in when the media is explaining which stock to pick at this point, is simply not to play.  But when some knuckle head gets the investment fever, it's like telling an alcoholic to stop after a single drink.

There are about a thousand other ways that 36 grand could have made working capital.  Shove it in a savings account and leave it alone, no risk.  Or with 36k, could have built a business and got the return back in sweat equity.  The idea of shorting a pigshit grade pharma stock, not at the top of that list unless you want something that costs a lot to wipe your ass with.

Thu, 11/19/2015 - 14:44 | 6814219 CPL
CPL's picture

Correct!  Trade on credit and lose your shirt.  That is no financial entity operating under the current paradigm is making it out with a real copper penny in their pocket.  The entire system is built on leveraged credit while running interest while calculating on interest on principal.  The math alone will eventually put the handful of trillionaires in the poor house regardless of their percieved capitalization.  When it goes full on zimbabwe, as it always does, 100 trillion might as well be worth 0.  For the newbie trader begging for jew confetti for shorting himself to death, he didn't lurk enough or play with numbers on paper for a couple of years to learn the two rules to trading:

  • don't plan on catching a falling knife
  • don't climb the wall when it's rising

Ethier position will just get a trader looking for a quick swap beaten.  Especially in a rigged market place and more so when the entire trade is built on leveraged credit based on capital that was non-exsistent to begin with.  Afterall fiat is called fiat because it's not really worth anything is it?

Do NOT follow this link or you will be banned from the site!