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"Devastated" Trader Crushed By Soaring Biotech, Starts Online Begging Campaign To Fund $106,000 Margin Call
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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Isn't this known as being on the wrong side of the trade?
Oh fuck this asshole.
First he was short, so a fucking parasite.
Second, it is a bet that he made so it is time to live up to your contract.
I had made a bad trades that cost me lot of money. I took the losses and it sucked. They were very stupid mistakes and very expensive lessons that I will never have to learn again.
100% correct. happens to all traders..ones that are honest and admit it.
This fuckhole shorts a micro-cap bio tech...MORON.
What you on about you fuckin bell end, you know jack. The only buyers in a collapsing market are short coverers.
Parasites? That's just retarded. Whine about that next time a short squeeze goes in your favor.
What's he thinking? Just call Janet.
Daytrading means dont hold over night...
No sympathy for a short position.
"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?"
ISIS has a few new openings.
Let him beg.
Wow... that is fucked up. I have a friend who is a disabled Vet with Parkinson's and he needs money for meds and food. No one donated a fucking dime.
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.
hahah. Going into any trade naked gives you unliminted risk.
In a perfect world, E-Trade would not be held responsible for this customer's losses, and if the customer had been caught in a short-squeeze on a stock costing more than $5 a share, the firm would not be.
However, E-trade may be held liable because the customer should never have been able to enter a trade on a non-marginable stock costing $2 a share. Only firms with market-making and proprietary trading can enter these types of trades. The trade was in violation of the rules, and E-trade's system should have blocked it at the outset.
So, while the customer is a dolt who richly deserves to go broke, E-trade will probably have to eat this one.
None of this is true.
Can add that no way no how will I donate money to someone like this guy.
That's a fucking newbie. You take positions like that you better be buying covering calls if you don't have deep pockets.
He should have bought "puts". Buying "calls means you're bullish on the stock. He's probably sold naked"calls".[ he was short the stock]
Those who trade metals know....it is often that big jumps happen during the time you cannot access your account.
I'm thinking Sunday evening May 2, 2011. Silver dropped 15%...with leverage (2X) I lost a house before I could take my next breath. Luckily for me I panicked and never touched the Demon metal again. I came out ahead but sadly I also came out much wiser.
Had the dipshit bought puts, or just owned the underlying shares outright, he wouldn't have had this problem.
He could only lose the premium on the puts, and he would have been up massively had he actually owned the shares.
Another typical example of over leveraging, that our wonderful "Feral Reserve" has instilled in society.
REALLY!!!! He goes to the gambling casino, makes stupid moves then begs others to rescue him!!!
This guy deserves to lose everything. He even makes a disclosure while begging by saying if someone helps him who is he to say no. In other words, if you are dumb enough to help this loser you are an idiot.
No different than the guy on the street corner with a sign begging by the freeway with a cigarette in one hand concentratiing on his false limp while wearing dirty clothers by design. The same guy that goes and gambles your donation or buys booze with it.
How can anyone feel sorry for this moron???
There are consequences for making impulsive foolish decisions and those that do have to live with them. What kind of message will you be sending by rescuing him after such foolish greedy trades.
Never gamble more than you are willing to lose.
If he had made a lot of money on the short, he wouldn't be sharing with anybody.
He lost any sympathy I might have had for him when he started talking about being able to afford to lose $37000. Profligate idiot.
Time to sell the heart, kidney, spleen, liver, arm & leg. nah seriously
Must be a ZH'er.
His only mistake was only losing 100k. Had he managed to lose a few billion, the Fed would come in to save the day, as he would then be deemed too-big-to-fail.
Something of an update: http://www.marketwatch.com/story/help-my-short-position-got-crushed-and-...
One word: Douche Bag.
Okay, two words
Aw, come on, Joe, I had a bankruptcy for a similar amount, it was not the end of the world, and is a lot simpler and saner to live without credit for a few years...it puts you in touch with reality and life as it should be...pay as you go, and pure free market.
This guy keeps up the dumber than a box of rock routine with the "moving foward to liquidate mine and wife's 401k's and try work out a payment plan with Etrade".
NEVER, NEVER, NEVER touch a 401k its safe in bankruptcy... call an attorny.
Find an open window about 20 stories up.
This dipshit rookie would be all over the yahoo finance boards if the company went under and he made a little money on it. He would be walking around telling everyone how he's a genius and investing is so easy, and how he doesn't understand how anyone could struggle with it. He would be on chat boards telling longs how dumb they are while they watched their money go down the toilet.
HOWEVER, the stock went the other way: Now he's shit out of luck. No stop loss makes the trade more risky. Holding over night is another risky move. Putting your entire account into one trade, another dumb mistake.
He's been trading since march, you've got to be shitting me. This guy is beyond rookie, he is an infant trying to play in the NFL. He should be trading extremely small intra-day moves. Albeit the buyout announcement over night was extremely unlucky but you have to plan for the highly unlikely low probability event because they do occur, it isn't NO probability it's LOW probability so therefore they do happen.
I have little sympathy for a guy like this because he's not doing it the right way, but if he were to get lucky and that trade went well, he would make most that go about it the right way reconsider their approach, which they shouldn't do.
The wife is probably a goner too by the way, that's high probability.
If Martin Shkreli cost me 100K I don't know what I would do
After reading this, I have to say I really do feel sorry for this guy. Was he naive? Oh yes! The thing is about being young though, he let his unfettered optimism get him to make a huge bet that he never in his wildest dreams could have thought would go this bad. This is why it's SO important to learn as much as you can before even thinking about playing the stock market game. If you're going to be buying shorts you really have to educate yourself as the wrong move here can literally ruin your whole life.
He needs to be like a Wall St Bank and just say "fuck you ETrade, you deal with it."
Ask him how many floors in his building, and if there's a 33rd, tell him to go clean the windows. ps: Also tell him its an open invite for all his chums.
I'm not a "trader" of any real description. However, after the 2008 crash it was pretty obvious what goes down will pro'ly go back up.
Cut a long story: I took Cdn$20k, turned it into Cdn$50k, then waded all the way into 50% margin leverage...got smoked when the reversal for the double bottom came (couldn't hit the sell button fast enough) then dove back in for some gains after recognising the double bottom pattern (couldn't hit the buy button fast enough).
When the smoke cleared I had Cdn$70k earning Cdn$630.oo/month in dividends (Cdn Energy Trusts). Backed out of the margin (sold everything that didn't pay a dividend monthly)and kept the dividends.
Later (mid 2011) all the diviends started leaking as they (Gov) wrapped up the Cdn Energy Trusts and made them revert back to Corps. Then my equity started to leak and the market began to make no sense to me (if they ever did) so I sold my shit and got all the way out of the "markets". Kept around Cdn$42k.
The only position I STILL have open is Pro Shares Ultrashort Realestate (SRS:NYSE) which STILL indicates a US$4k negative position. There was a great big Class Action against them after I bought...it was supposed to increase in value but didn't go as expected and this obvioulsly enraged some of the more important lads downtown.
This was MORE than 10% of my portfolio and I felt pretty dumb. I broke all my rules to own it. I like dividends, especially monthly dividends! Also...I NEVER go short. I justified it by going long in a short vehicle that offered a sembelance of a dividend. It feels wrong to me to take a negative bet against someones outcome...so I play long and collect my dividends.
Curently, I'm out of the market holding everything in physical gold + four 1ozT Silver coins...waiting for gold to rally hard and the markets to tank hard so I can pile back into some good dividend paying companies when they are laying on the botttom.
Any advice so I don't end up being the next "E-Trade baby loses everything!"
The high of the day isn't even 15, what a lie
Premarket.
"Are you telling me that he's going to DK you for a lousy quarter point? Somebody's got to pay. Ain't gonna be me."
-Lynch to Bud Fox
Max gain $2, potential loss, infinity......good risk/reward
Fo' a small trader, that's a margin call what IS a margin call.
I wonder if the French Foreign Legion still takes recruits?
I got advice for this guy: double down and do the same trade again. What's the worst that could happen?
I am sure that if he had profited, he would not have wished to share out his 'winnings' beyond immediate family and friends. Unfortunately (for him, and he alone) he came out on the wrong side of the bet.
Tolstoy lost his family estate at the card table, and he survived to write his best works, so why should we want to do anything more than wish this failed gambler good luck-and may he learn from his errors of judgement.
No ill wishes- but we mak our beds and must lie in them.
Yeah...hey he's not a bank! Maybe he'll write a NY Times Best Cellar about how he predicted his boner would shrink to a puckered nubbin. He didn't help me when 5 star stocks all of a sudden lost everything (still rated 5 star though).
I'm not a bank I just pay one through extortion.
"The" computer knows your situation thats why you owe. Your a/the target. They're programmed to take your money (try proving it).
Dont do the crime if you cant do the time...
Go FUCK yourself, TraderBOY.
How about go fuck yourself. File bankruptcy like every other chump.
Next time only trade highly liquid markets and USE STOPS.
The best advice I can give to Mr. Campbell is to kiss his fucking ass goodbye!
Martin Shkreli will hire this guy as Turing Pharmaceuticals PR guy.
Historically traders have leaped out windows of tall buildings. Sometimes lacking proper height they just shoot themselves or jump from bridges and drown. What are we to now think, Traders Lives Matter? Have we become such a nation of whimps that doing what is right under such circumstances in no longer a consideration. If he had been up $106 K would he have given it away? He sounds like an individual who sees himself as a corporation, which is to gamble and when winning keep the spoils and when losing charge it to the taxpayer.
This Bernie Sanders supporter has already made over $2,000 from people even stupider than him. The "greater fool" theory holds true yet again. I am reminded of the infinite nature of the Universe and human stupidity, with an uncertainty about the universe.
Maybe Corzine will find someone else's money to donate to this guy's go fund me site. He's been there, done that.
Just look at that 10min chart - volume spike: positive reaction, volume spike: positive reaction, volume spike: positive reaction.
Now what the fuck do you think is happening there, genius?
And everyone on this thread laughing at him and saying 'have you never heard of a stoploss?' are probably just as big a danger to themselves as this guy. Stoploss wouldn't do shit if there's no market.
Just like Jan 15th and all of 200:1 leveraged FX 'traders' that thought it would be a good idea to defend the peg on USDCHF, then crying in forums about suing the brokers or the SNB or liquidity providers (I shit you not).
Even so, a conversation about a stopless is almost irrelevant when he was going all in on a leveraged position.
Etrade probably hedged his position to remain net neutral anyway. I doubt they lost a penny.
It's possible the shares were loaned to him out of a house account, true. You're one of the few on here who get that a stop wouldn't have done shit here.
I'm actually quite shocked at that.
Thank you fo sharing...its why I come to this site.
It's called bankruptcy. Tough cookies for you. I'm sure if you had made $200K profit, you wouldn't be turning around and handing it out to the homeless.
God Almighty, this really is the gimme generation, is it not? According to the leftist commies controlling our economy, everyone is "entitled" to everything--oh, except those who are trying to make an honest living, aka, the middle class, who are the real targets of the far left: Soros, Jarrett, and Obama et al...
Suck it up buddy.
Lot's of good stops do you when there is little liquidity. Solution: Never open an account with margin priviledges, and stick to liquid plays.
Remember Ted Beneke from Breaking Bad, and how he tried to milk Skyler White for even more money saying that the IRS money she gave him wasn't enough?
This guy sounds a little like that narcissistic character.
Just do what the banks do, don't pay for your stupid mistakes and tell your creditors that they can go fuck themselves.
I've an idea:
Rather than paying the government 3.5 Trillion dollars, so that they can redistribute your money the way they see fit, how about everyone just keeps their own money, pays the feds $0, and then we can have a real economy again?
Remember the good ole days back in the 1800's when the government was funded by selling land patents?
I will not vote for a candidate unless they can guarantee me:
0% Federal Income Tax for at least 5 years
0% "payroll tax" aka FICA "" "" "" ""
3% Capital Gains tax--no loopholes (hear that GE?)
Dump the tax code and initiate country specific wage tarrifs. That way $9.00/day in China or Vietnam or whatever has to compete on a level playing field with the American labor rate. Very simple. Sound GOOOOOD? At least a huge pile of jobs will come home. The crony capitalists will be screaming, but who cares about them.
The country was run on tarrifs before the idiot Wilson initiated the "progresssive income tax" and of course the criminal FED.
Quick: Hide the nail guns.
If you ask me, young Joe was the one who originally thought up the TARP.
If I go there and put in a negative amount for the "contribution" does he send me a check or maybe I get first call on future contributions. There might be a way to hedge this..... or maybe bifurcate it.
The lack of understanding on how trading works in this audience is mind boggling.
1. This is a non-marginable security but that doesnt mean it cant be shorted. It only means you cant short more than you have available in cash to cover. If you short 100% of what you have available to cover, as soon as it moves against you you will be getting autocalls letting you know you owe money.
2. LOL at a bracket order helping. Not for any reasonable price. No one plans for a gap up of 400%. 7 to 10% and then trigger a market order is standard, but this one he was going to get stuck on.
3. Buying some calls would have helped, sure, but if he was smart enough to do that......
4. I would love to hear that call. If that broker advised him to get out at the high of the day......now youve got a case, in that these arent advisors. They are licensed brokers, thats it. They can present choices, and the onus is on the client. Put it this way, if I placed this trade for a client back in the day it would have been with all risk disclosed.(This is what could happen.)
5. LOL at the brokerage being expected to get you out of your shitty trade you held overnight. As much as you have no time to react neither do they. Its a self directed account. That being said, a margin department could make that call but what if they pull the trigger at a 600% loss and it closes at 400%? Now what? Its a judgement call that is actually on the client
As to #4...He admitted he made the broker sell at the high.
Exactly. This guy did EVERYTHING wrong and as far as I can tell the only thing ETrade could have done is tell him no you can't place this trade and at the time no reason to do that. He wanted to take on risk, he had the money to do so (cash availabke to cover at current price) and as a brokerage part of the job is to facilitate risk.
IMO.... crowd-funding is the next internet category killer .... check out the only 2 public crowd-funding paltforms; "LC" and "ONDK" they both posted positive cash flow last quarter .... which is unlike scoial media stocks that mostly continue to operate deep in red every quarter.
Tell E-Trade to stick it
I can't believe this guy has raised a dime
There really is a sucker born every minute
I am wondering, as well, who the fuck gave him the $141? WTF!!!!! They are worse than fucking dumb. Shit is really getting crazy.
"Margin call, gentlemen."
-creepy dude from trading places
If I were you I'd leave as much money as possible in IRAs, homestead my house if necessary, and declare bankruptcy. I believe your house and IRAs would be protected from seizure, but definitely consult an attorney.
That right, lock this stupid fucker up and send him to prison for just over $100K "stolen" from E-Trade.
John Corslime steals millions from farmers and "others" at MF Global and walks the streets as a free man.
Just sayin......
Didn't hesitate long enough! Fn problem with society today (well one of them) no one is accountable for their own actions!
Kindly go fuck yourself!
END THE FED!
That's it! I'm starting a campaign too!
https://funds.gofundme.com/dashboard/fdb67398
my campaign is better!
How many donate one penny just so they can leave a comment heckling the loser?
lol
This retard shorts a stock w/ a average daily volume of a measle 608,620 shares and bets farm on it. His wife is looking for plan B right now!
I am calling BS, most retail brokers (etrade, scott, TD) won't let you short sub $5 stocks for this exact reason. Because of volatility and if the trade goes south they (the brokerage house) can't close your account out fast enough and end up being on the hook for the loss until they can hopefully squeeze it out of the loser moron who thought he was a stock trader.
Notice disclaimer at top of that site when you go to the link...sounds more like BS story just sucker people into going to the site to drum up click ad money.
I am calling BS, most retail brokers (etrade, scott, TD) won't let you short sub $5 stocks for this exact reason. Because of volatility and if the trade goes south they (the brokerage house) can't close your account out fast enough and end up being on the hook for the loss until they can hopefully squeeze it out of the loser moron who thought he was a stock trader.
Notice disclaimer at top of that site when you go to the link...sounds more like BS story just sucker people into going to the site to drum up click ad money.
What a fucknuckle this guy is.
Rule 1 for trading is "Protect your capital"
He took a naked short position in a volatile, illiquid section of the market.
Got everything he deserved.
I feel really bad for the guy but how could he not use stops?
The NYSE banning stop orders.
How COULD he?
Seriously. Explain how a stop would work in this situation. If a stock gaps up 600% between sessions what stop gets you out at less than a 600% loss?
I'll wait.
Overnight stops will not save you. If there are no sellers between 2 and 16 no stock will change hands...
So this guy made over 5000 so far, what can you say? Maybe he is an idiot, maybe he will become a great trader, shows you can't underestimate the kindness of people.
As grandma used to say (grandma had the sharpest tongue in history):
"You should have thought about that, before you went short with your entire account and blew up over night!"
I have no sympathy whatsoever. I have been on the wrong side of the trade too many times. You live, learn (to manage risk), pay, and move on.
This story is the featured headline at MarketWatch as I write this. When stories like this make the headlines, very often the market moves the opposite way to what people expect from the story. Is the top in?
I feel sorry for the guy. But you can't put more into play (or your "trading education fund") than you can comfortably say "goodbye" to.
In the Peak Prosperity Crash Course, they apply the "fire insurance" analogy to prepping:
#1) How likely do you think it is that [insert negative event] will occur?
#2) Are you willing to pay the consequences if the event does happen and you have no protection against it?
Ironically, Shkreli shorted the stocks once before!
1) Fuck the kike and his company of fraud.
2) Fuck that dumbass for gambling in a rigged market. He deserves it.
and....
3) Fuck e-trade for NOT stopping it when the balance was 0. I would tell them to go pound salt! Fuck them too!
All 3 can SUCK DEEZ NUTS!
Another idiot. Why in the world would you WANT the BROKERAGE to stop you out?
Think about that before you answer. All angles.
This is not E Trades fault. At all. That's trading. It very well could have worked and he makes 200 percent in a day. Easily. In this case he didn't. That's the risk. Nothing wrong with it.
If you don't believe in risk bro why are you even here?
poor soul - betting on one of those sure things. reminds me time and again never to have an open position with unknown loss potential / loss I can´t handle.
shorting a a dead stock that suddenly experiences heavy trading is not a good idea. Nevertheless this shall pass too - its only money...