It appears that crime needs to be cleaned out of the Venture, this would help all Venture stocks, including ours. If the regulators could clean this stuff up, then more little guys would invest, but the way it is now, the little guy doesn,t have a chance, when someone like this has lots of money and are able to short. I wonder who was doing the naked shorting of our stock?

An awakening read!

http://investorintel.com/graphite-graphene-intel/flagrant-foul-called-convicted-felons-short-selling-hit-zenyatta/

Also, below see the email Lori sent shareholders a few years back, informing shareholders about shorting and how she suggested we contact government then. I thank you Lori for the email that time, whereas it prompted other shareholders and I to look deeper at this as part of our DD, for this Lori, I am grateful.

July 29, 2011

Dear St. Elias Shareholder;

Re: Illegal Shorting of St. Elias Shares

I have fielded many phone calls from loyal shareholders recently concerning trading in our company’s shares on the TSX Venture Exchange. Many are concerned with and question certain aspects of trading, namely the suspicion that illegal short selling of St. Elias shares may be taking place. We have carefully reviewed the shareholders’ list and other data that might help inform you if this is the case and have taken proper procedures with the Exchange to seek answers for you. Perhaps this letter will be of help.

Short selling (also known as “shorting” or “going short”) is the practice of selling shares without ever owning any shares with the hope that the price of the shares will decline and the short seller will make a profit by buying back the shares at a lower price. Essentially, short selling is the opposite of the more conventional practice of “going long” whereby an investor buys shares, holds them and profits from any increase in the price of the shares. A short seller takes a negative stance, believing that the price of the shares will fall just as traditional investors attempt to profit on shares which they believe will increase in price.

In a short sale, a short seller sells shares (he doesn’t own) and must eventually buy back the same number of shares to cover. Profit (or loss) is made on the difference between the price at which the shares are sold compared to the price when they are bought back. A short seller makes money only when shorted shares decrease in value.

Short selling can be done either legally or illegally. Some unethical short sellers even spread false information about a company in an attempt to drive the price of a stock down thereby making a profit.

Legal and Illegal Shorting

Legal and illegal shorting are both done in “margin accounts”. With a margin account the broker lends you a portion of the funds at the time of purchase and the shares act as collateral as compared to a “cash account” that requires that you pay for your stock when you make the purchase.

Legal Shorting: To carry out a legal short sale, a short seller first must ensure that he has enough cash or equity in his margin account as collateral for the initial short margin requirement. Margin requirements differ for each brokerage firm or financial institution (i.e. BMO margin requirements for a stock trading at $2.00 or more is 150% of its trading price therefore to short 10,000 shares at $2.50, a short seller must provide cash or have equity of at least $37,500.)

The short seller sells the shares and the proceeds are credited to his margin account. Upon completion of the sale, the short seller has three days to cover (buy back the shares he sold which he didn’t own) or meet appropriate margin requirements. If the share price increases, the short seller will receive a margin call from the broker, demanding that the short seller either cover his short position (by purchasing the shares) or provide more cash in order to meet the additional margin requirement for the shares.For example, if the shares increased from $2.50 to $3.00, the short seller would have to put up additional cash –margin requirements of $37,500 would now increase to $45,000.

The transaction concludes when the short seller buys back the shares he sold short.If the price has dropped, he makes a profit.If the price has increased, he takes a loss.

Legal shorting, while being costly and risky, effectively puts a limit on the amount of money that can be lost because of the strict rules regarding margin requirements.

Legal shorting must be declared and reported to regulatory authorities.

Illegal Shorting:Illegal short selling occurs when shares are sold short without declaring the short sale and without providing the proper margin requirements (as with legal shorting.)Brokers lend/rent out the shares to a short seller for an indefinite amount of time for a fee (i.e 15%, 20%, 30% or higher.)Shares held by brokerage firms or other financial institutions in other clients’ margin accounts can be borrowed for this purpose.Brokers receive a fee which may or may not be shared with the client who holds the shares in his margin account. Most shareholders are not aware that their shares are being lent out.

While illegal shorting avoids the extensive cash requirements of legal shorting, it is very, very risky.Losses can be infinite.A short sale loses when the share price rises and a stock is (theoretically, at least) not limited in how high it can go.

Short sellers also risk getting caught in what is known as a “short squeeze” where stock prices go up causing short seller losses to get higher and the short sellers rush to buy the shares to cover their positions.This rush creates a high demand for the stock, quickly driving up the price even further.A short squeeze is a great way for shorters to lose a lot of money extremely fast.One big shorting mistake can kill.Just as you wouldn’t jump in front of a pack of stampeding bulls, don’t fight against the trend of a hot stock.

What should a shareholder do?

Loaning or renting out shares is a big business in North America.The stock rental business may, in my opinion, be the next major Wall/Bay Street scandal.To protect yourself from having your stock loaned out so it can be sold to depress the price of your shares, you should hold them in a CASH account, in which case the shares cannot be loaned out without your written permission.You could also contact your broker and ask if your shares are being lent out.

Shareholders are also encouraged to write a letter to their Members of Parliament in support of changing the shorting laws in Canada (which were recently relaxed).

We will continue to monitor the trading and will notify the Exchange of any irregularities.

Sincerely,

ST. ELIAS MINES LTD.

(signed“Lori McClenahan”)

Lori McClenahan,

President