The FBI Tried To Suppress 80,000 Documents On Saudi Ties To 9/11

Submitted by Tyler Durden on 05/17/2016 09:04 -0400
http://www.zerohedge.com/news/2016-05-17/fbi-tried-suppress-80000-documents-saudi-ties-911

Submitted by Carey Wedler via TheAntiMedia.org,
The classified 28-pages of the 9/11 report have made global headlines lately as a handful of lawmakers battle to release them to the public. Those pages are believed by activists and members of Congress — who have seen them — to expose the role of Saudi Arabia, including government officials, in the terrorist attacks.
But according to a new report based on years of investigative journalism, it turns out there are far more than 28 classified pages on Saudi Arabia and 9/11 — there are 80,000 kept secret by the FBI. And though not all 80,000 are expected to concern the Saudi family — and the FBI insists their investigation of the documents came up empty-handed — journalists, at least one lawmaker, and heavily-redacted documents suggest otherwise.
As the Daily Beast reported, the discovery of the 80,000 pages came when Irish investigative journalists Anthony Summers and Robbyn Swan were contacted by an unnamed counterterrorism official in 2011. The reporters were preparing to publish a book on the 10th anniversary of the terror attacks and were told  by the source that a Saudi family who had been living in Sarasota, Florida, prior to the attacks had connections to the attackers. Specifically, they were linked to Mohamed Atta, the Egyptian terrorist widely recognized as the ringleader of the attacks.
The unnamed official’s tip conflicted squarely with the FBI’s prior conclusions on that family. Abdulazzi al-Hiijjii, his wife Anoud, and their three small children lived in an upscale Sarasota community, along with Anoud’s father, Esam Ghazzawi, a financier and interior designer, who owned the home, and Ghazzawai’s American-born wife. The FBI had received multiple calls from the family’s neighbors expressing concerns over erratic behavior. Two weeks before 9/11, they left the house in a huge hurry, leaving dirty diapers and toys strewn about, a fully stocked refrigerator, and three cars in the driveway.
Though the FBI opened an investigation in April 2002, it still insists it never found any significant connection between the family and Atta. The agency acknowledged they had suspected a connection, but “not until after the Tampa field office opened an investigation that claimed to find ‘numerous connections’ between the family and the 9/11 hijackers,” the Daily Beast explained. The 80,000 classified pages in question stemmed from that investigation.
The FBI says “the bureau’s own agents did initially suspect the family was linked to some of the hijackers.” But “on further scrutiny, those connections proved unfounded, officials now say.”
But Summers and Swan contacted Dan Christensen, a veteran Florida reporter, and together they published an exposé on these connections in Sarasota in September 2011. As they reported, following the 9/11 attacks:

“[L]aw enforcement agents not only discovered the home was visited by vehicles used by the hijackers, but phone calls were linked between the home and those who carried out the death flights — including leader Mohamed Atta — in discoveries never before revealed to the public.”

They were also never revealed to lawmakers. The 2011 story caught the attention of Bob Graham, a Florida Democrat who has since led the campaign to release the 28 pages on the Saudi connection, which are said to contain information showing Saudi government officials were involved in orchestrating the attack.
At the time, he said the journalists had “open[ed] the door to a new chapter of investigation as to the depth of the Saudi role in 9/11.” Graham attempted to view some of the documents, and told the Daily Beast (for a forthcoming article) they did show a connection between the family and three hijackers. He was soon after confronted by then-deputy director of the FBI, Sean Joyce. According to Graham, he said, “Basically everything about 9/11 was known and I was wasting my time and I should get a life.”
Christensen filed a Freedom of Information Act request in the hopes of either confirming or refuting their original reporting. Thomas Julin, his lawyer, said the FBI initially denied having any records. When Graham said he was willing to testify he had seen some, the Department of Justice conveniently admitted to having 35 relevant pages. They released them, but they were heavily redacted. In spite of the overt censorship guarding that information, they reportedly still made clear the FBI had suspicions about the family — and that they had found several connections between them and the hijackers. The pages also include the FBI’s dismissals of those suspicions.
U.S. District Court Judge William Zloch, who presided over the Freedom of Information case, was unconvinced and demanded the FBI conduct another search of its records. This time,“the FBI found some additional responsive documents which it produced,” Juline told the Daily Beast. “But it also found 80,266 pages of material in the Tampa Field Office of the FBI which had been marked with the file number for the FBI’s PENTTBOM investigation.”
PENTTBOM was the FBI term for its investigation into the 9/11 attacks. Though the New York Post had previously reported on these 80,000 pages, the DoJ’s small release of documents clarified suspicions. Zloch ordered the FBI to hand over all the documents in May 2014 — and he is still going through them to determine which pages can be released. He has given no indication of when he will be finished.
The Daily Beast explained “Zloch’s task is made all the more painstaking by the strict security rules governing review of classified documents, even for a sitting judge. The files are kept in a secure facility, and he can only remove a portion at a time.”
It remains unclear how many of the 80,000 pages pertain directly to the Tampa FBI field office’s investigation of the family in Sarasota — and their ties to the attackers. Though Christensen says he’s ready to be proven wrong, he believes “those files will reveal the underlying reasons for the FBI’s early suspicions.”
As the Daily Beast laid out:

“The FBI, for instance, says that phone records searches showed no links to the house and the hijackers. Christensen’s confidential source says the opposite is true. If the FBI is right, Christensen asks, then why not just release the information and put the dispute to rest?”

The FBI has attempted to discredit the pages, claiming the agent who filed the first reports on the family and their potential connection to the hijackers was “not a good writer and should not be taken as the last word,” according to Graham. However, that agent was promoted shortly after 9/11, casting doubt on assertions they were incompetent.
In a similar evasion of accountability, President Obama vowed to block a legislative effort to release the 28 pages amid pressure from the Saudi Arabian government, which threatened to remove $750 billion in American assets should the legislation pass. The president cited concerns that allowing families of 9/11 victims to sue a foreign government could, in turn, open the United States government up to prosecution, itself. The White House has since indicated it intends to release part of the 28 pages.
Though Julin says the 28 pages likely aren’t linked to the Sarasota Saudi family, he hopes their eventual release “might help Judge Zloch see the wider significance of the events in Sarasota and persuade him that some or all of the records have not been properly classified.”
Last week, a former member of the 9/11 commission said he believes six Saudi officials supported the 9/11 hijackers. John F. Lehman said Wednesday, “There was an awful lot of participation by Saudi individuals in supporting the hijackers, and some of those people worked in the Saudi government,” he said. “Our report should never have been read as an exoneration of Saudi Arabia.”
The FBI’s trove of documents also requires further examination. Julin dismissed suspicions Judge Zloch is intentionally lagging in his investigation of the 80,000 pages. “I believe this is not a stalling tactic at all,” he said. “The judge is doing what he has to comply” with the stringent rules surrounding the release of the classified documents. “But I would urge him to speed it up,” he said.

Obama Administration Doesn’t Care Anymore, Releases Fast And Furious Documents

Submitted by Tyler Durden on 04/09/2016 11:49 -0400
http://www.zerohedge.com/news/2016-04-09/obama-administration-doesn%E2%80%99t-care-anymore-releases-fast-and-furious-documents

After four long years of ensuring the detail behind the US Government’s role in running guns to Mexico (aka "Fast and Furious") never saw the light of day, the "most transparent administration in history" hasfinally released the requested documents to the House Oversight Committee. It is not lost on anyone that this is taking place well after it could do any significant damage to the Obama administration.

The release of the documents was ordered by a US District Court Judge Amy Berman Jackson on January 19th, ending a long saga that actually saw the House vote then Attorney General Eric Holder in contempt of congress for withholding requested information. Of course the DOJ decided not to prosecute itself on that matter.

As Politico reports, Justice Department spokesman Patrick Rodenbush confirmed that the administration does not plan to appeal. He argued that Jackson's ruling validated Obama's initial claim of privilege. As a reminder, Obama's privilege claim was broad-ranging, seeking to cover not only internal deliberations about how to respond to congressional inquiries but also discussions about media strategy related to the congressional probes.

"The Department of Justice is pleased that the district court ... continued to recognize that the deliberative process component of the executive privilege exists and was a valid basis for the Department to withhold certain documents when requested by the House in 2011. Although the Department disagrees with the district court's conclusion that the privilege was overcome in this particular case by disclosures and statements made in other contexts, the Department has decided not to appeal the court’s judgment and has provided a production of documents to the House Committee on Oversight and Government Reform," Rodenbush said in a statement.

Speaking of not prosecuting, while nothing will come of this as relates to criminal charges, it remains to be seen what other information the people will allow the government to completely sweep under the rug as if it never happened. 

So far, we know that in 2010 a US Border Patrol Agent was killed using a gun supplied by US as part of the program. We also know, as was more recently revealed, that a weapon owned by none other than "El-Chapo" was traced back to the program as well.

Republicans who had fought to get the upcoming disclosure for years, were delighted by the White House's long overdue retreat. Darrell Issa (R-Calif.), who chaired the oversight panel when the dispute arose, called on Obama to explain his actions.

"After 4 years of objection and delay, President Obama has finally been forced to give up additional documents related to why senior Justice Department officials in his administration lied to Congress," Issa said in a statement. “What we need from the President is an explanation of why he felt these documents couldn’t been seen by the American people and why there has been no real accountability for the officials involved. Was he protecting the failed gun-walking operation or the cover-up?"

As for Eric Holder who was US Attorney General from 2009 until 2015, when he quit to rejoin Covington & Burling, the law firm at which he worked before becoming Attorney General and whose clients have included many of the large banks Holder declined to prosecute for being "Too Big To Prosecute", we doubt he will i) make a statement or ii) be in any way implicated once the full severity of the Fast and Furious docs is made public.

And finally, in yet another direct insult to the intelligence of Americans everywhere, the letter sent by the DOJ to Chairman of the House Oversight Committee Jason Chaffetz notifying him that the documents had been turned over, nearly four years after the Obama administration invoked Executive Privilege (said otherwise, we don’t care if we’re supposed to answer to you or not, we’re not telling you anything), ended the following way:

"Please do not hesitate to contact this office if we may provide additional assistance regarding this or any other matter"

Or visually:

How The US Government Is Raiding A Citizen Victim Relief Fund To Pay For General Expenses

Submitted by Tyler Durden on 11/03/2015 10:45 -0500
http://www.zerohedge.com/news/2015-11-03/how-us-government-raiding-citizen-victim-relief-fund-pay-general-expenses
Submitted by Mike Krieger via Liberty Blitzkrieg blog,
One of the primary “talking points” used by the Department of Justice to defend its practice of systematically deeming corporate criminals above the law via its used of deferred prosecution agreements, has been an emphasis on how much money it has earned in fines from criminal corporations. These fines were supposed to be distributed to help victimized American citizens. Not any more.
The Wall Street Journal reports that:

WASHINGTON—The government’s just-approved budget deal takes $1.5 billion from a fund for crime victims and uses it instead to help pay for federal spending, drawing on a growing reserve collected from settlements with banks and major corporations.

The unprecedented transfer, part of closed-door negotiations between the Obama administration and congressional leaders, has raised the ire of advocates. They say it violates the integrity of a decades-old program that funds safe havens for domestic violence victims, counseling for abused children and financial aid for murder victims’ families, among other programs.

The administration and Republican congressional leaders averted a partial government shutdown by striking a two-year budget deal approved by Congress last week. As part of the pact the Crime Victims Fund will lose $1.5 billion to the general treasury, Obama administration officials said.

Since the fund’s creation in 1984 by the Victims of Crime Act, it has gathered money from fines imposed on criminals and set it aside to pay for services for crime victims.

But during the Obama administration, as major banks and corporations paid large sums to settle Justice Department investigations, the fund ballooned from about $3 billion to nearly $12 billion at the end of the 2014 budget year, according to the department.

The fund’s growing size has presented policy makers with a dilemma. When the fund began, the government paid out almost every dollar it received. But in 2000, Congress began capping the amount paid each year to ensure a steady stream of money for victims’ services.

From 2000 to 2008, the fund grew from $1 billion to $3 billion. As its balance kept rising, White House accountants were able to use the cash in an accounting move to offset government spending. Now, Congress and the White House have struck a deal to go further, by agreeing to withdraw some 10% of the money to directly fund the government.

Victims’ advocates say the move could set a dangerous precedent and encourage lawmakers to keep dipping into a pot of money intended to help crime victims, not to pay government bills.

Two years ago, the fund distributed about $745 million for victims services. That jumped last year to almost $2.4 billion, most in grants to state and local groups that provide counseling, aid or other services.

The proposed White House budget for fiscal 2016, which started Oct. 1, would give $1 billion to victim-services groups. Budget officials said it was a coincidence that the proposed reduction from last year’s $2.4 billion is about the same as the amount to be transferred out of the fund to general spending.

And once again, the U.S. citizenry gets steamrolled by its own corrupt government.

"Project Omega" - Why HFTs Never Lose Money: The Criminal Fraud Explained

Submitted by Tyler Durden on 08/13/2015 11:51 -0400
http://www.zerohedge.com/news/2015-08-13/project-omega-why-hfts-never-lose-money-criminal-fraud-explained
Two weeks ago, without knowing the details of the most recent market-rigging and frontrunning scandal involving "alternative" market veteran ITG's dark pool POSIT, which issued a vague 8-K it would settle with the SEC for "irregularities", we explained what we thought had happened:

ITG had an in house prop trading group, or "pilot", which operated for nearly two years, whose only signal was client order flow, which it would frontrun, and make millions in profits. In other words, once again precisely what we have claimed since 2009. But oh yes, not everyone is guilty of such manipulation. Only Liquidnet... and Pipeline... and ITG... and countless other ATS and HFT firms for whom clients are better known as either "easy money" or muppets.

And yes, we get the "trading experiment" narrative: calling it "criminal market manipulation and order frontrunning scheme" just does not sound like something the Modern Markets Initiative would spend millions of dollars to get Congressmen to agree on.

It turns out we were spot on, the only thing we missed was the name of this market manipulation exercise. Now, thanks to the SEC, we know: "Project Omega" (or as it was also correctly dubbed here the "criminal frontrunning scheme") is how ITG dubbed its secretive prop-trading desk whose only purpose was to frontrun clients.
Here are the details for all you suckers who still read the HFT apologists and believe the bullshit that all these algos do is provide liquidity, when in reality all the really do is frontrun your orders, assuring them of 6 years of trading without a single day's loss (or in the case of Virtu, one trading day loss). From the SEC:

Between approximately April 2010 and July 2011, ITG violated the federal securities laws and regulations in multiple ways as a result of its operation of an undisclosed proprietary trading desk known within ITG as “Project Omega” (“Project Omega” or “Omega”). During the period of April to December 2010, Project Omega accessed live feeds of ITG customer and POSIT subscriber order and execution information and traded algorithmically based on that information in POSIT and in other market centers. In connection with one of its trading strategies, Project Omega identified and traded with sell-side subscribers in POSIT and ensured that those subscribers’ orders were configured in POSIT to trade  “aggressively,” or in a manner that benefitted Omega by enabling it to earn the full “bid-ask spread” when taking the other side of their orders.

Project Omega, which operated as part of AlterNet, traded a total of approximately 1.3 billion shares, including approximately 262 million shares with subscribers in POSIT. ITG’s proprietary trading gross revenues resulting from Project Omega totaled approximately $2,081,304.

A quick point here: since ITG was quick to settle at a cost of $20 million, one can be absolutely certain that the true damages to clients, aka Project Omega revenues, were orders of magnitude higher, however since it wasn't the SEC's intention to disclose just how criminal HFTs are in general but just to put a black eye on ITG's dark pool (as Goldman flexes its muscles and prepares for world algo domination by taking down its competition one by one), and since it is difficult to capture all the "externalities" and dollar benefit from rigging, the SEC was happy to only point out the absolutely bare minimum of damages which were probably the explicit documented loss by those traders who brough this case to the SEC's attention in the first place. Everyone else will have to wait in line for the class action lawsuits to begin when laying out their damages.
But back to the SEC's big picture "explanation" of what we have said for years:

While Project Omega was engaging in proprietary trading, including with ITG’s own customers, ITG was simultaneously promoting itself, and POSIT, as an independent “agency only” broker that did not have conflicts of interest with its customers and that protected the confidentiality of its customers’ trade information.

Project Omega was managed and overseen by an ITG senior executive who at the time served as the firm’s Head of Liquidity Management (the “Liquidity Executive”). The Liquidity Executive designed and directed Omega’s trading strategies even though they violated written policies set by ITG’s compliance department restricting Omega’s access to customer information.

ITG Inc. and AlterNet violated Sections 17(a)(2) and 17(a)(3) of the Securities Act by engaging in a course of business that operated as a fraud and by failing to disclose to ITG customers and POSIT subscribers, among other things, that: (i) ITG was operating a proprietary trading desk while at the same time promoting its brokerage services and POSIT by describing ITG as an independent “agency-only” broker; (ii) the proprietary trading desk, until December 2010, accessed live feeds of highly confidential order and execution information and used this information to inform its own trading decisions; and (iii) one of the proprietary trading desk’s strategies involved identifying sell-side subscribers with which the desk wanted to trade in POSIT, and ensuring that those subscribers’ orders were configured to trade “aggressively” in POSIT.

ITG Inc. violated Rule 301(b)(2) of Regulation ATS by failing to file an amendment on Form ATS at least 20 days before it launched Project Omega disclosing the commencement of its proprietary trading activities and that one of its primary trading strategies would involve accessing confidential information regarding subscribers’ identities and orders and trading algorithmically based on a live feed of highly confidential information regarding open orders bound for the POSIT dark pool.

And here are the details of Project Omega, ör as we called it in July for what it really was "the criminal market manipulation and order frontrunning scheme":

During the period of late 2009 to early 2010, ITG explored initiatives to increase diversification and revenues for the firm, including launching a proprietary trading operation that would engage in algorithmic high frequency trading. Thereafter, on the recommendation of senior management, Group’s Board of Directors approved a proprietary trading desk that was limited in scope to inform whether ITG should launch a fully-scaled and disclosed proprietary trading operation. This initiative at ITG, which was managed by the Liquidity Executive, became known as Project Omega.

When he began managing Project Omega, the Liquidity Executive had overall product management responsibility for all of ITG’s electronic brokerage products, including its entire suite of trading algorithms, its smart order routers, and for the POSIT dark pool.  Prior to becoming Head of Liquidity Management in 2009, for several years the Liquidity Executive had been the Head of Product Management for ITG’s algorithmic trading group. In that role, he was responsible for designing and building ITG’s entire suite of trading algorithms and managing a team of software developers who wrote the computer code for the algorithms.

As a reminder, it was Zero Hedge who broke, and subsequently BBG and WSJ confirmed, that the "Liquidity Executive", aka criminal frontrunning mastermind, was none other than Hitesh Mittal, the same person who left ITG in 2011 and went on to become the head trader of the world's 4th largest hedge fund, Cliff Asness' (formerly of Goldman Sachs) mega quant fund, AQR Capital. It was this same "liquidity executive" who, after making hundreds of millions in HFT profits for AQR, was unceremoniously fired early this month. Per the WSJ:

Hitesh Mittal was terminated from his position as head of trading at AQR Capital Management LLC in a move related to an enforcement action the Securities and Exchange Commission brought against a former employer.

Mr. Mittal was head of trading at the $136 billion hedge fund since 2012. Brian Hurst, AQR’s former head of trading, resumed his role on July 31, AQR said in a statement. Mr. Mittal wasn’t formally named in the action, but his role in the project was reported by The Wall Street Journal and Bloomberg News in recent weeks.

“AQR has ended its employment relationship with Hitesh Mittal,” the company said in a statement. “Mr. Mittal has been referenced in reports about an SEC investigation of ITG. This investigation reportedly relates to misconduct that occurred in 2010 and 2011 while he was employed at ITG.”

Mr. Mittal didn't respond to attempts to reach him Wednesday.

His boss, Mr. Asness, did not respond to twitter inquiries if the reason he "loves High-Speed Trading", as he admitted in a 2014 Bloomberg Op-Ed, is because of the criminal frontrunning profit it may have afforded him courtesy of the hiring of the "liquidity executive."
And just so there is no confusion, ITG's "prop trading" group was all HFT and algo-based.

None of the Omega team members had experience with proprietary trading. Instead, the Omega team consisted almost entirely of ITG employees with significant experience in ITG’s algorithmic trading group designing, building and/or writing computer code for ITG’s trading algorithms. Based on that experience, the Omega team had detailed knowledge regarding how ITG’s algorithms operated.

Not surprisingly, the whole criminal scheme was shrouded in secrecy:

From the start, and during the entire time it was in operation, Project Omega’s existence and trading activities were kept confidential and were not disclosed to ITG customers or POSIT subscribers or to the Commission.

Proprietary trading represented a significant departure from ITG’s core “agency-only” business model and public profile, and ITG had concerns that Project Omega or proprietary trading at ITG could result in reputational risk for the firm. If ITG decided to increase the scale of Omega’s proprietary trading activities, ITG planned to disclose its existence publicly and to customers at that time. However, before reaching that point, ITG decided that Project Omega and its proprietary trading activities were to be kept confidential.

Even within ITG, Project Omega was only to be discussed on a “need-to-know” basis, and even the customer-facing side of ITG was not informed of Omega’s existence.

The company was smart: it would only rip off sell siders, not the buyside, because as everyone knows the biggest idiots on Wall Street are on the sellside; buysiders tend to be at least modestly smarter on average.

Project Omega was subject to the limitation that its total open positions could not exceed $500,000 at any time. In addition, it was designed to trade only against the orders of sellside subscribers in POSIT, and not against buy-side subscribers. Based on these limitations, and that ITG initiated Project Omega to determine whether it could profitably engage in proprietary trading and/or market making on a larger scale, ITG considered Project Omega to be an “experiment.”

In short, Project Omega was this:


That's right: dark pools, HFTs, and so on, are nothing more than the Office Space scam: steal a little, millions of times, just don't get caught.
However, just like in Office Space, they eventually got caught.
And here's why:

For the period of approximately April to December 2010, Omega’s Facilitation Strategy, which was designed by the Liquidity Executive, involved trading based on a live feed of information (the “Aleri Feed”) relating to open orders routed by sell-side subscribers to ITG’s trading algorithms for handling. 8 The Omega team accessed the feed by connecting to a software utility called “Aleri” that was used by ITG’s sales and support teams. The feed contained various categories of real-time information regarding “parent” orders routed through virtually all of ITG’s algorithms, including: (a) client identifier, (b) symbol, (c) side, (d) quantity of shares, (e) filled shares, (d) target price, (e) the ITG algorithm in which the order was located, and (f) time parameters.

The Facilitation Strategy was designed to detect open orders of sell-side subscribers being handled by ITG via the Aleri Feed and, based on that information, open positions in displayed markets on the same side as the detected orders, and close its positions in POSIT by taking the other side of the detected orders. The Facilitation Strategy was designed to earn the full “bid-ask spread” by opening and then closing positions.

* * *

For the entire time that ITG’s proprietary trading desk was in operation, the Omega team had access to the identities of POSIT subscribers and used this information to identify the full range of potential sell-side subscribers for Omega to trade with in POSIT. In addition, the Omega team used the information to which it had access to analyze the Facilitation Strategy’s profits and losses by contra party. Based on these ongoing profit and loss analyses, and without POSIT subscribers’ knowledge or consent, the Omega team made decisions about whether to stop trading with a small number of subscribers and to continue trading with others.

The Facilitation Strategy was designed to trade only with the sell-side subscribers identified by Omega. In order to effectuate this aspect of the strategy, the Omega team needed assistance from the POSIT development team – a group that also reported up to the Liquidity Executive. At the direction of the Omega team, ITG’s POSIT team implemented the required configurations in the dark pool to “enable” sell-side subscribers to trade, or interact, with Omega in POSIT.

* * *

Despite the strategy’s goal of earning the full “bid-ask spread,” there were times when Omega executed trades in POSIT at “midpoint” and did not obtain the “full spread.” In certain instances when this happened, the Liquidity Executive directed his team to investigate by coordinating with the POSIT development team to determine why the trades executed at midpoint, instead of at the bid or the offer, as the Liquidity Executive thought they should have.

No market participant other than Project Omega had access to the information provided in the Heatmap Feed.

From approximately April to December 2010, Omega’s Heatmap Feed included live trade execution information for all of ITG’s customers, including both sell-side and buy-side customers.

In December 2010, ITG’s Senior Management and Compliance Department Learned that Project Omega was Improperly Accessing Subscriber Order Information.

In the late fall of 2010, ITG’s CEO directed two other ITG executives to speak with the Liquidity Executive to gather information concerning the operation of Project Omega for the CEO’s information and to assist the CEO in making a presentation to Group’s Board of Directors in February 2011.

In early to mid-December 2010, ITG’s compliance department and senior management learned – based on the Liquidity Executive’s admissions – that Project Omega was trading based on a live feed of information regarding sell-side customers’ orders that had been sent to ITG’s algorithms. As a result, ITG immediately suspended Project Omega’s trading. Shortly thereafter, the compliance department and ITG’s senior management learned additional detail regarding the Facilitation Strategy and Omega’s use of the Aleri Feed, as well as certain information about Project Omega’s use of the customer execution feed in connection with its Heatmap Strategy.

The Liquidity Executive had not previously disclosed to ITG’s compliance department or senior management that Project Omega’s strategies involved accessing and trading based on the Aleri Feed and the Heatmap Feed. Instead, prior to December 2010, the Liquidity Executive had misrepresented to ITG’s compliance department the manner in which Project Omega’s trading strategies were operating.

On approximately December 20, 2010, a meeting among ITG’s senior management and compliance department was held to address Project Omega. During this meeting, the CEO reprimanded the Liquidity Executive for violating ITG policy and placing the firm at risk. Thereafter, Project Omega made certain changes to its trading strategies and was permitted to restart live trading.

As a reminder, this same liquidity executive went on shortly thereafter to become head of trading at Cliff Asness' AQR hedge fund.
But wait, despite being "reprimanded" Hitseh Mittal continued to defraud clients:

On or around December 21, 2010, Project Omega restarted a modified Facilitation Strategy that did not involve access to the Aleri Feed. In addition, Project Omega restarted a modified Heatmap Strategy on or around January 24, 2011, without direct access to the Heatmap Feed.
When Project Omega resumed trading, no changes were made to its organizational structure. As before the temporary suspension, the Liquidity Executive continued to manage Project Omega and direct its trading strategies while also continuing his overall product management responsibilities for ITG’s trading algorithms, smart order routers and POSIT, which included access to confidential customer order and trade information. The other members of the team also continued in the same roles they had before the temporary suspension.

Despite the removal of the improper direct feeds, in connection with the Facilitation Strategy, Project Omega continued to have improper access to information identifying POSIT subscribers. In addition, the Omega team continued to coordinate with ITG’s POSIT development team to identify the sell-side subscribers for Omega to trade with in POSIT and to ensure that such subscribers were configured to trade “aggressively” in POSIT.

After resuming trading in late 2010, Project Omega continued to engage in live trading until on or around July 11, 2011, when ITG terminated the Liquidity Executive as an employee and discontinued Project Omega’s operations.

During and after the temporary suspension of Project Omega’s trading activities in December 2010, ITG continued to keep Project Omega and its trading activities confidential and made no disclosure of it publicly, to subscribers, or to the Commission via an amendment to the POSIT Form ATS.

That's ironic: at the time Traders Magazine reported that Mittal had been fired in what was a "cost-cutting measure." That was incorrect. He was caught rigging markets. At this point he wasted no time to move to AQR where he was welcomed with open arms, and make his boss Cliff Asness millions in profits which in turn gave Cliff the green light to write pandering op-eds about why he loves HFT.
* * *
The fraud was so blatant not even the staunchest supporters of the HFT lobby could come up with anything even remotely relevant to justify this fraud:

... one thing to say about this is: Hahahaha, that's really bad! Like, paranoid-fantasy bad. The deep worry of modern equity market structure is that high-frequency traders, brokers, exchanges and dark pools are conspiring in some combination to front-run unsuspecting customers: The bad guys know, somehow, that the customers are trying to buy a particular stock, and can, somehow, race ahead of those customers to buy the stock and re-sell it to them at a higher price. And that's exactly what happened here! So, terrible. ITG will pay the SEC $20.3 million, a record dark-pool fine. "'The conduct here was egregious,' Andrew Ceresney, director of the SEC’s enforcement division, said during a conference call Wednesday," and it is hard to argue with that.

The "analysis" could have just ended there, and spared itself the footnoted embarrassment.
* * *
But none of the above is really shocking: after all the only business model of HFT is criminal order frontrunning, pure and simple, which is why it allows multi-millionaires to become billionaires even as they profess their love of said crime, under the guise of "high-speed trading."
What is shocking is the following, from the filing:

... on the recommendation of senior management, Group’s Board of Directors approved a proprietary trading desk that was limited in scope to inform whether ITG should launch a fully-scaled and disclosed proprietary trading operation. This initiative at ITG, which was managed by the Liquidity Executive, became known as Project Omega.

So the company's board was ultimately responsible for Project Omega, a board among whose members was the following :

Mr. O’Hara worked in the Division of Enforcement of the U.S. Securities and Exchange Commission and as Special Assistant United States Attorney at the U.S. Department of Justice
 

As we reported before, O'Hara promptly quit the day ITG announced the SEC settlement - after all it wouldn't look very good  to have a former SEC enforcer oversee a market rigginal, and criminal client defrauding prop trading group which was busted by, well, the SEC... but by then it was too little, too late.
And there you have it: open, outright, market rigging and criminal fraud, and best of all, with the explicit blessing of former SEC enforcers. As in, the fox is not only not guarding the hen house, but telling the hens to come right in: the water is warm.
And that's why the US equity market is a farce, broken beyond repair and will never be fixed until everything comes crashing down to be rebult from scratch.
Source: SEC Charges ITG With Operating Secret Trading Desk and Misusing Dark Pool Subscriber Trading Information

Knife Regulation Arrives: This Is The US Government, Hard At Work

Submitted by Tyler Durden on 06/16/2015 23:22 -0400
http://www.zerohedge.com/news/2015-06-16/us-government-hard-work
When it comes to the contents of the TPP, the most important law of Obama's second term, merely leaking its contents to the press can have result in imprisonment or treason charges, which, considering recent revelations that a substantial portion of the bill was drafted by and for the express benefit of pharmaceutical companies, was to be expected:  when the US population learns that their elected legislators not only don't read the laws they "pass", but are merely bribed figureheads that don't even write them, the resultant collapse of the "democratic" process would be unpleasant.
And yet, other laws such as S.1315, are perfectly transparent and open. So, with nobody in Congress drafting the TPP (and apparently not even able to pass it, despite corporate backers' demands), here is a vivid example of the US government, hard at work.
presenting: S. 1315, Knife Owners’ Protection Act of 2015

S. 1315 would allow people to possess knives in states where they are illegal if the person is travelling to and from states where the knife is legal, if the knife is secured, or if the knife is a safety blade designed for cutting seatbelts. Based on information provided by the Department of Justice and the Federal Trade Commission, CBO estimates that implementing S. 1315 would have no effect on the federal budget. Because enacting S. 1315 would not affect direct spending or revenues, pay-as-you-go procedures do not apply.

S. 1315 would impose an intergovernmental mandate as defined in the Unfunded Mandates Reform Act (UMRA) by preempting some state and local laws related to possessing and transporting knives. Laws regulating knives vary from state to state. The costs for state and local governments to comply with that mandate would include the cost to change protocols and train law enforcement officers. CBO estimates the total costs for state and local governments would be small and would not exceed the threshold established in UMRA ($77 million in 2015, adjusted annually for inflation).

Yes, it would cost US taxpayers $77 million to "protect" knife owners, and yes if you own a knife, you too may be considered a threat.
h/t Bruce Krasting