This is the final part… congratulations on making it here! This post is Chapter 15 of a 15 chapter series. The entire series is listed here

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When Dendreon’s FDA application was derailed as a naked short selling attack flooded the market with
tens of millions of phantom shares, Dendreon’s supporters went berserk. They sent the government
hundreds of letters complaining about the naked short selling and the apparent machinations of Michael
Milken’s associates. After that, all but one of the ten hedge fund managers ceased to own “put options” in
Dendreon.
However, for the following two years the naked short selling continued more or less unabated. And in
April 2009, Dendreon was again on the SEC’s “Reg Sho” list of companies whose stock was “failing to
deliver” in excessive quantities. Dendreon stayed on that list even after the company’s CEO announced
that results of an Independent Monitoring Committee study of 500 patients were “unambiguous in
nature…a clear hit” for Provenge.
After the CEO’s announcement, Dendreon’s stock, which had been as low as $4 weeks earlier, rose to
the mid-20s. Then, on April 28, 2009, just hours before Dendreon was to present this “unambiguous” data
to an all-important meeting of the American Urological Association, the now legendary Yahoo! message
board post appeared, warning of a “BEAR RAID” that was to occur at precisely 12:30pm Central time.
Right on cue, within minutes of the moment predicted by that message, Dendreon’s stock tanked 65% (to
$7) in only 75 seconds.
Within hours of that amazing crash, Nasdaq announced that it had investigated the matter and decided to
let the trades stand. This was remarkable, given that it would have been impossible for the exchange to
identify that message board poster and sort through the trading data in such a short period of time. It is all
the more remarkable considering that this “BEAR RAID” was most likely the work of naked short selling
criminals.
At any rate, it is likely that short sellers, recognizing that it was now going to be more difficult to prevent
Dendreon from getting FDA approval, used the opportunity of that sharp price drop to cover their short
positions. Some short sellers might also have used the opportunity to go long, hoping to cash in on the
bonanza that was to follow. After the “BEAR RAID,” Dendreon’s stock price quickly rose back above $27.
The night after the “BEAR RAID”, CNBC’s Jim Cramer (who has begun a “crusade” against the crime of
naked short selling in an effort to distance himself from his previous efforts to cover up the crime of naked
short selling) said “I’m not qualified to talk about Dendreon.” This was two weeks after Cramer had
screamed that Dendreon had no chance of receiving FDA approval. Now he was no longer commenting
on Dendreon’s chances, but he noted, “I am a big believer in taking profits when I see a short squeeze.
So I am going to recommend taking profits.”
Some people clearly did “take profits.” After Cramer’s comment, the stock started to fall, and by May 8, it
was at $19. Then the buying started again. Quite possibly, some of the hedge funds that had been short
selling Dendreon used the dip to $19 to purchase still more Dendreon shares. After May 8, the stock rose
back up to around $25, which is approximately where it remains today. When SEC filings for this period
are in, it will be interesting to see which hedge funds bought shares.
But it will remain impossible to know who the criminal short sellers were. As far as the SEC is concerned,
that is a big secret – “proprietary trading strategies.”

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After Dendreon reported its data to the American Urological Association – data that showed almost
precisely what the data showed two years earlier (that is, that Provenge was safe, and that it lengthened
survival times while greatly improving the quality of life for end-stage prostate cancer patients who would
otherwise be subjected to the misery of chemotherapy) — Milken’s Prostate Cancer Foundation, which
had long shunned Dendreon as Milken’s allies maneuvered to derail it, finally concluded that it was time
to say something positive about Provenge.
“The PCF is delighted to see evidence of increased patient survival from Provenge,” the Milken
“philanthropic” foundation said in a press release. “We share the analysis of Dr. Philip Kantoff, a leader in
the PCF Clinical Therapy Consortium…and a principal investigator of the Provenge Phase III clinical
study. The results validate 16 years of modern research to harness a patient’s own immune system to
fight their prostate cancer and prolong their lives…”
The Prostate Cancer Foundation continued: “The PCF first provided funding to Dr. Eric Small…to support
clinical research around measuring immune responses in patients treated with Provenge…”
In other words, Milken’s “philanthropy” hadn’t spent two years ignoring, and in some cases trying to quash
Dendreon’s treatment. In fact, the Prostate Cancer Foundation had supported Dendreon all along!
This is nonsense. What the Prostate Cancer Foundation did not mention is that Dr. Philip Kantoff, the
physician mentioned in the press release, was on the advisory board of Cougar Biotechnology, the
company that Milken’s “philanthropic” foundation was promoting as a better alternative to Dendreon.
Moreover, Dr. Kantoff was one of the few physicians to publicly cast doubts on Provenge. He was never
able to say that Provenge did not work, but when talking to the press at the time of the FDA advisory
panel meeting in 2007, he was dismissive, or at least confused.
“I didn’t think [Provenge] had a snowball’s chance in hell of working,” Dr. Kantoff told Forbes magazine’s
Matthew Herper, the journalist who went to lengths to argue against FDA approval. “I’m still skeptical, but
I think there’s something going on here.” Kantoff suggested that Provenge could be a “slam dunk,” but
maybe the trial size was too small. Left unmentioned was the fact the FDA had regularly approved
treatments for dying patients when relatively small trials had shown such stunning results.
As for Dr. Small, he too was on the advisory board of Cougar Biotechnology. The Prostate Cancer
Foundation did indeed give him funding to measure immune responses in patients treated with Provenge,
but it is not at all clear that Milken’s “philanthropic” outfit was keen to see Dr. Small’s study yield positive
results. When the study did yield positive results, Dr. Scher, the chairman of the Prostate Cancer
Foundation’s Therapeutic Consortium (referred to in the above press release as the “Clinical Therapy
Consortium”), spun them as negative results.
In his letter to the FDA (the one that quickly and mysteriously ended up in the hands of The Cancer
Letter), Dr. Scher quoted Dr. Small as saying the following: “In summary, this study suggests that while
sipuleucel-T fell short of demonstrating a statistically significant difference in TTP, it may provide a
survival advantage to asymptomatic [prostate cancer] patients.” Dr. Small had not written the word “may”
in italics. That was Dr. Scher’s improvisation, part of his effort to convince the world that absolute “proof”
of efficacy was needed for FDA approval.
As both Dr. Small and Dr. Scher knew, the “gold standard” for physicians, and the federally mandated
standard for drug approval, is “survival” — “substantial evidence” that a treatment may help patients live
longer. Perhaps Dr. Small felt constrained in challenging Dr. Scher’s misuse of his study. Perhaps he also
felt uncomfortable about joining Dr. Scher (who was, after all, the powerful chairman of Milken’s
Therapeutic Consortium) at the meeting of the FDA advisory panel that voted on Provenge in March

Dr. Small was supposed to speak on behalf of Provenge at that panel. Perhaps this concerned the folks
at the Prostate Cancer Foundation. Either way, Dr. Small was a no-show at the panel that day.
He apologized – something about a hitch in his travel plans.

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In May 2009, while Milken’s Prostate Cancer Foundation was rewriting history, Milken’s hedge fund crony,
Steve Cohen, who was one of those seven hedge fund managers who had bet big against Dendreon after
the advisory panel meeting in 2007, reached out to Care-to-Live, the grass-roots organization that had
done so much to highlight the connections among Milken’s “philanthropy,” Milken’s investments, and
Dendreon’s travails
On May 19, 2009, one of Care-to-Live’s founders received an email from an employee of CR Intrinsic
Investors, which is one of Steve Cohen’s hedge funds. “I’m an investor in biotechnology and
pharmaceutical companies and I’m interested in understanding the patients perspective on Provenge and
any other therapies in development…,” the email began. “Would you or someone from Care-to-Live be
available speak with me…? I have spoken to a number of academic thought leaders, but I’d like to better
understand what the patients want…”
And by the way, “I’m happy to provide compensation for time spent speaking with me if that is of interest.”
Milken-affiliated hedge funds already have analysts and journalists regurgitating their party line on
command. They also have doctors on the payroll. Might as well put the troublemakers on the payroll, too.

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Or perhaps Cohen is genuinely thinking about investing in Dendreon. Perhaps he already has. The
intentions of this network remain a matter of some speculation.
Much of this speculation focuses on Dmitry Balyasny, the Russian “whiz kid.” As recently as March of this
year, when they filed their last SEC documents, Balyasny’s hedge funds – Balyasny Asset Management,
BAM and Visium – held around 3 million put options in Dendreon. Simultaneously, these hedge funds
owned an almost equal number of call options. It is possible that Balyasny and his associate, the
mysterious Jacob Gottleib, were implementing a split-strike pricing strategy – selling out-of-the-money
calls and buying out-of-the-money puts. The effect is to create a large synthetic short position.
But SEC documents show that during much of the past two years, Balyasny’s funds also owned large
numbers of Dendreon shares. These could have been shares that they bought to cover short positions.
Or it could be that they owned shares to gather proxy votes and put pressure on Dendreon’s
management to act in ways that might not be good for the company.
Whatever the case, Dendreon’s latest Schedule 14-A, filed on April 30, showed that Balyasny (previously
one of the seven hedge funds with large bets against Dendreon) had become Dendreon’s largest
shareholder, with a 9.8% stake in the company. The second largest shareholder was Capital Ventures
International, the unit of Susquehanna that did the PIPEs deal with Dendreon. Visium Capital owned
5.5% of Dendreon. Meanwhile, Joseph Edelman, the hedge fund manager who was employed in 2007 by
Lindsay Rosenwald, formerly of the Mafia-connected D.H. Blair, has bought at least 2 million Dendreon
shares.
In addition to those purchases, many of the Milken network hedge funds that bought Dendreon’s
convertible bonds now have the capability to convert, so they, too, might soon count themselves among

Dendreon’s largest shareholders. Altogether, this network may already control (or have the ability to
convert into enough shares to control) as much as 30% of the company.
If Balyasny had acquired more than 10% of the company, he would have been subjected to reporting
requirements designed to identify hostile takeover attempts. Given that he acquired 9.8% (that is, just
under 10%), and given that he nowhere declares his co-ownership of Visium, which adds 5.5% to his
stake, it is possible that Balyasny and others in his network have considered seizing control of the
company by stealth.

Incidentally, this was the modus operandi of the Milken network in the 1980s. As most every book on

Milken recounts, affiliated investors (some combination of Michael Milken, Ivan Boesky, Carl Icahn,
Princeton-Newport, John Mulheren, and others) would each buy, say, 4.9% or 9.8% of a company without
declaring themselves to be affiliated investors. In some cases, Milken would “park” stock (e.g. Princeton
would secretly buy stock on Milken’s behalf) in order to conceal that he had any ownership at all.
By secretly holding large blocks of shares, the network was able to acquire controlling stakes in firms
while bypassing regulatory requirements to declare such positions. Besides putting them in a position to
manipulate prices, Milken and friends then put pressure on companies’ managements by quietly letting it
be known that they had, as a group, a controlling number of proxy votes.

If Milken’s friends come to control Dendreon, Milken’s “philanthropic” foundation will no doubt continue to
articulate its new position of being “delighted” that the data shows that Dendreon’s treatment is safe and
effective (which is the same thing the data showed two years and 60,000 American deaths ago). And if
the Milken network takes over Dendreon, perhaps Michael Milken will, in the name of “philanthropy,”
convince his government minions to grant approval to Provenge, so that it can be administered to the
patients who desperately need it.
But that should not cause us to ignore the ordeal that Dendreon has endured during these past few years.
And we should demand an end to a status quo which cedes our capital markets to Wall Street
miscreants, cheats, and manipulators who decide which companies survive unmolested, and which will
be crippled or killed off entirely.
But it is not surprising that criminals see fit to maim public companies.
There is a legal principle that holds that one can only insure something in which one has “an insurable
interest.” For example, one cannot buy life insurance on another person’s life. But imagine that this were
not the case. Imagine if it were possible for people to buy insurance on other people’s lives. One can see
that there might evolve a type of criminal who would buy life insurance on the lives of others, and then
arrange for those people to die.
One can even imagine that, as society wised up to this practice, such criminals would evolve new tactics.
For example, the criminals might target newborn babies in hospitals, because babies are vulnerable, and
it would be difficult for anyone to know for certain when they were dying naturally, or as a result of
criminals manipulating outcomes.

One could even imagine that the most sophisticated of these criminals would come to target newborn
babies who were already sick, because manipulating their medical outcomes in order to cause their

deaths would leave the slightest statistical footprint possible.

In our society one cannot buy life insurance on another person, but one can buy “life insurance” on a
company: that is, one can make a bet that a company will fail, and collect on that bet when the company
dies. It is the contention of Deep Capture that there are criminals who take out life insurance policies
against companies, and then manipulate their outcomes so as to collect on those policies.

And just as we can understand the logic of criminals focusing on newborn babies, so too can we
understand why financial criminals have learned to focus on small, early-stage public companies. And to
extend the morbid metaphor one last step: just as the criminals might focus on newborns who are already
sick, because their outcomes are already in the most doubt (making the criminal manipulations hardest to
spot), so too have the financial criminals learned to focus not just on early-stage public companies, but on
early stage public companies working in the field of biotechnology.
That is because in biotechnology the difficulties in valuing a company are at their greatest. There is often
little to no revenue. The idea behind the company may be nothing more than the theory of a scientist. No
one knows whether it will work. If it works, no one knows how long it will take to prove that it works. And
even if it can be proven to work, no one knows how long it will take to clear all the legal and regulatory
hurdles it will face. Such companies are favored targets for manipulators because it is easy to manipulate
the truth when no one knows the truth, and whatever truth exists lies behind so many veils.
In the case of Dendreon , the truth was hard to miss. It was more than a company with a blockbuster
treatment. It was the first company in decades to develop a medicine that could truly revolutionize the
way that doctors treat cancer. The company had gathered its data, and the data was conclusive (to a
95% confidence level): Provenge was safe and effective. A panel of experts assembled by the FDA had
declared that the treatment should be approved.
So when naked short sellers attacked, and the treatment was derailed, it was obvious that there had been
foul play. Hundreds of concerned citizens took it upon themselves to investigate, and document, the
footprints of the miscreants. As a result we have been able to present a highly discernible, if admittedly
incomplete, picture of their scheme.
But we must ask: How many other small biotech companies have been victimized in less obvious ways?
How many companies were like the babies of our morbid metaphor — snuffed out before they could
demonstrate their potential; killed by criminal naked short sellers and their accomplices (captured
journalists, regulators, doctors) who successfully pled innocence, saying the companies died because
they were sick or weak? And how many of those murdered companies, weak or not, had medicines that
could have saved lives?
Our morbid metaphor, you see, is not entirely metaphor. Real people have died.
In answer to the question of how many people have died, we know only from the data that abusive and
illegal short selling has affected many hundreds of small biotech companies with all manner of medicines.
We know that the vast majority of those companies are now gone, and that some number of them, if left
to the rigors of the market (but not to the whims of criminal short sellers), would have one day delivered
their medicines to patients.
But, of course, we do not know who the criminal short sellers are. According to the Securities and
Exchange Commission, that is a big secret – “proprietary trading strategies.”

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