This is Chapter 4 of a 15 chapter series. The entire series is listed here
D.H. Blair, the Mafia-affiliated brokerage founded by Lindsay Rosenwald’s father-in-law (the so-called
“king of stock fraud”) and managed for some time by Rosenwald and Michael Milken’s former national
sales manager, received much of its finance from the family of a man named Zev Wolfson. Mr. Wolfson
was also closely involved with another Mafia-affiliated brokerage, A.R. Baron.
As you will recall, D.H. Blair and A.R. Baron featured prominently in the prosecution’s case against White
Rock Partners, the firm co-founded by Felix Sater and Salvatore Lauria. Felix Sater, remember, is the
alleged son of a top Russian Mob boss. Lauria previously worked as a trader for Gruntal & Company, a
Mafia-affiliated brokerage stacked with cronies of Michael Milken.
You will remember that Felix Sater is currently a business partner of Milken crony Leon Black. Sater is
also the guy whose naked short selling colleague, Alain Chalem, had his ears and face shredded with
bullets. You will also recall that Sater is allegedly the man who sent a message that the Mafia would
murder Deep Capture reporter Patrick Byrne if he continued his crusade against illegal naked short
Wolfson, meanwhile, was involved in another “colorful” brokerage, Pond Equities. In 2006, the SEC filed
civil charges accusing Pond Equities of participating in a massive naked short selling fraud.
Aside from funding Mafia-affiliated brokerages, some of which were closely tied to Michael Milken,
Wolfson was also the key early investor in funds controlled by a number of Milken’s more “prominent”
cronies. For example, Wolfson was an early benefactor of a “prominent billionaire” named Saul Steinberg.
In the 1980s, Steinberg built a company called Reliance Insurance with generous junk bond financing
from Milken. Reliance, in turn, became one of the Milken-aligned financial conglomerates that regularly
bought the junk bonds that Milken was selling for his other cronies. In other words, Steinberg was a key
player in Milken’s junk bond merry-go-round – one of history’s great Ponzi schemes. Eventually,
Steinberg looted and bankrupted Reliance, though he has never been charged with any crime.
Today, Steinberg is a founding partner of Wisdom Tree Investments, which is managed by Steinberg’s
son, Jono. Jono is married to CNBC’s Maria Bartiromo, also known as the “Money Honey.” The Money
Honey’s father is the former owner of a Brooklyn catering outfit and private club called the Rex Manor.
Residents of Brooklyn know the Rex Manor as a popular hang-out for members of the Bonanno
organized crime family (a fact that is merely of biographical interest and not meant to imply that Mr.
Bartiromo is in the Mob).
The other founding partner of Wisdom Tree Investments is Michael Steinhardt, who is one of the nation’s
most “prominent” hedge fund managers. As was noted in Chapter 3, Steinhardt’s father, Sol “Red”
Steinhardt, worked for the Genovese organized crime family and spent a number of years in Sing-Sing
prison after a New York prosecutor pegged him as “the biggest Mafia fence in America.” According to
Steinhardt himself, the key limited partners in Steinhardt Jr.’s first hedge fund were the Genovese Mafia
and three “prominent investors” – Marty Peretz, Marc Rich, and Ivan Boesky.
Ivan Boesky, we know, was famously indicted in the 1980s for participating in various stock manipulation
schemes with Michael Milken. Also convicted for his participation in these schemes was a man named
John Mulheren, who had run an arbitrage fund largely financed by Zev Wolfson (the fellow who also
financed Saul Steinberg, the Mafia-affiliated brokerages tied to Milken and other Milken cronies who will
be introduced shortly).
Although Mulheren’s conviction for manipulating stocks was ultimately reversed on appeal, there was a
time when he believed that Boesky might squeal on him and his friend, Michael Milken. So one day
Mulheren loaded his car with weaponry and set out to assassinate Boesky. Fortunately, the police
arrested Mulheren before he could commit the murder.
According to a famous book called “Den of Thieves,” written by Pulitzer Prize winning author James
Stewart, Mulheren spent most of his time in jail conversing with Anthony “Fat Tony” Salerno, who was
then the top boss of the Genovese Mafia family. In addition, Scotland Yard has linked Salerno to Steven
Wynn, a Las Vegas casino operator. Wynn is Milken’s closest friend, according to Milken, and Wynn’s
wife, Elaine, sits on the board of Milken’s Prostate Cancer Foundation, which, we will see, seems to have
little interest in promoting effective treatments for prostate cancer, and probably played a role in derailing
After he got out of jail, Mulheren co-founded a hedge fund called Millennium Partners, then promptly died
of an early heart attack, leaving his co-founder, Izzy Englander, to continue operating the fund. Izzy
Englander secured much of his investment capital from not just Zev Wolfson, but also the Belzberg
brothers – William, Sam, and Hymie. Executives at an investment firm called the Bache Group once
accused the Belzberg’s of having ties to organized crime, citing U.S. Customs Service reports,.
As we know, in late March, 2008, after Dendreon received its fantastic news that an FDA advisory panel
had voted in its favor, only ten hedge funds were maintaining long-shot bets against Dendreon (long-shot
bets that would, in time, prove strangely prescient). At least seven of those hedge funds are quite
“colorful” – and all seven are part of the same network.
So far we have examined two of the seven “colorful” fund managers who stood to profit from the demise
of Dendreon. Those two are Bernie Madoff (the $50 billion Ponzi schemer and naked short seller), and
Lindsay Rosenwald (formerly a manager of the Wolfson-financed D.H. Blair, which was founded by
Rosenwald’s father-in-law, the “king of stock fraud”). Both Madoff and D.H. Blair had ties to organized
crime. Both worked intimately with Michael Milken or his closest associates.
So perhaps it is no surprise that the third hedge fund that was betting heavily against Dendreon in March
2007 was Millennium Management, co-founded by John Mulheren–jailhouse confidante of “Fat Tony”
Salerno (the Genovese Mafia boss); co-conspirator of Michael Milken; would-be murderer of Ivan Boesky;
and recipient, like other Milken cronies and a number of Mafia-affiliated brokerages, of key finance from
Altogether, Millennium owned put options on 800,000 shares of Dendreon at the end of March 2007 – just
after the company’s prostate cancer treatment was endorsed by an FDA advisory panel; right at the time
that Dendreon came under a blistering illegal naked short selling attack; and just before Dendreon was to
experience some strange occurrences.
Let us return to Zev Wolfson — and because there are readers who might have a hard time following this
tangled web, permit me to begin this section by repeating a few facts.
As we know, Wolfson funded D.H. Blair, the Mafia-affiliated brokerage which became the target of a 173
count indictment, saw two vice chairmen plead guilty to securities fraud, had a president (Richard Maio)
who was once Michael Milken’s national sales manager, and had another vice chairman (the son-in-law
of the “king of stock fraud”) who is now one of America’s biggest biotech traders and an adversary of
Dendreon. Wolfson was also the key early investor in funds run by Milken cronies Saul Steinberg (partner
of Michael Steinhardt, whose father worked for the Genovese family as the “biggest Mafia fence in
America”) and John Mulheren, who spent his jail-time conversing with Genovese boss Anthony “Fat Tony”
Salerno, and then co-founded Millennium Management, which later also became an adversary of
In addition, Wolfson was a key early investor in a fund managed by “prominent billionaire” Carl Icahn.
Before he became a “prominent” billionaire, Icahn, remember, had founded the options trading
department at a firm called Gruntal & Company, which owed its existence to the generous finance that
the criminal and future “philanthropist” Michael Milken gave to its parent company, the Home Group. Like
Steinberg’s Reliance Insurance, the Home Group was a key player in Milken’s junk bond Ponzi scheme.
As mentioned, Icahn was replaced at Gruntal by Milken crony Ron Aizer, who proceeded to hire as
traders two associates of Michael Milken. According to a reliable source, one of those traders was
investigated for trading on inside information provided by Milken’s operation at Drexel Burnham Lambert.
Both traders are now “prominent” hedge fund managers, and both are important characters in the story of
Dendreon, so I promise to name them soon.
As also mentioned, Gruntal was caught embezzling millions of dollars. One of its traders was found to be
running money for the Gambino Mafia family. And a large number of its traders went on to work for White
Rock Partners, the Mafia firm that was indicted for manipulating stocks with help from the Mafia-affiliated
D.H. Blair, founded by the father-in-law of Lindsay Rosenwald, who was one of those seven “colorful”
hedge fund managers who stood to profit from the demise of Dendreon.
Recall that White Rock also did business with the naked short seller Alain Chalem. Recall also that White
Rock’s co-founder Salvatore Lauria has said that he once worried that White Rock’s other co-founder,
Felix Sater, might murder Chalem. As we know, Chalem eventually was assassinated in his New Jersey
When Icahn left Gruntal, he began a career in “greenmailing” – acquiring large amounts of companies’
stock and threatening to make problems if the companies didn’t buy back the stock at a premium. His
greenmailing (a.k.a. blackmailing) exploits were made possible by generous junk bond finance handed to
him by Michael Milken. By most accounts, Icahn owes his phenomenal wealth and power to two people –
Zev Wolfson (financier to multiple Mafia-affiliated brokerages) and Michael Milken, who is (as should be
clear by this point) on close terms with many Mafia-connected investors, and is now considered a
Given his association with Milken and Wolfson, it is perhaps predictable that Icahn has relationships with
other Mafia-connected goons as well. For example, Icahn once employed a man named Allen Barry Witz,
who was later implicated by the U.S. government in another Mafia-run stock manipulation fraud. As it
happens, Witz also did business with Alain Chalem, until, that is, Chalem’s head was shredded with
bullets in his New Jersey mansion.
According to various reports, Icahn’s former employee, Barry Witz, was one of the last people, other than
the killers, to see Chalem alive.
Milken crony Carl Icahn has had multiple brushes with naked short selling. For example, Icahn was the
man behind Ladenburg Thalmann, an investment bank that financed many companies through so-called
PIPEs – private investments in public equities.
The PIPEs industry is rife with abuse (See Forbes magazine’s story, “Sewer PIPEs,” which describes
some of the industry’s ties to the Mafia). Since PIPEs dilute equity, a company that does a PIPEs deal will
typically see its stock fall in value. To capitalize on this, hedge funds affiliated with the PIPEs investor (i.e.
with the company’s supposed benefactor) will sometimes illegally naked short the company before and
after the PIPEs deal is announced. Often, this naked short selling sends the stock into a “death spiral,”
and the company is put out of business.
In one famous case, Icahn’s Ladenburg Thalmann was hired to broker a PIPEs deal for a small software
firm called Sedona Corporation. In this capacity, Ladenburg introduced Sedona to a hedge fund called
Rhino Advisors, which in turn brought in a hedge fund called AMRO International. According to the
prosecutors who later charged Rhino with stock manipulation, as soon as AMRO and Sedona entered
into their PIPEs deal, Rhino’s owner Andreas Badian, instructed his traders to naked short Sedona with
“unbridled aggression.” Rhino’s other owner, Thomas Badian, is now a fugitive from the law living in
According to the SEC, Rhino’s naked short selling was conducted in collaboration with Pond Equities
(also known as Pond Securities), which was financed by Zev Wolfson, the fellow who also financed all
those Milken cronies, including Icahn and the folks at the Mafia-affiliated D.H. Blair.
Most of Rhino’s phantom stock was processed through a giant brokerage called Refco Securities, which
was later found to be hiding more than $400 million worth of liabilities in off-balance sheet entities. As
Deep Capture reporter Judd Bagley detailed in a recent video (click here to watch), those liabilities were
likely related to Refco’s rampant naked short selling.
In a series of stories for The Deal, a financial news magazine, reporter Stacy Mosher determined that
Amro International had provided PIPEs financing to over sixty companies, many of them biotech firms. At
least 29 of those deals involved Carl Icahn’s Ladenburg Thalmann. Soon after announcing their PIPEs
deals, every one of those 29 companies were hit with unbridled naked short selling. Every one of those
29 companies saw their stocks go into “death spirals.” And nearly every one of them quickly went out of
Icahn is not the most famous player in the world of PIPEs. That accolade belongs to another of Milken
and Wolfson’s charges — Lindsay Rosenwald, one of those seven “colorful” hedge fund managers who
stood to profit from the demise of Dendreon.
Rosenwald worked for Ladenberg Thalmann before joining his father-in-law (the “king of stock fraud”) at
D.H. Blair, the Mafia-affiliated brokerage whose president was Michael Milken’s former national sales
manager. In addition to financing medical companies with no medicines, Rosenwald’s Paramount Capital
has done some PIPEs deals with companies that did, indeed, have promising medicines. Many of those
companies are now gone — drowned by tsunamis of phantom stock.
I promised to return to this: When Icahn left Gruntal, he was replaced by Milken crony Ron Aizer, who
proceeded to hire two traders who are cronies of Michael Milken.
The first trader hired at Gruntal by Aizer was a man named Steve Cohen, who later founded a hedge fund
called SAC Capital. Cohen has been described (by BusinessWeek magazine and others) as “the most
powerful trader on Wall Street.”
In an upcoming chapter, I’ll name the second trader hired by Aizer. Soon after that trader was hired,
Cohen was joined at Gruntal by Stephen Feinberg, who had previously been a top trader for Milken’s
operation at Drexel Burnham, and now runs Cerberus Capital Management, which was, until recently, coowned by J. Ezra Merkin, one of the most important “feeders” to Bernard Madoff’s Mafia-connected $50
billion Ponzi scheme.
While at Gruntal, Cohen grew closer to Milken, and came to be on especially good terms with one of
Milken’s top employees, Bruce Newberg, who was later implicated in Milken’s stock manipulation
schemes. A reliable source has told Deep Capture that the SEC once investigated Cohen for trading on
inside information provided to him by Milken’s staff at Drexel, Burnham, Lambert.
Nowadays, Cohen is known for demanding strict loyalty from his co-workers, past and present. Some say
that these demands border on paranoia (Cohen’s employees are required to sign non-disclosure
agreements swearing them to absolute secrecy – for a lifetime), but many of Cohen’s colleagues have
benefited. Cohen’s former employees often move to new hedge funds that are satellites of Cohen’s
powerful trading empire.
Sometimes the hedge funds that are staffed by Cohen’s former employees are initially or wholly financed
by Cohen himself. Other times Cohen and the hedge funds staffed by his former employees merely trade
in tandem – betting for or against the same stocks and precisely the same time. It is fair to assume that,
collectively, Cohen, his former employees, and others in his network (traders who are tied to Michael
Milken or his close associates) have enough fire power to move share prices.
In the 1990s, Cohen’s SAC Capital sometimes bought stocks being promoted by D.H. Blair, the Mafiaaffiliated brokerage that figured prominently in the prosecution’s case against White Rock Partners,
whose traders were mostly Cohen’s former co-workers at Gruntal. Cohen would hold these D.H. Blair
stocks even when they had no revenues and had been delisted from stock exchanges. Generally, these
kinds of stocks were held by only two sorts of investors – little old ladies who’d been bamboozled by D.H.
Blair, and stock manipulators. But who knows, maybe Cohen did the math and figured they were the next
At any rate, Cohen seems to have had some sort of relationship with the Mafia-affiliated D.H. Blair. But
D.H. Blair is gone. In its place, we have Paramount Capital, run by Lindsay Rosenwald, the son-in-law of
the “fraud king” who founded D.H. Blair.
One employee of Paramount Capital was Joseph Edelman, who, remember, was simultaneously running
one of the seven “colorful” hedge funds that was betting big against Dendreon. Meanwhile, Rosenwald
was the controlling shareholder in Cougar Biotechnology, which was promoted (by Milken’s Prostate
Cancer Foundation) as having a promising treatment for prostate cancer, even though that treatment was
(and is) largely untested and years away from receiving FDA approval.
The vice president of Rosenwald’s Paramount Capital was a man named David J. Kellman. Prior to
becoming the vice president of Rosenwald’s Paramount Capital, Kellman was a top trader for Steve
Cohen’s SAC Capital.
I assume that Steven Cohen has been as diligent about maintaining his relationship with Kellman as he
has been with all his former employees (a diligence that some describe as “maniacal”). Presumably
Cohen also stays in touch with the folks at Millennium Management, the fund that was co-founded by the
fellow who sought to assassinate Ivan Boesky, and later became one of the seven “colorful” hedge funds
that owned large numbers of put options in Dendreon.
Over the years, Millennium has employed a number of Cohen’s former traders, including Edmund Debler
and Steve Lisi, who ran Millennium’s healthcare trading until 2005, when they set up their own fund,
which no doubt served as another satellite of the Cohen empire.
Millennium is a highly secretive fund, so it is difficult to know which of its employees were responsible for
its Dendreon trades, but perhaps its current healthcare team, like its previous one, are colleagues of Mr.
Cohen. We do know that Millennium has hired a new vice president. His name is Hanming Rao. And he
was previously a top trader for Cohen’s SAC Capital.
Millennium, Paramount, Steve Cohen and others in this network often take similar positions in the same
stocks. Many of those stocks have been pummeled by illegal naked short selling.
So it should not surprise that Cohen is the fourth of those seven “colorful” hedge fund managers (the
other three being Bernard Madoff, Joseph Edelman of Paramount and Perceptive Advisors; and
Millennium’s Izzy Englander;) who had the foresight to hold improbably large numbers of put options in
Dendreon at the end of March, 2007, just when Dendreon was hit with an unprecedented wave of illegal
naked short selling (phantom stock).
Cohen’s lesser known hedge fund, Sigma Capital, held put options on 750,000 shares of Dendreon at the
end of March 2007. Another of Cohen’s lesser known hedge funds, JL Advisors, owned 1.3 million shares
of Dendreon as of the end of 2006. These shares were dumped sometime before March 31, 2007,
contributing to the selling volume created by Joseph Edelman dumping more than 6 million Dendreon
shares that he’d received by exercising call options — and by the simultaneous appearance in the
marketplace of at least 9 million more phantom shares, the result of rampant naked short selling which
the SEC decries as illegal, but refuses to address, except to say that naked short selling is a big secret –
a “proprietary trading strategy.”