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Ari Sussman’s backdoor insider selling technique

Gather round, ladies and gentlemen, learn how one of the seedy operators in the junior sector got rich while (he thought) nobody was looking. Ten years ago, Ari Sussman had his current game plan at Continental Gold (CNL.to) on the back-burner. The manifold fun of Buriticá, from discovery to exploration to problems with the illegals, working through permits, getting Newmont in as JV and then trying to wash hands of all responsibility for the deaths of three of its geologists all lay in the future, because at that time Ari’s main thrust (along with the now deceased Vic Wall (RIP) and many of the same people now at CNL) was Colossus Minerals (ex-CSI.to).
By way of the briefest reminder, Colossus (CSI) was an almighty pump and massive crash and burn when it finally fell apart. It was based on the remnant mineralization at the near-legendary Serra Pelada deposit in Brazil and the whole thing took off like a scalded cat when CSI started returning some of the most eye-popping drill assays ever seen in the world of juniors, with intercepts that were admittedly small but off the charts for gold, platinum, palladium and other such metals of valuable goodness. CSI had a good three years of market stardom and saw its share price rocket from pennies to the $8 and $10 range, thanks to the hype, the grand plans and the sponsorship of deep pockets such as Sandstorm Gold (SAND) and ARC Fund. But to cut a VERY long story short, the grand plan was not to be and when it became clear CSI was abjectly failing to provide a resource or manage the engineering to reach the ultra-high grade rocks buried in difficult terrain (not to mention some extremely difficult community and political risk issues), the company fell apart.
No end of people lost many, many hundreds millions of dollars. But ex-CEO and ex-Chairman of the company Ari Sussman did well out of the collapsed disaster of his company. Very well indeed. That’s because aside from collecting a juicy salary and bonuses, he was fond of selling his stock at high prices but doing so in a way that wouldn’t attract any sort of attention. I’d like to make it clear that what he did was indeed legal, but it was most unusual for a company chair/CEO, off the charts immoral and even went directly against what he told other insiders at the company, because when things fell apart he went round telling CSI personnel that they couldn’t sell their shares and had to “go down with the ship”…while all the time using a backdoor method to dump millions of dollars of his own stock onto the market.
To get a handle on what he did, you need to go to Canada’s SEDI website, go to Sussman’s filings spend a while seeing how he went about his shady business and get it straight in your head. But fear not, your humble scribe has done the legwork for you and what follows is just about the easiest way I could think of to present the data. It’s quite long, but after the first couple of examples you’ll see how the pattern repeats as Sussman goes to the well, time after time, to sneakily turn his shares into dollars.

Each of the following blocks of trades have six columns, which are:

  • Code: This is the code given by the Canadian regulatory authorities/SEDI for the trade. And this is in fact an important item, because it shows the chronological order of the trades and also why the way in which Sussman liquidated his shares was so unusual.
  • Trade date: When the trade happened. Self-explanatory.
  • Filing date: When the trade was registered, usually a couple of days after the trade happened. Standard stuff for the most part.
  • Trade: What was bought or sold. I’ve colour-coded this to make it easier to see, basically when shares leave Sussman’s account it’s in red, when they enter his account it’s green.
  • Price of trade: What they shares were sold (or bought in) for, also self-explanatory.
  • Net Position: How many shares Sussman owned after the deal was done.

To start, we go back to February 2009 and this set of trades. Sussman had previously traded his stock in modest purchases and sales, but this block marks the beginning of the bigtime moves as well as the pattern Sussman would used to liquidate and cover his tracks.

You see the first lines are a whole bunch of sales, all around the C$6
price level. If you add them up there are 168,800 shares sold for total
gross proceeds of C$1,021,240. But then come three green lines, with shares entering his account at a much cheaper price. These are options that Sussman held and he had a whole gazillion of these (awarded to himself in previous years when CSI was a penny stock and just getting started). So what he did, just a few days after the sales, was exercise enough options to cover the sales so they wouldn’t show up when it was time to ask about holdings. He’d say “Yeah, I have 1.71m shares of CSI, I’m a big holder of this company” and that was true, but what he failed to mention was that by selling fully paid up shares and then quickly replacing them with the exercising of very cheap warrants, he was cashing out big-time while retaining the pretense. It cost him some money to exercise those derivatives of course, but as he’d just hit a large payola that was not an issue. Once the job was done he’d netted himself a cool $937,276.
The strategy clearly worked too and nobody saw what was going on, so at the end of the year he did it again, twice. This time a couple of small 10,000 share sales at C$5.69 and at $5.90 that were immediately topped up by 40c options (note the trade dates different, but the filing dates the same to make it seamless). Net profit on these round trips, $107,900
We move to May 2010 and exactly the same pattern. First the sales of expensive shares, then afterwards (NB. this is NOT before, the trade codes make that clear) come the cheap options to top the holding back to exactly where it was before, 1,711,401 shares. He did well here and made $417,642 net.

It’s now late May, the CSI promo is in full swing, the hype is at full volume and suckers all over the world are buying this stock…just as company head Ari Sussman is selling. Once again sales that are covered immediately by cheap options exercises. Once again his total holding returns to exactly 1,711,401 shares. But then in late June we have a outlier to all his trades during this period as according to the records he sold himself 81.1k shares with no options exercised into the account and no profit or loss recorded.

My best guess is that he was transferring shares from one brokerage
account to another, but even that’s a guess and would be for unknown
reasons. However, these three self-swap trades were a one-off and we
soon got back to the real business of turning Ari shares into Ari cash
without anybody noticing.

Here we are in August 2010, he does the same switcheroo on 50,000 shares, comes away with $362,596 profit

January 2011,  20,000 shares done at a net profit of $5.35 each, ring the bell, $107k profit

Then in February 2011 Ari got busy with a whole bunch of smaller trades spread between Feb 4th and Feb 7th. But of course, none of them filed until the 25c options had covered his tracked to the share. Hey look we’re back at exactly 1,711,401 shares again. It’s magic!

Then another 20k a couple of days  later, same story.

And 10,000 more shares blown out into a unwitting market just two days after that.

And then a big one. Just one week later in the same February 2011, Ari Sussman sells 100,000 shares at $8.35 and then $8.48, immediately topping them back with 25c options. However and for the first time in a long time he actually adds to his holding by exercising another 50,000 shares, bringing us to 1,761,401.

By the time his Febraury 2011 was through, company head Ari Sussman had quietly liquidated 200,000 shares of CSI and made a net profit of over $1.57m. Not bad for a month’s work
All that must have got him enough money to live on for a while, because we had no more inside dumping from Sussman until February 2012 and his final act while and officer of CSI.

This 50,000 share switcheroo, in exactly the same style as before, netted Sussman $353,451. But it was just after that when things started to go horribly wrong at Colossus, the story unwound and the share price fell apart. First Sussman resigned as CEO and then on October 15th 2012 he also resigned as chairman, leaving the company entirely (which also means he was free to sell all his remaining shares and options without having to declare a single trade publicly.

Once the dust had settled on Colossus, as noted above many people had lost fortunes due to the ineptitude, mismanagement and promotional hype that went badly wrong at the company. For example, ask Sandstorm’s Nolan Watson if he has plans to invest in Continental Gold. Or Beto Arias of ARC. However, Ari Sussman came out of the disaster smelling of roses and vastly more wealthy than when he began. Aside from his salary and bonuses, and even if he didn’t end up liquidating his shares the moment he left the company, the insider trades as noted above made him around $3.86m net profit. And all the time while he played it sneaky and pretended to the market he was a tight hand holder. 
Leopards do not change their spots, ladies and gentlemen. Don’t think for a minute this person wouldn’t throw you all under a bus once again and run off with your money via trades in Continental Gold, he’s done it once and he’s more than capable of doing it again.

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