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The stock price plunged, triggering margin calls that pushed the Seppenwolde syndicate into bankruptcy.
The stock plummeted, leading to the margin calls that led him to admit the fraud, he said in his confession.
Thornburg shares closed at $11.54 on Feb. 27, the last day before it began disclosing a series of margin calls that began in mid-February.
During that stretch, the Nasdaq fell 7percentt or more on three days, producing front-page news that panicked some traders, as well as a spate of margin calls that forced some traders to sell.
In a liquidity crisis, as we have seen all too recently, a sudden tightening of credit sets off a vicious cycle of margin calls that lead to forced sales, which in turn cause asset prices to plunge, and so on.
NEW YORK TIMES Merrill Ordered to Pay Rosen Capital Over Financial Crisis Calls | Merrill Lynch was ordered to pay $63.7 million to the hedge fund Rosen Capital Partners over claims that the brokerage made "unexpected margin calls" that led to losses during the financial crisis in 2008, in an arbitration ruling by a Financial Industry Regulatory Authority panel.
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Is the U.S. economy so indebted that falling asset prices will trigger a massive margin call that pushes the economy into the black pit of deflation?
In the event of another disaster like the global margin call that followed the August 1998 Russian default, Treasurys once again might well be the refuge of last resort.
So the market could look like this: In this case, there are two equilibria, H and L. (there's one in the middle, but it's unstable) And this introduces the possibility of self-fulfilling panic: if something spooks the market, you can get a "systemic margin call" that causes the whole financial market to go to L, and causes a big, unnecessary price decline.
She ultimately confessed her broker had put her into Phone.com without telling her and she'd had to put up $9,000 in a margin call that day.
On Friday, it said it couldn't make $610 million in margin calls and that has "raised substantial doubt" about its ability to survive.
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