Kiting: ( was *Really* bad week for SCO)

[James Knott]

That doesn't make sense.  A cheque is returned to the home bank as 
quickly as practical, either directly, through a clearing house or via 
3rd party banks.  Once it's there, it stays unless bounced back. 
There's no reason for it to keep making the rounds.  Kiting requires 
issuing a series of checques to cover the previous ones.

Peter Hiscocks wrote:
> I heard of one kiting scheme that was finally discovered when the magnetic
> ink on the cheque wore down to the point that it could no longer be read by
> the cheque-reading machines and had to be handled by a human. Apparently the
> cheque had been going back and forth across the continental US for several
> weeks before that happened.
> 
> Peter
> 
> 
> On Mon, Dec 08, 2003 at 11:52:49PM -0500, Gary Layng wrote:
> 
>>I think I can google something up, but for now:
>> - kiting is illegal.  The scheme depends on how long it takes cheques to
>>clear the central clearing facility that all banks share.  Imagine you have
>>two bank accounts with, say, $50 in each.  You cut a cheque from your
>>account in Bank 1 for, say, $5 million, and deposit it into the account you
>>have in Bank 2.  At the same time you also cut a cheque from the Bank 2
>>account and deposit it into the account in Bank 1.  When the cheques clear,
>>you have enough money to cover them.  You get the interest on the $10
>>million dollars you had for two-three days in the two accounts.
>> - Margin is perfectly legal.  "On margin" means that you borrowed money
>>from your broker to buy shares.  Typically the broker lends you up to about
>>75% of the value of the shares.  If the value of the shares drops 25% you
>>get a "margin call" and they can sell the shares.  You're leveraging your
>>potential capital gains by borrowing the money, but it's quite dangerous.
>>
>> 
>>His Lordship Mayhem
>>
>>-----Original Message-----
>>From: owner-tlug-lxSQFCZeNF4 at public.gmane.org [mailto:owner-tlug at ss.org] On Behalf Of Byron Sonne
>>Sent: Monday, December 08, 2003 7:30 PM
>>To: tlug-lxSQFCZeNF4 at public.gmane.org
>>Subject: Re: [TLUG]: *Really* bad week for SCO
>>
>>
>>>its stock price may jump to $50, and if you hold -100 of them, you'll
>>>now have to pay $5000 to close out your position, and you're in the hole
>>
>>big
>>
>>>time.
>>
>>Does anyone have a link to a site or some docs that explain, to a putz 
>>like me, what all this various financial wizardry is?
>>
>>I've seen shorting briefly explained here, but what about kiting, 
>>selling on margin, etc, and various other techniques and scams? I'd like 
>>to know but I don't have the inclination to read entire books about this 
>>stuff, or become a CPA or something.
>>
>>Later,
>>B
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>>The Toronto Linux Users Group.      Meetings: http://tlug.ss.org
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> 
> 


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