The reaction to a campaign to infiltrate an alleged network of naked short sellers by using a phony Facebook profile to befriend several bloggers, old media journalists, and a couple of fund managers may not be what Overstock CEO Patrick Byrne and Judd Bagely were hoping for.
“Dude this just gets crazier by the minute,” the manager of a small fund wrote to us this weekend. “We will be adding to our ostk short position in the coming weeks.”
Last week, several bloggers discovered that a list of their Facebook friends had been compiled on the Deep Capture website. The purpose and origins of the list was initially mysterious. Deep Capture was founded by Overstock.com CEO Patrick Byrne to attack what he insisted was a cabal of naked short sellers and allied journalists. Critics of Byrne say it is just an attempt to intimidate and pester critics of Overstock.
Now we know why and how the list was assembled. Judd Bagely and others set up a fake Facebook profile under the name Larry Bergman and invited several hedge fund managers and journalists to be his friends. Once they accepted, Deep Capture had access to all of their lists of friends. Those lists were assembled in order to allow Deep Capture to create a picture of journalists who were allegedly too close to their sources. (Joe Weisenthal and I were targeted.)
Here’s how Bagely described it in comments to an earlier post:
John, Larry Bergman is a composite, and indeed was used by multiple folks.
The reason for creating him was to simplify the process of finding links, since gathering the data was a pain in the arse.
It made the process easier by pointing out, up front, when a Facebook user had friends in common with Larry. That way, we didn’t have to go through to the process of copy/paste/compare all the time.
Larry was a simple labour-saving device.
As to why we put the data on deepcapture.com…we did it for two reasons:
1- to allow our readers to spot relationships I’m certain to be unaware of. We’ve had a few of those already.
2- To be preemptively on the record predicting who was going to attack my thesis that some financial bloggers and journalists are far too close to their subjects. The attacks are not unexpected. What is unexpected is that Joe, Barry, Eric, Felix, etc, would be basing their attacks on the existence of the list itself, despite its being (as I’ve pointed out) public information. It never occurred to me that a Facebook list was anything but public. But, if they understood differently, I can see why it might concern them (briefly).
And over at Deep Capture, Patrick Byrne explains the operation with these words:
DeepCapture claims that a network of hedge funds is inappropriately close to a set financial journalists and bloggers. The Party line response has always been that the hedge fund managers are too competitive with each other to be friends, and that the journalists and bloggers are independent of the hedge funds. DeepCapture investigative reporter Judd Bagley used an assumed name to infiltrate their Facebook network and discovered that, yes, the hedge fund managers are in fact Facebook Friends with each other and precisely the financial journalists and bloggers about whom we have been writing, and that (while no one would claim that Facebook Friendship = “co-conspirators”), this fact is interesting.
The weird thing about this is that the operation is self-refuting. The willingness of the journalists and hedge-fund managers to let some guy they didn’t even know–because he didn’t exist–into their Facebook network proves that Facebook is a very bad proxy for who might really be close to one another.
In any case, the strategy seems to be backfiring. As the hedge fund manager we spoke to over the weekend explained, when companies engage in this kind of cloak-and-dagger activity it is usually an indication that something has gone badly wrong with their business operations.
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