The Great Game

by D. R. Bell

  “What exactly is CFTC?” asked Megrano.

  “CFTC stands for Commodity Futures Trading Commission. They follow commodity markets, making sure they aren’t being manipulated. You know, things like oil, grain, copper, cocoa. They also get involved in regulating Forex, the exchange of currencies. There were always rumors that commodity and currencies markets had been heavily manipulated. People started paying more attention when the price of gasoline first broke five dollars a gallon around 2008 or so. Jonathan already had some knowledge of what was really going on, having defended those very manipulators in the past. So when he went to the enforcement side, he was a powerful opponent. He worked there for three years before running into problems.”

  “What kind of problems?” James was leaning forward, digesting every word.

  “He was following trading in gold and saw some things that bothered him. He did not tell me at the time, but it was something that went beyond the usual squeezes and arbitrage; it was illegal systemic fraud that posed a danger to the system. Kind of like subprime mortgages in 2008 but on a smaller scale. In any case, he must have gotten close to something or someone big, because he’d been told to stop by his higher-ups.”

  “Who was that?” Megrano asked, his expression alert and attentive.

  Frank shrugged. “CFTC is run by five commissioners appointed by the President with the Senate’s consent. I understand the order came from one of the commissioners, but I don’t know which one. I do know that Jonathan did not take kindly to being ordered like that. When he’d been told to shut down his investigation, Jonathan didn’t want to stay there any longer. I’d left SEC by that time and moved from Washington to LA to be close to my kids and grandkids. But I still had my connections, so I helped Jonathan join SEC. The place fit him even better than CFTC, and he quickly made a name for himself with a couple of big insider trading cases and put in jail the head of a large hedge fund.” Frank paused to sip his drink. “Then the 2019 dollar crisis hit. Do you remember how following the 9-11 attacks there were rumors of some large bets made to profit from them?”

  “I certainly remember,” Bowen said. “Wasn’t there a major news network reporting this?”

  “Yes, it was CBS reporting a huge amount of put options on United and American Airlines. Put options are bets that the price of a stock will go down. Stocks of these companies had been cut almost in half following the attacks, so whoever bought the puts made a ton of money. Reports of highly suspicious activities had also been made by the German Bundesbank, Wall Street Journal, the Swiss Banking Authority, and others. There were a number of statistical studies that concluded that a significant amount of trading was done by people that had inside knowledge of the coming attacks.”

  “But didn’t SEC investigate?”

  “Yes, it did. The investigation died down and nothing ever came out of it. Some people claimed later that SEC was muzzled when the trail led in an uncomfortable direction. I don’t know. But the bets were real, made by people who knew about the attacks. They made a lot of money and got away with it. It received less attention in the 2019 turmoil and subsequent events of 2020, but there were huge bets in stocks, in gold, and especially in currencies. Many people don’t know that currencies exchange markets dwarf stocks, bonds, and commodities, with a daily volume in 2019 of around five trillion dollars. Usually these markets don’t move too fast, but when there is a sudden big drop in a major currency, the impact is enormous. And there was an over thirty percent drop overnight in the most important currency of the time.”

  “So there were unusually large bets prior to the 2019 crisis?” Bowen asked.

  “Oh yes. Surprisingly, there wasn’t a lot of publicity about it. I last saw Jonathan in May of 2020. His work brought him to LA and he came to see me. He told me he was investigating positions across multiple markets that benefited from the crash. He said there was a steady hidden buildup starting months in advance. Positions were taken in puts against the market indexes, in shorts against certain stocks, and especially against the dollar. It was done carefully and stealthily, but when the markets opened on September 16th he estimated that those who’d set up these positions walked out with over a trillion dollars.”

  “A trillion?!” David and Oleg exclaimed in unison.

  “Yes, that’s what he’d said. Of course, it’s a zero sum game, so companies on the other end of these trades lost over a trillion. There was something else that Jonathan said that was interesting. According to the last officially published numbers prior to the crisis, the US was supposed to have over eight thousand tons of gold, while China and Russia both accounted for less than three thousand tons. But when China announced the convertible “jin huobi” currency that Russia and others joined, they backed it with over ten thousand tons of gold. Remember, Jonathan was investigating the gold market at CFTC when he had to leave. He told me that the only way that the numbers made sense to him was if some of the US gold had ended up in China and Russia.”

  David thought out loud. “So over a period of years the Chinese, the Russians, and perhaps others had been patiently acquiring gold. Once they had most of it, they decided to move against the dollar, knowing that the US couldn’t counter by making the dollar convertible?”

  Bowen said, “Couldn’t or wouldn’t? Remember, by 2019 the US government obligations were untenable with a strong dollar.”

  Gorman nodded. “Yes, this makes sense. Jonathan had told me he believed that the method and the timing had been carefully planned in advance. And some people knew the setup and made a whole lot of money off it. He was trying to find out who. I had not heard from him after his visit in May. A few months later he was killed in the explosion with Mitchell Williams.”

  Frank sat down, signaling that he’d finished his talk about Schulmann.

  Oleg spoke first. “A trillion dollars? People get killed for much less.”

  Frank cautioned him. “As an old lawyer, I’d say you might be jumping to conclusions. From what I understand, the only connection here is a question that David heard under quite stressful circumstances. He may have gotten the name wrong. This situation may have nothing to do with Jonathan Schulmann.”

  “I think there’s more to it than that,” Megrano said. “They clearly are looking for some information and they’re putting significant resources into it.”

  James agreed. “There is at least a possibility of connection here. And we have to get back to the people holding Maggie with something. We have to take a chance. David and I will do some research and try to come up with a response based on what Frank told us tonight. Let’s recap: Oleg is going to contact his friend Sasha to help look for the two Mexican guys that helped to kidnap David, Robert will get GPS trackers to Oleg, and Frank is going to call his friend in Seattle.”

  Everyone got up to leave. James turned to David. “I think it’s best you stay here. Let me rephrase that—David, you are very welcome to stay here.”

  David shook his head. “I’d rather not. I already have Jim’s and Alex’s deaths on my conscience.”

  James put a hand on his shoulder. “I understand. But you shouldn’t go home yet, and it may not be safe to use your credit card at a hotel. We don’t know the full capabilities of your adversaries. Plus we can get going on our research first thing in the morning.” He smiled. “Most of all, I would appreciate the company.”

  David took one of the spare bedrooms, wondering if he would ever get back to his own place. James handed him an old-fashioned paper book with a giant black cat on the cover. “Here’s The Master and Margarita. I don’t know about you, but reading a book helps me to relax. Otherwise, I just rehash the same thoughts over and over. As you go through the book, you’ll see that Bulgakov used Aramaic names for events taking place in Judea two thousand years ago. It was the language people spoke there at the time. So Jesus is Yeshua Ha-Nozri, Jerusalem is Yershalayim. I happen to like it. And remember, the novel’s Margarita sells her soul to the devil.”

  Monday, 4/25/2022,
7:06 a.m. PDT

  David woke up with some difficulty after staying up late reading the book. His usual fast reading did not work too well. He could follow the plot but had to keep circling back to try to discern the meaning. The Devil, using the name Woland, indeed came to Moscow circa 1935 and preyed on unsuspecting Muscovites, especially the greedy and callous ones. It was not the usual “hoofs and horns” evil creature but a cynical, almost sorrowful man with great powers. And in a parallel book-within-a-book by a writer known only as The Master, in the first century’s Yershalayim Pontius Pilate was sentencing Yeshua Ha-Nozri to die on a cross. Pilate saw that Yeshua was a kind and naïve man that believed in everyone’s goodness and feared pain. Pilate wanted to spare him but was afraid to do so. And the Master was a sad and burned-out writer, who gave up on love and on life.

  It took David a few moments to orient himself, but then he remembered where he was. He glumly thought that he was getting used to waking up in strange places and wearing strange PJ’s (this blue flannel pair was loaned to him by Bowen).

  He found James already in the kitchen carefully making a pot of tea. Thankfully for David, the kitchen had a coffeemaker, although teas in the pantry outnumbered coffee choices by at least ten to one. After breakfast, they decided to head to UCLA. Bowen suggested they could work in his office and perhaps do some research in the university library. Both were anxious and concerned about Maggie. They had to come up with some new information to keep the charade going.

  Largely out of habit, David sent an e-mail to his boss at the company, letting him know that an urgent family matter came up, and he’d need a few days. David thought this was going to put him on the RIF list for sure, but by now he doubted he’d ever make it back to work.

  David went to his car, but James called out to him, “Come on, let’s walk. I need my exercise.” They made it to Sunset and turned east. The right lane was mostly occupied by bicyclists, with much honking from cars darting between lanes. There were quite a few pedestrians as well, most probably UCLA students.

  “How was the book?” asked James.

  “I got to the end of Part One, then became too tired.”

  “Wow, you are half-way through it. So, you have met all the main characters, except for Margarita. What do you think of Woland?”

  David shrugged. “He doesn’t come across as evil, more cynical and disappointed in people. He tempts them at times, but for the most part they sin on their own.”

  “Yes, very much so. He is testing them, but they exercise their free will. Even when one is tempted, he or she chooses how to act. And so do societies …”

  “Societies do what?”

  “Collectively choose how to respond, which road to take. Speaking of the road, be extra careful when crossing streets; now that we have as many cars as bicycles here, it’s a Wild West.”

  They came to a bridge across the 405 Freeway.

  “It is interesting how the events take place almost two thousand years apart,” David said, “but they still feel connected.”

  “Yes, reminds one that some questions are eternal. Do you like the Master?”

  “He seemed to be a talented writer that gave up and turned his back on everything. Is that how Bulgakov saw himself?”

  “There are probably some things in common, but I doubt it. Bulgakov had been persecuted the same as the Master, but he did not give up. The book is a testament to him not giving up.” Bowen’s health watch gave a warning beep. He stopped and took a few deep breaths. “I’m sorry, I have to bring my pulse under control. We’re almost there. Back to the book—there are many possible interpretations. I personally think that the Master should be viewed together with Yeshua and Pontius Pilate. The Master gave up struggling and just wanted peace. Pontius Pilate knew that what he was doing was wrong, he did not want to do it, but he chose to conform to the wishes of his Caesar. Only Yeshua did not give up and did not conform. He did not expect eternal life, he was physically weak, he was afraid of pain, he had a chance to submit, but he could only tell the truth even in the face of danger.”

  “So do you see this as a religious book?” asked David.

  “No, I don’t. At least not in a sense of advocating a particular religion. I don’t think it was by accident that the author chose Aramaic names and that neither Yeshua nor others resemble the characters in the Gospels. I see it as an argument that, though we live in a material world, we can’t ignore spiritual questions. Without spiritual strength, the material world corrupts us.”

  James rubbed his temples. “Of course, that’s my view. Ultimately, the novel not only entertains but makes you think and question. Perhaps that’s the mark of a great book.”

  Monday, 4/25/2022, 8:52 a.m. PDT

  Bowen’s office at UCLA looked pretty much like other professors’ offices David had seen at Purdue: small, lots of books, desk and floor cluttered with papers. There were two chairs, a large one for Bowen behind the professor’s desk, and a smaller one for visiting students in front of the desk. There was a second desk in the corner as well. Conveniently, there were two computers, a desktop and a laptop. Bowen was only teaching one class that semester and did not have visiting hours on Monday, but just in case, he marked his online calendar as being “out of the office.”

  James and David decided to divide their efforts: James would focus on investigating trades in gold and currencies around September 6, 2019, while David would look at stock trading.

  Sensing nervousness on David’s part, James said, “Remember, we don’t have to find a smoking gun. We really don’t stand a chance of finding one quickly and without help. We only have to find enough to keep them thinking that we may have a smoking gun.”

  David took the laptop at the small corner desk and started researching. He could see that the bets against the US market and some of the larger, more liquid stocks had been slowly but steadily rising since early 2019, but since for every seller there was a buyer, so were the opposite bets. The crash exposed some of the entities that bet the wrong way, especially the ones that could not meet their obligations. It was less clear who benefited directly. David noted names of some funds and companies that had the resources to acquire their less fortunate competitors. There were some Chinese, Russian, Dubai, and Brazilian names there.

  He proceeded to look at blogs and commentaries of the time. As could be expected, there were suspicions and rumors galore, together with calls for investigation. Schulmann’s name had been mentioned in the context of SEC looking at some of the charges. Most of the rumors died down toward the end of 2020, as the possible USA division took the center stage.

  Then David had a small breakthrough: in one of the angry discussion forums the name of Mark Androssian was mentioned as someone who found out too much and was killed for it. Androssian had been an executive at one of the investment banks that went under in 2019. He’d posted his suspicions on a couple of blogs, including some specific names of companies and people, and implied that he had more. Androssian died in a single-car crash on a winding New Jersey road in February of 2020. Police blamed the ice. After his death, someone suggested on one of the forums that Androssian was also posting on various sites under the handle “Sept6researcher.” David searched for everything he could find on Androssian and “Sept6researcher.” While many blogs, sites, and posts had been taken down, enough survived in caches and archives to start painting a picture.

  As a computer engineer, David thought of the resiliency of the Internet data. Androssian did not have direct proof, but he dug under the surface and correlated enough data to accuse some entities. The two companies he fingered in particular were Changzoo Tongren from China and Novaya Energya from Russia. In both cases he traced a flow of puts and NASDAQ index shorts that were made through multiple intermediaries. Each transaction was small enough to not look extraordinary, but together they added up to outsized bets exceeding $30B. David researched the two companies and found they had been characterized as commercial entities with ties to their respecti
ve governments. Androssian had followers that claimed his death was not an accident, but also detractors saying he was an embittered loser who made bad market calls and became bent on revenge using false accusations.

  Bowen’s desk phone rang. James answered and said, “Hold on, let me put you on speaker. David is here.”

  Frank’s voice came through. “I called the house, nobody was there, so I figured I’d try your office. I spoke with my friend in Seattle today, explained a little bit about the situation and the young woman’s life being in danger. He’ll try to help and get whatever information he can. Said he’d call me back this afternoon. How are you guys progressing?”

  David explained what he found about Mark Androssian and some specific data points tying Changzoo Tongren and Novaya Energya to suspicious trading.

  Frank said, “This is good information. Exactly what I would expect—the positions were taken through multiple levels of intermediaries, each transaction being inconspicuous, designed to hide the real monster bet behind all of them. Tracing these transactions won’t be easy, especially without the level of access that SEC and CFTC would have.”

  James reported that he did not have a lot of luck. There were clearly big positions that benefited from dollar’s fall, but he wasn’t able to get beyond the information that was readily available in the public domain.

  Frank explained why. “I would venture that most of this trading was done off-market, in so-called “dark pools.” This has been going on for years, to help companies hide their orders. Private brokerages, such as Goldman Sachs’s Sigma X, run such exchanges. They operate under fewer regulatory and public disclosure requirements than public exchanges and the trading data is not easily visible.”

  “How can we get access to it, then?”