NAKEDSHORTSTOP™ SPECIAL REPORT – ACT I
PROLOGUE – META MATERIALS WAS DEAD
Or At Least That Was How It Looked.
By August 2024, Meta Materials Inc. had reached what appeared to be the
end of a remarkable and deeply controversial journey through the
American capital markets.
Operations ceased. The company entered Chapter 7 bankruptcy. Its common
shares, once the subject of extraordinary trading activity and an
intensely loyal retail following, were reduced to the remnants of a
failed public company.
For many observers, that should have been the end of the story.
It wasn’t.
Bankruptcy produced something Meta Materials had never possessed while
struggling to remain alive:
**An independent fiduciary armed with unusually broad compulsory
discovery powers.**
Christina Lovato, appointed Chapter 7 trustee, was not charged with
defending Meta’s former management. She did not represent the short
sellers, market makers or brokers that had traded its securities. Nor
was her job to vindicate the thousands of investors who had spent years
alleging that something was profoundly wrong with the trading of Meta
Materials and its predecessor, Torchlight Energy Resources.
Her mandate was considerably simpler.
Find assets belonging to the bankruptcy estate.
And potential legal claims are assets.
What followed transformed what might otherwise have become another
postmortem of a failed public company into something considerably more
consequential.
The Trustee and her attorneys began pursuing granular market records
held by institutions including Nasdaq, FINRA and the Depository Trust &
Clearing Corporation.
Some of those demands met resistance.
Motions were filed.
Discovery disputes followed.
Courts became involved.
Then, in August 2026, the investigation crossed an important threshold.
The Trustee became a plaintiff.
Lovato, Meta Materials and Doug Collins brought securities claims
against Citadel Securities, Virtu Americas, Anson Funds Management and
Anson Advisors, alleging manipulative conduct affecting trading in Meta
Materials shares.
The defendants have not been adjudicated liable, and the allegations
remain allegations that must be proved.
But the filing changed the significance of what had preceded it.
For years, investors had attempted to understand Meta Materials through
the fragmentary information available to the public: trading volume,
short-interest reports, failures-to-deliver data, corporate filings,
regulatory notices and clearing-agency memoranda.
The Trustee had something they did not.
Compulsory process.
She could seek the records behind the aggregates.
Orders.
Executions.
Cancellations.
Reported short positions.
Broker records.
Clearing information.
And potentially the identities of the financial intermediaries behind
transactions that had remained anonymous to the investing public.
That distinction matters because buried five years earlier, beneath the
extraordinary history of Meta Materials, is a surprisingly simple
unanswered question.
**What happened to Torchlight’s short and delivery obligations when
Torchlight disappeared?**
To understand why that question matters, the clock must be turned back
to June 2021.
ACT I – THE TRANSACTION
The Billion-Share Week
Torchlight Energy Resources was approaching a transformative merger with
Canadian advanced-materials company Metamaterial Inc.
The transaction was unusual.
Legacy Torchlight shareholders were to receive a Series A preferred
share representing an economic interest associated with Torchlight’s
oil-and-gas assets.
The preferred distribution became intertwined with the merger, a reverse
stock split and the conversion of Torchlight into the public company
that would become Meta Materials.
Then the market erupted.
During Torchlight’s final days as an independent trading security,
extraordinary volume poured through the stock.
Over the five trading sessions surrounding the climax of the event,
approximately one billion TRCH shares changed hands.
The scale was breathtaking relative to the company’s capitalization.
Torchlight’s price surged.
Short sellers became a central part of the public narrative.
Management recognized the opportunity presented by the extraordinary
market demand and used an at-the-market offering to raise substantial
capital.
That decision would later become central to an SEC enforcement case
against former Torchlight and Meta executives. The SEC has alleged that
conduct surrounding the period was intended to generate a short squeeze
and facilitate capital raising.
Those allegations matter.
But they do not answer a different question.
Who was short?
More importantly:
What happened to those short positions when Torchlight ceased to exist?
A short position does not disappear because a ticker symbol changes.
Corporate actions transform obligations.
And Torchlight’s transformation was unusually complicated.
Follow the Obligation
On June 28, 2021, Torchlight became Meta Materials.
But the common stock was only one part of the transaction.
Eligible Torchlight shareholders were also entitled to the Series A
preferred share.
Legacy Torchlight options underwent adjustment as well. The resulting
adjusted contracts carried not only MMAT common shares but an
entitlement involving the Series A preferred.
That created a delivery obligation of a different kind.
OCC records subsequently documented **delayed settlement of the
preferred-share component** associated with the adjusted contracts.
Genuine preferred-share delivery obligations therefore existed within
the clearing system, and ordinary immediate settlement of that component
was not occurring.
Months later, in October 2021, OCC changed the settlement procedure.
Accumulated obligations involving the preferred component were moved
into a special broker-to-broker process in which clearing members would
arrange delivery directly.
OCC’s procedure identified opposite-side clearing members and continued
to margin obligations pending settlement.
In other words:
The system knew who owed whom.
And that is where the public record begins to become considerably less
illuminating.
The OCC notices explain the mechanics.
They do not publicly disclose the distribution of the obligations among
clearing members.
How many firms were responsible?
How many preferred shares remained to be delivered?
Was the exposure spread broadly across numerous clearing members?
Or was a substantial portion concentrated within one or two financial
complexes?
Those are not theoretical questions.
The clearing records could answer them.
The publicly available records do not.
Then Something Stranger Happened
The Series A preferred shares had not originally been created as an
ordinary exchange-traded security.
Yet in October 2021 they began trading under a new symbol:
MMTLP
FINRA would later provide an explanation for how that happened.
According to FINRA, a broker-dealer had already executed a transaction
in the preferred security.
The transaction needed to be reported.
Because no symbol existed through which the broker could report it, the
broker requested one.
FINRA assigned MMTLP.
That explanation resolves one mystery while creating another.
FINRA necessarily knew which regulated member submitted the request.
The public still does not know who it was.
And suddenly two events sit remarkably close together in time.
On one side:
**An unidentified broker executes a transaction in the preferred shares
and requests the symbol that becomes MMTLP.**
On the other:
**OCC is dealing with accumulated preferred-share delivery obligations
arising from legacy MMAT1 contracts.**
There is presently no public evidence establishing that the two events
involved the same firm.
They may have been completely unrelated.
But the records necessary to determine that existed.
One dataset identifies the broker responsible for the transaction that
precipitated MMTLP’s symbol assignment.
Another identifies the clearing members responsible for legacy
preferred-share delivery obligations.
The public record permits examination of neither relationship.
And that creates what may be the central evidentiary gap in the entire
affair:
***Was the broker whose transaction precipitated the creation of MMTLP
– or its clearing correspondent – also carrying a significant legacy
TRCH/MMAT1 delivery obligation?***
A negative answer could dispose of an important suspicion.
A positive answer would demand an explanation.
A positive answer accompanied by substantial concentration would raise
considerably more serious questions.
Yet years after the events, the public still lacks the information
required to perform that comparison.
The Information That Would Settle It
Remarkably little disclosure would be necessary.
No customer’s identity need be revealed.
No trading algorithm need be exposed.
No proprietary strategy need become public.
Four numbers could substantially resolve the concentration question:
**The total preferred shares represented by accumulated delivery obligations.**
The number of clearing members carrying them.
The percentage attributable to the largest clearing member.
The percentage attributable to the three largest clearing members.
If those figures demonstrated broad distribution, theories of
concentrated exposure would suffer a serious evidentiary blow.
If they demonstrated extreme concentration, the opposite would occur.
Either result would advance public understanding.
Neither result appears in the public record.
Perhaps the underlying clearing records contain an entirely ordinary
explanation.
If so, remarkably little information would be required to demonstrate it.
REWIND THE TAPE
To understand what Christina Lovato inherited, it is necessary to return
to the final days of Torchlight Energy Resources.
Not to the theories that later grew around them.
Not to MMTLP.
Not to the litigation.
To the trades.
June 2021.
Torchlight was approaching the completion of its merger with
Metamaterial Inc., a transaction that would fundamentally alter the
company, its capital structure and the obligations attached to its securities.
The merger had attracted considerable attention.
But one feature made the transaction particularly unusual.
Before the combination was completed, Torchlight shareholders of record
were to receive a Series A preferred share representing an economic
interest associated with the company’s legacy oil-and-gas assets.
The preferred share therefore created something more than another
corporate distribution.
It created an entitlement.
And entitlements have to be delivered.
Then, immediately before the transaction was completed, trading in Torchlight exploded.
June 21
The week began with Torchlight already attracting extraordinary attention.
Its common shares were moving rapidly.
Volume accelerated.
Retail interest surged.
Short sellers became part of the public conversation surrounding the stock.
And hanging over every transaction was an approaching corporate-action deadline.
Torchlight had established June 24 as the record date associated with
the Series A preferred distribution.
That mattered because ownership of Torchlight common stock was about to
carry something additional:
the right to receive another security.
Every ordinary purchase therefore existed inside a rapidly narrowing window.
So did every sale.
And so did every open short position.
The market was no longer trading only Torchlight common stock.
It was trading Torchlight common stock immediately before a corporate
event that would attach a separate economic entitlement to qualifying ownership.
Then the volume began climbing.
June 22
The trading intensified.
Millions upon millions of Torchlight shares changed hands as the market
attempted to price an unusual combination of events:
a merger,
a preferred-share distribution,
a rapidly appreciating common stock,
and the prospect of a corporate transformation only days away.
Torchlight management also had something enormously valuable available to it.
An at-the-market financing facility.
As demand for the shares increased, the company could issue stock
directly into that demand and raise capital.
It did.
The extraordinary market activity therefore wasn’t merely changing the
price of Torchlight.
It was changing Torchlight’s balance sheet.
Within days, the company would raise an amount of capital that would
fundamentally alter the financial position of the business entering the merger.
The market was doing two things simultaneously.
It was determining a price.
And it was creating financing capacity.
The financing was substantial.
By June 21, Torchlight reported that it had already sold 11,738,345 shares through its at-the-market facility, raising approximately $100 million.
By the time the June offering was complete, the company had sold approximately 16.2 million shares and raised $137.5 million.
The extraordinary trading activity had become extraordinary financing capacity.
June 23
By June 23, Torchlight had become one of the most intensely traded
securities in the market.
The numbers were extraordinary.
Shares were changing hands repeatedly at a rate that dwarfed the
company’s underlying share count.
That does not mean every reported trade represented a different share.
The same share can trade repeatedly during a session.
High-frequency market making, day trading, arbitrage and rapidly
changing positions can generate turnover many times larger than the
number of shares outstanding.
But turnover at this scale creates an important analytical problem.
Aggregate volume tells us how much trading occurred.
It does not tell us how that trading was distributed among participants.
A billion shares can represent millions of unrelated decisions.
Or substantial activity concentrated among a much smaller number of
financial intermediaries.
The tape alone cannot distinguish between the two.
For that, participant-level records are required.
Those records existed.
The public did not have them.
June 24
Then came the record date.
June 24, 2021.
Torchlight shareholders of record were entitled to the Series A preferred distribution.
That sentence sounds simple.
Operationally, it was anything but.
Modern securities markets do not function by physically handing
certificates from buyer to seller.
Positions are maintained electronically through brokers, custodians,
depositories and clearing organizations.
Trades create obligations.
Corporate actions create additional obligations.
And when a security carrying a corporate-action entitlement is sold
short, the economics of that entitlement do not simply vanish because
the seller did not own the underlying shares.
Somewhere in the chain, the entitled holder must receive what ownership requires.
That fact becomes important later.
For now, the essential point is simpler.
**June 24 fixed an entitlement against a market that had just
experienced extraordinary turnover.**
And there was still another trading day before Torchlight disappeared.
June 25
Friday, June 25 was Torchlight’s final trading session before the merger
became effective for market purposes.
By the closing bell, an extraordinary five-day episode had unfolded.
Approximately **one billion Torchlight shares had changed hands during the period.**
Again, that figure cannot be treated as one billion unique shares.
But it establishes the scale of the event through which the corporate action had to pass.
At the same time, the company had dramatically strengthened its cash
position through its at-the-market financing.
And the market now faced a weekend during which Torchlight, as investors knew it, would cease to exist.
Positions remained.
Trades remained to be settled.
Corporate-action entitlements remained.
Options remained.
The ticker was about to change.
The obligations were not.
The Weekend
This is where the story becomes less visible.
The stock market closed Friday.
Behind it, the machinery kept moving.
Torchlight’s merger with Metamaterial Inc. was completed.
The capital structure changed.
A reverse split took effect.
Former Metamaterial shareholders entered the public-company structure.
Torchlight common stock was transformed into MMAT common stock.
The Series A preferred distribution remained associated with eligible legacy Torchlight ownership.
Options contracts had to be adjusted.
Broker positions had to be converted.
Clearing systems had to recognize the new deliverables.
Records had to reconcile.
The transformation was not simply:
TRCH becomes MMAT.
It was closer to:
**TRCH position + merger mechanics + reverse split + preferred
entitlement + adjusted derivatives = a new collection of securities and obligations.**
And all of it had to reconcile against the positions that existed when
Torchlight stopped trading Friday afternoon.
That makes the weekend of June 26-27 one of the most consequential periods in the entire story.
Because this is the moment when positions created during the billion-share week had to pass through the corporate action.
The Obligation Splits in Two
The options market provides a remarkably clear view of what happened inside the machinery.
On June 21, the Options Clearing Corporation adjusted existing TRCH options to account for the Series A Preferred distribution.
Each adjusted contract now required delivery of:
100 TRCH common shares
plus
100 Series A Preferred shares.
But there was a problem.
The trading status of the preferred shares had not yet been determined.
OCC therefore placed the preferred-share component under delayed settlement.
Then came the merger and reverse split.
On June 25, OCC adjusted the contracts again.
The new MMAT1 deliverable became:
50 MMAT common shares
plus
100 Series A Preferred shares.
The MMAT component could settle through NSCC.
The preferred component remained subject to delayed settlement.
That record establishes something important.
At least within the adjusted options system, the Torchlight corporate action did not erase the old obligation.
It divided the deliverable into two branches.
One became MMAT.
The other remained attached to the Series A Preferred.
And that second branch had not yet finished settling.
Monday Morning
On June 28, 2021, MMAT began trading.
Torchlight was gone from the tape.
The conversion ratio was mechanical: under the 1-for-2 reverse split, each two TRCH common shares became one MMAT common share.
But the market did not begin with a blank ledger.
Every legitimate position existing before the transformation had to
emerge somewhere on the other side of it.
Long positions.
Short positions.
Options positions.
Clearing obligations.
Corporate-action entitlements.
They had changed form.
They had not ceased to exist.
And the new capital structure was considerably different from Torchlight’s old one.
Former Metamaterial shareholders now represented a substantial portion
of the combined company.
The reverse split had changed the number of common shares represented by legacy positions.
And eligible Torchlight ownership carried the separate Series A preferred entitlement.
This distinction matters enormously when examining the extraordinary trading volume
that preceded the merger.
The pre-merger TRCH share count cannot simply be compared with the post-merger MMAT share count as though the capital structure remained unchanged.
It did not.
The correct question is not: How could one billion shares trade?
The correct question is: **What positions did all that trading leave behind?**
And where did those positions go?
June 29
The following day provides an unusually revealing glimpse into how
complicated the transition remained.
On June 29, Meta Materials publicly addressed questions surrounding the
Series A preferred distribution.
The transfer agent had distributed the preferred shares associated with eligible holders.
But the process of allocating and reconciling those interests through the brokerage system was still underway.
That is an important moment.
The common stock had already begun trading as MMAT.
The merger had closed.
The capital structure had transformed.
Yet a component of the legacy Torchlight corporate action was still
working its way through the financial plumbing.
And something else was happening on June 29.
Years later, after obtaining granular market records, the Meta Materials
bankruptcy Trustee would point to trading on this very date in
allegations against Citadel Securities.
The complaint describes specific orders, executions and cancellations.
That litigation remains unresolved.
But the coincidence of timing is striking.
The Trustee’s reconstruction begins almost immediately after the
corporate transformation.
The market had barely finished becoming MMAT.
The Position Nobody Can See
At this point, the public record allows us to reconstruct much of the transformation.
We can determine how many shares Torchlight reported outstanding.
We can calculate trading volume.
We can identify the merger terms.
We can identify the reverse split.
We can identify the preferred-share entitlement.
We can follow the adjusted option contracts.
We can see when MMAT began trading.
We can see when the preferred distribution was still being reconciled.
What we cannot see is the most important ledger of all:
**the participant-level position map at the moment Torchlight became Meta Materials.**
Who entered the weekend long?
Who entered it short?
How large were those positions?
Which brokers carried them?
Which clearing firms stood behind those brokers?
How did those positions transform Monday morning?
And what delivery obligations accompanied them?
Those questions cannot be answered from a daily volume chart.
They require the records behind the market.
Which brings us to a distinction that will become increasingly important
as this story unfolds.
Trading volume is activity.
A position is what remains after the activity stops.
And the story of Torchlight may ultimately turn not on the extraordinary
number of shares that traded—
but on what was left behind when the trading ended.
The First Ledger
Imagine freezing the American securities market at the closing bell on June 25.
Ignore every theory that came afterward.
Ignore MMTLP.
Ignore the lawsuits.
Ignore the arguments that would consume investors for the next five
years.
Ask only what the clearing system itself had to know.
For every participant:
What did you own?
What did you owe?
What were you entitled to receive?
What were you obligated to deliver?
Those answers had to exist.
Otherwise the corporate action could not be processed.
And once the merger was completed, those answers had to be transformed
into the corresponding positions and obligations of the new securities.
That means somewhere within the records of brokers, clearing
organizations and market infrastructure lies a before-and-after picture:
TRCH at the close on June 25.
MMAT and associated obligations at the opening on June 28.
That is the ledger we have been trying to reconstruct.
And it is precisely the sort of participant-level information that
ordinary shareholders never possessed.
Five years later, Christina Lovato began asking for the records behind it.
But One Obligation Refused to Disappear
The common shares transitioned into MMAT.
The preferred entitlement was distributed.
The adjusted options were created.
Yet the preferred component associated with those adjusted contracts did
not immediately settle in the ordinary way.
It remained.
OCC records would later describe that preferred component as subject
to delayed settlement.
Then weeks became months.
And in October 2021, the clearing machinery changed course.
The accumulated obligations would have to be dealt with differently.
That is where the next part of the story begins.
Because by October, two things were about to happen within days of one
another.
**The clearing system was preparing to release accumulated
preferred-share delivery obligations.**
And somewhere in the market, somebody had already executed a trade in
that preferred security.
There was only one problem.
The security didn’t have a trading symbol.
WHAT THE RECORD NOW ESTABLISHES
The events of June 2021 did more than change a ticker.
Torchlight became Meta Materials through a defined corporate action. Its common shares were transformed by the merger and reverse split. A separate Series A Preferred entitlement was distributed to eligible Torchlight shareholders.
The OCC records show something equally important. Adjusted legacy TRCH option contracts carried two components – MMAT common shares and the Series A Preferred shares – and settlement of the preferred component was delayed.
The transaction changed the securities. It did not simply erase the obligations attached to them.
What the public record still does not tell us is how large the unresolved exposure was, who carried it, or where every obligation ultimately went.
That is where Act II begins.