CMKX - CMKM Diamonds Inc. - CEO Faulk - Company Website Update

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"The 622 billion shares that we alleged were improperly issued are included within the 703 billion issued and outstanding shares." - Leslie Hakala, SEC
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CMKM Diamonds, Inc. Shareholders' Corner

3-25-09

The Company has had numerous inquiries from shareholders about the status of certain CMKM Diamonds, Inc. stock. The Company's viewpoint on this issue was addressed in the 9-2-08 Shareholders' Corner update:

There has been a lot of speculation and concern about whether certain shareholders are bonafide. With over 50,000 shareholders, it is impossible to say at this time with any degree of certainty whether or not individual certs are bonafide. Determining who are our actual shareholders are and who holds bonafide shares is a process that unfortunately will take considerable time, and could ultimately involve regulators and/or a legal process. However, as the Company has stated many times, we will do everything within our power to assure that anyone who purchased shares in good faith is bonafide. If you have bought shares in good faith from your broker, and have received a certificate for those shares from our transfer agent, then most likely your shares are bonafide.

Because of ongoing concern about this issue, I sent an email to the SEC detailing questions about shares of CMKM Diamonds, Inc. stock held by our shareholders. Both my email and their response is reposted below. I'll keep everyone updated on any further information and/or clarification we receive from the SEC. As always, all shareholders should be aware of their right to seek legal advice from their own attorney on any issue pertaining to their CMKM Diamonds, Inc. stock:

The company has been receiving numerous inquiries from our shareholders about the status of their shares of CMKM Diamonds stock. Some of the answers to these questions might seem obvious, but I do not feel comfortable in making assumptions when it comes to the SEC's position on issues pertaining to stock. We would greatly appreciate some guidance from the SEC on this matter. I guess the best way to address this is to simply lay out the questions that shareholders have submitted (condensed and paraphrased for the sake of expediency), and ask you to address them as best you can:

In the case of CMKM Diamonds, Inc., company officers and insiders, according to the SEC, approved the issuance of hundreds of billions of unrestricted shares "based on obviously incomplete and suspicious, and in some cases, forged documentation" (Item 35). In general, are shares issued and sold into the market through allegedly fraudulent means such as those cited in the CMKM example considered to be unrestricted and/or registered shares once they are purchased in good faith by shareholders from brokers, especially those who have applied for and received stock certificates through their brokers from the transfer agent?

Are shares originally issued through fraudulent means (as referenced in the prior question) subsequently purchased by shareholders in good faith and held in electronic form at their brokers considered to be unrestricted and/or registered shares?

At what point do said affected shares become registered and/or unrestricted shares?

Are the "up to 622 billion shares of purportedly unrestricted stock" (Item 4) issued by former company insiders in an "unregistered distribution" (Item 4), as cited by the SEC in Case 2:08-cv-00437, part of the 703 billion issued and outstanding shares, or are they above and beyond that number?

Again, I would appreciate any guidance on this issue from the SEC, so that we can respond properly to shareholders' inquiries.

Feel free to call me if you have any questions, or if we can assist you in your ongoing efforts to help us find justice in the ongoing CMKM Diamonds, Inc. investigations. As always, we are willing to cooperate in any way possible.

Sincerely,
Mark Faulk
CEO, CMKM Diamonds, Inc.

This is the response I received today from SEC attorney Leslie Hakala:

Thanks for your email. Answering your last question: The 622 billion shares that we alleged were improperly issued are included within the 703 billion issued and outstanding shares.
Unfortunately, we can’t give legal advice to investors, so we are not comfortable responding to the other questions. I have, however, passed the questions on to others in our Washington headquarters, and will let you know if they can provide any guidance.

Regards,
Leslie

CMKX - CMKM Diamonds - SEC Enforcement Blows Off Inspector General's Recommendations

Business As Usual At The 'New' SEC...

SEC Enforcement Division Ignores Recommendations From Inspector General On Stopping Naked Short Selling.

"We have recently alleged such behavior in the widely-discussed CMKM Diamonds litigation."

Practices Related to Naked Short Selling Complaints and Referrals

March 18, 2009
Report No. 450
Appendix VI

OIG Response to Management Comments

We are disappointed that the Division of Enforcement (Enforcement) only concurred with one of the 11 recommendations in this audit report. We are particularly concerned that Enforcement did not concur with the report’s first three recommendations that it develop written in-depth triage analysis steps for naked short selling complaints, as it has for other complaints; that it revise its written guidance to the Enforcement Complaint Center staff to ensure that naked short selling complaints are given a proper level of scrutiny and referred for further investigation; and that it add naked short selling to the list of categories of complaints on the Commission’s public webpage and develop an online complaint form specifically tailored to naked short selling complaints.

As we discussed in our report, the SEC has repeatedly recognized that naked short selling can depress stock prices and have harmful effects on the market. In adopting a naked short selling antifraud rule, Rule 10b-21, in October 2008, the Commission stated, “We have been concerned about ‘naked’ short selling and, in particular, abusive ‘naked’ short selling, for some time.” In this report, we determined that Enforcement’s current policies and procedures appear to limit significantly the referral of naked short selling complaints, and that its written policies and procedures result in naked short selling complaints being treated differently from other types of complaints of securities law violations. Notwithstanding the Commission’s previous statement and our findings, Enforcement responded to our report by stating that “there is hardly unanimity in the investment community or the financial media on either the prevalence, or the dangers, of ‘naked’ short selling,” and references the view held by some that “the threat posed by ‘naked’ short selling is wildly exaggerated . . . .” Accordingly, Enforcement concludes that the report’s recommendations, which are intended to allow for more thorough investigations of naked short selling complaints, are not optimal uses of Commission resources. We would hope that Enforcement reconsiders this position in light of the Commission’s stated concerns about the effect of naked short selling on the market.

We are also disappointed that Enforcement does not intend to implement immediately our specific recommendations (Nos. 5-11) designed to improve its complaints, tips and referral process. We understand that the SEC’s new Chairman has announced the enlisting of a contractor to conduct a comprehensive review of internal procedures used to evaluate tips, complaints, and referrals for the entire agency, and we will certainly work closely with the contractor to assist with this review. Nonetheless, we believe that implementation of our recommended improvements should begin now, in coordination with the contractor’s review, to ensure that the implementation of necessary improvements to Enforcement’s complaint system is not unduly delayed.

Practices Related to Naked Short Selling Complaints and Referrals March 18, 2009
Report No. 450 - Page 44

Audit Requests and Ideas
The Office of Inspector General welcomes your input. If you would like to request an audit in the future or have an audit idea, please contact us at:

U.S. Securities and Exchange Commission
Office of Inspector General
Attn: Assistant Inspector General, Audits (Audit Request/Ideas)
100 F Street, N.E.
Washington D.C. 20549-2736
Tel. #: 202-551-6061
Fax #: 202-772-9265
Email: oig@sec.gov

Hotline
To report fraud, waste, abuse, and mismanagement at SEC, contact the Office of Inspector General at:
Phone: 877.442.0854
Web-Based Hotline Complaint Form:
www.reportlineweb.com/sec_oig