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It was a business. That's right,

this illegal trading of mutual fund shares was a business for these mutual funds. It was a business to sell you out on behalf of others. It was a business that they knew was illegal, and yet they didn't care. They thought it was OK.

In fact, it's alleged that with

Bank of America

(BAC) - Get Bank of America Corp Report

, it was such a good business they installed a machine to make it easier for

Canary Capital Partners

to stiff you.

Let's go through the math. Say you own 1,000 shares in a


mutual fund that closed at $100 at 4 p.m. After 4 p.m.,


preannounces down, as it did in September 2000. You know that fund is going to open down at least 2 points. What would you have done to be able to get out at $100? Canary was able to sell your fund short at the $100 price. It then could cover the next day down two -- risk-free!

How do you get hurt? You obviously would have liked the right to sell at that price. But because you weren't a

big enough

customer, you couldn't.

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Of course, the flip side is just as awful. If Intel preannounced to the upside, the hedge fund could have bought in at $100 and flipped at $102. That trader would get part of


profit because you owned less of that $100 price than you thought. He would be kiting part of your gain.

How could anyone in his right mind sanction this behavior?

How could anyone think it is a business, this setup that allows a big guy to win while a little guy loses?


And just unbelievable.

Random musings:

In retrospect, I guess that, had I stayed in the business long enough, one of these firms might've approached me because it was a great, ongoing business for both the mutual funds and the hedge funds -- to hurt you.

James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made.

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