Crazy Eddie Fraud
whitecollarfraud.com
whitecollarfraud.com
OK, Wikipedia has a pretty good article. And ... I question the ethics of directing traffic to the fraudster himself. https://en.m.wikipedia.org/wiki/Crazy_Eddie
Crazy Eddie was a consumer electronics chain in the Northeastern United States- previously called ERS Electronics ... It was started in 1971 in Brooklyn, New York, by businessmen Eddie and Sam M. Antar. The chain rose to prominence throughout the Tri-State Region as much for its prices as for its memorable radio and television commercials, featuring a frenetic, "crazy" character played by radio DJ Jerry Carroll ... At its peak, Crazy Eddie had 43 stores in four states, and earned more than $300 million in sales.[1]
In February 1987, the United States Attorney's Office for the District of New Jersey commenced a federal grand jury investigation into the financial activities of Crazy Eddie. In September of that year, the United States Securities and Exchange Commission initiated an investigation into alleged violations of federal securities laws by certain Crazy Eddie officers and employees. Eddie Antar was eventually charged with a series of crimes. Antar fled to Israel in February 1990, but was returned to the United States in January 1993 to stand trial. His 1993 conviction on fraud charges was overturned, but he eventually pleaded guilty in 1996. In 1997, Antar was sentenced to eight years in prison and was subject to numerous fines. He was released from prison in 1999.[2]
https://www.youtube.com/watch?v=uCGsqBn9pog
reminds me of Morrie's Wigs from Goodfellas
https://www.youtube.com/watch?v=9dwV18I2ngk
I wonder if Eddie inspired the character.
That term is used to describe an alien mindset that comes up in a certain alien species every so often where they think they can break them out of their explosive population climb and subsequent social destruction before having to rebuild their civilization again.
Meanwhile, steal $100 from a 7-11 and you can get 5-10years
But still, the Crazy Eddie guys should have gotten more time. They probably would, today.
I can understand that you might be able to influence one or two people to become complicit. But it sounds like everyone was taking part in the scheme: everyone in the family, employees at every level, even the auditors contributed a part to the conspiracy.
I mean, dozens of people must have been involved in this scheme. Why didn't anybody of them say, hey, I'm not going to be a part of this? I'm going to report this?
It two completely different level of effort and involvement.
Saying "I'm not going to be a part of this" means you step away and brush your hands clean.
Saying "I'm going to report this" requires much more effort. If you personally know someone working there it's even more difficult as you'd be intentionally ratting out your friend/colleague/family.
But you have to eat, your family does as well. You need a place to live (electricity, water, gas - all those things cost).
It comes down to "How do your ethics compare to underlying ability of yourself and family to live?
And then, it's even worse when your family == family business crooks. You have no out.
Now, people have an amazing ability to rationalize behavior, so it's entirely possible some of those people convinced themselves that they needed to continue because they would be out on the streets with now way to provide for their family because that's all they knew, but I think it's important to distinguish irrational thinking such as that and the reality of the situation when discussing it.
1: "Out on the streets" could very well have been well above the poverty line and quite comfortable given their likely assets and resources, but unfortunately it's all to often a relative assessment that is made, where relatively worse still may be quite comfortable on an absolute (or relative to the region) scale.
1. Family. Doing this the "right way" would mean fessing up. And that means alienating and testifying against family. Unless they're Hannibal The Cannibal, or other absolutely horrible crimes against humanity, you're not going to want to destroy your family and the business.
2. Inertia. It was already done, we're just doing it how it was done before. (Insert "Cause everyone else does it").
Inertia is a big one though, I think your're spot on there.
"Crazy Eddie was from Day One planned to be a criminal enterprise. We committed our crimes simply because we could," said Antar, whose cousin Eddie Antar founded the chain.
http://money.cnn.com/2014/11/17/investing/fraud-wall-street-...
I guess you hire people you trust..
The article is really excellent. It is really a closed community. There is an religious edict that bans everyone who marry a non Syrian Jew.
From the article: "Seventy years after the promulgation of the Edict, it seems fair to say that, taken on its own terms, it has been an almost uniquely successful tool of social engineering. The enclave grows and thrives beyond the dreams of its founders. It offers a secure economic future and a sweet family life to those who remain within its confines."
BTW, is it offensive to use the word Jew? If so, how should I have called them?
“Never accept a convert or a child born of a convert,” Kassin told me by phone, summarizing the message. “Push them away with strong hands from our community. Why? Because we don’t want gentile characteristics.”
great article, thx for link
If the people you are referring to are indeed believers in Judaism, I can't see why you can't use the word "Jew".
Another problem is neither "Jew" nor "Jewish" is particularly precise. For instance, in America, it typically refers to someone of Ashkenazi extraction, not a believer in Judaism.
The problem being, "Jew" refers both to both a belief system and a racial characteristic, and without qualification it can be thoroughly unclear. This is even true of more precise terms e.g. "Hasidic". There's a very tight-knit ethnic group that share a bunch of religious practices, but the adjective refers to both things.
Aside: if you're not easily offended, watch Chanuka Honey on YouTube. It's an extended joke about American Jewish culture, but religion barely features.
This is one of those things where the delivery matters more than the word. It's fine in this context but could be used in an offensive way.
https://www.amazon.com/Digital-Gold-Bitcoin-Millionaires-Rei...
If you ever find yourself in a bad culture, you simply need to leave, especially if you are young. Culture has a powerful momentum but that momentum reduces with each person who opts out.
The classic case is tax returns, where you tell the government how much you made, what you deduct, and hence how much you owe. Because a proportion of the information is self reported, it is (especially in the past) possible to cheat. Anecdata is that cheating, and getting away with it is somewhat common, and not frowned on by society.
Another is speeding on the roads, where ire is directed at the process of catching speeders versus the reason for the limits and their levels.
It's my opinion that this leads to a perception that the government is out to take advantage of you unless you proactively protect yourself, and I think that may lead to people being far more willing to lie to reduce what they pay due to the feeling that government has taken advantage of them in the past, or at least tries to.
"Fairness" is a highly developed Human trait, and has even been shown in primates[1]. This is, of course, my pet theory regarding taxes and I'm not providing sources (but maybe some exist?), so take it for what it's worth.
1: http://news.nationalgeographic.com/news/2003/09/0917_030917_...
What originally perplexed me originally would be seeing signs like "do not walk on the grass" and in some places it seemed completely ignored, and others obeyed. Same with speed limits (one time I was the slowest driver on the New Jersey turnpike because the signs said go 45 due to roadwork, so I did). I think it is the chances of getting caught that define people's behaviour, not any reasons for the rules in the first place, and this seemed to be a very big American trait.
BTW Dunbar's number is also related to the fairness thing IMHO.
I worked at AIG's Credit Default Swap group in NYC in 2007/2008 and someone in IT noticed strange audit records showing Operations/Accounting users manually changing prices for no documented reason. The person in IT foolishly copied the logs into an email and emailed some managers inquiring why. You might recall the company was under investigation for massively over-marking their derivatives so any accusation around derivatives prices being manually overridden without an audit trail is quite damning.
Within 24 hours, he was accused by one of the Operations/Accounting users of assault (supposedly a mouse was thrown at her.) There were no eye-witnesses, a total he-said-she-said. Despite that, he was walked out of the office soon after. He had no prior HR records/demerits. He was on an H1 which meant he'd be sent back to China within two weeks if he didn't find another job.
Despite having a printout of the email which likely initiated this retaliatory accusation, HR was not interested in any email. They seemed to be more interested in squashing the original concerns than investigating it. HR did not interview anyone besides a few of the accusers. It seemed like a professional hit job (cover-up?)
The message to the overall group was clear and chilling -- keep you mouth shut and don't look where you should not. I tried to switch departments immediately, as did others. Luckily the entire group was re-org'd and much better and more fair management took over. Regardless, I never publicly mentioned the story (I am now posting it for the first time since many of the people involved are retired and I'm in a different industry.)
One fun fact I remember is that your share price is not calculated based on shares outstanding. Sure, perceived supply and perceived demand account for a lot but many traders and armchair investors are not aware of this larger detail:
The bedrock of your share price is based on available tradeable DTCC-deposited http://www.dtcc.com/ "unchilled" float. It's all in the float and that includes a few private companies out there that determine your float number, including the DTCC and CapitalIQ https://capitaliq.com, which can mean a manipulated or highly inaccurate market cap via your share price which is calculated by your float. And, if a crook has any spies or moles working there, that crook can get a lot done with his buddies which can include stock transfer agents who play a big role here. I got offers like this from time to time.
Market makers and institutions will eventually dial your price in based on your float as it's one of the few solid factors they have for determining price. Shorts are all over this too. Large caps have arsenals of CFO's, attorney's and connections that fighting for an accurate unmanipulated float is trivial. "Bigger Stuff" is happening for them although NFLX was known as a "short incinerator" due to their essentially well-engineered low float which helped them maintain a high but volatile share price historically.
For mid size and small public co's if you're market cap is manipulated, you can see this when you ask for NOBO reports provided by the DTCC combined with reports from CapitalIQ who control how and when the main DB gets updated with the number of shares used to calculate your float aka number of tradable shares any given day, week or month. Try and get them to make corrections if you can, sometimes you won't be able to, depending on who you know or how well your engineering plan for your float is from the start of structuring your public co.
A company might have a shareholder that needs a new certificate of stock issued because they "lost" their old one. Or it got eaten by sharks or something while you were at the beach, somebody's house burned down, they moved it got lost, cancer. Whatever the case, this happens everyday in the market, people lose certs for all kinds of reasons. If you own a public co, you'll have to work with your current stock transfer agent to get the certs reissued and this is a pain in the ass as affidavits and sometimes insurance bonds need to be issued along with them. These certs might represent e.g. 1 million shares of stock, 50k, 100k but it all accumulates if not taken care of and tracked like a hawk immediately. This might happen 1-3 times per year.
Each time this happens, the DTCC needs to finally validate the certs and "put them on deposit" officially approved for trading. Once this is done, if you have not worked with your SEC attorney, stock transfer agent (to get the ledger updated) and the DTCC to make sure there are no hold ups you then make sure CapitalIQ/S&P are holding accurately reflected updates in their DB as most institutions and market makers and some traders just rely on this data to adjust or predict your price in their models. Remember, a price adjustment must come if there is any change in the float. And, you've just witnessed a change in the float as the CEO properly overseeing the process, if you're on top of it, so you then expect to see a corresponding change, more or less, in the price in some reasonable amount of time, say a day or two or immediately if you have some good connections.
Now multiply the above by several accumulated share cert reissuances, which is more real-world, then add the fact that not many small cap CEO's are hawkish about that (half of them just let the stock transfer agent take care of everything and call it day, wake up the next day, grab a bag of popcorn and watch their stock trade <- keep this mind. Now add, the critical part, guys on the inside that know this process like the back of their hand. They in fact make money by making sure all this happens "smoothly", they are usually working closely with the stock transfer agents.
Next factor shrewd but unscrupulous friends in this guys little network, who might be big shorts of this stock. They call their friend at the transfer agent and throw a monkey wrench into the process knowing that inaccurate float data will then be distributed to OR within CapitalIQ. Prices then will not be accurately reflected and they are now in the money for building a short position in the stock while everyone else including the public thinks it should be valued differently. Unethical Information Arbitrage is happening.
Then then call their buddy up at the stock transfer agent and correct a synthetic mistake. Once corrected, the price of the stock must come down, making the short a load of $$$ on the way down because e.g. 20M shares have just been added to the float. This means more supply right. BTW: you want no where near that amount in your float as a small cap.
Unless the CEO can correct this or even knows about it, a form of fraud can continue to exist on that company stock.
This is just 1 of many examples of how fraud can be structured on the short side. The long side is a bit different but with the same principles of screwing with a public companies cap table based on inside manipulation of the float, by deep insiders, not company insiders. I know this because I had to fight this exact scenario and few others from happening to my company. Being a software engineer also helps quite a bit. I built all kinds of automated monitoring systems for this in particular to monitor the NOBO list and true "short interest" for example.
I also use to have bots send certain small Market Maker guys updated news on our company. They hated that because it then bound them to a piece of knowledge that could be traced back to them. I thought it was funny. I eventually stopped that as I thought it was also too aggressive in terms of taking a bite out of fraud that ran against my company.
Keep in mind, some CEOs are in collusion here shorting their own stock after going long and just riding the waves of what they consider giant ATMs. You can tell who they are because 99% of the time they have super high floats and know that the public are clueless related to the bad "financial engineering" specific to float structures.
Other examples of the above including someone disagreeing with the NAV (Net Asset Value) of the assets within your company. If you legitimately change the NAV of one of your assets such as an LLC that has a JV with a new partner based on some IP or the acquisition of something valuable, then you can negotiate with CapitalIQ/S&P to have them change your float based on shares being issued to the JV or LLC and no longer being part of the public company. This is bit more complex strategy for the CEO to control the float. This process can also be manipulated by being help up a firm being used by some outsider. I had to deal this scenario too. I had some outside shareholders saying one of our NAVs was too low and another saying it was too high and he would not stand for a change in the float so he wanted to get personally involved with communicating with the outside data vendors.
Another example relates to "Donkey Kong" but that's different kind of volume manipulation that can help chip away a bloated float altogether.
And then there are those that will offer to manipulate the option pool which of course entails them cashing out very soon or immediately, buying all the way up and then shorting all the way down when your float become bloated from all the options being converted to actual tradeable stock and then just sitting out there waterlogging everything for investors and traders that are trying to figure out why your stock does not move up like the others but moves down much greater than the others... messing with options for the CEO while the deal includes the same options for the outside partner is still outright illegal and can land you jail. But I'm pretty sure its still being done.
And there's always the good nuclear option of cleaning up the cap table, buying back shares, finding ones no one is using (believe it not yes, unclaimed or those someone may want to give back to the company based on first right of refusal or for tax reasons and then once all rounded up - outright "canceling" a large lot, which can burn a lot of people real quick on the short side and make tons for others on the long side overnight. This is actually perfectly legal with the right intent. This also takes lots of phone calls and negotiation.
The bad nuke option is a reverse split, this leads different kind of death spiral for the stock and is encouraged by dealers and brokers some of which know that you won't be able to sustain it. You cut the float in half e.g. and then the price doubles correspondingly overnight. However, most companies are unaware that they being manipulated such that naked shorts keep piling on and worse off than where you started. Naked shorting and other kinds can almost endless add to an inaccurate float number.
Lots of details left out but in principle that's how the above works.
https://www.bloomberg.com/news/articles/2015-03-12/josh-saso...
Would these types of loans aggravate the situation? Are these the companies with super high floats?
The way to handle those guys is with some basic Sun Tzu stuff. Most guys would ignore them, but they are so fun to talk to for the lulz.
You have to be real careful because even if smart money gets wind that you have talked to these guys, you might be looking at owning a roach motel by the end of the year. These guys also have the ability to naked short your stock til the cows come home. Something you've got to track. They will sometimes do things like try to book a call through someone partner or shareholder and get an intro, then blab to some subnet of people that you're going to take the deal and mess things up for you while they still short your stock knowing it's going to take a hit just because their dirty asses got near you. They know exactly how dirty gloved they are. Avoiding people like them during trips to NY is also fun and games.
One more point, this is also the main way companies looking to raise money screw their cap table up because, it absolutely ruins their float - this due to the fact that 99% of the time they have to reissue more and more and more of their stock to these death spiral guys to pay them back on the loans after 6mos. The reason its named a death spiral is because the model of most of these crooks follows includes knowing that these fledgling companies are going to have a hard time raising combined with a model that is purely based on shorting these kinds of deals. Amazingly close to absolute fraud.
You really want long term partners and financing from friendlies that understand your long term vision and at least buy into it a little bit. And, what it takes to uplist or cross list to higher quality exchanges if your an OTCBB with a healthy story, volume and price relative to some actual revenue or large partner.
Sam Antar is a convicted felon and a former CPA. As the CFO of Crazy Eddie, Mr. Antar helped mastermind one of the largest securities frauds uncovered during the 1980s.
Today, Sam Antar is a forensic accountant. His primary work focuses on identifying and investigating public companies engaged in securities fraud by performing an in-depth (deep-dive) forensic analysis. (...)
All this while thousands of Americans languish in jail/prison for nonviolent drug charges.
https://www.deepcapture.com/tag/sam-antar/
https://www.deepcapture.com/2011/03/judge-gill-freeman-throw...
If you could spare the time for a tl;dr I'd be interested :)
"Sam Antar, generally not short of opinion, has suddenly developed laryngitis."
That's a metaphor. It means that Antar is suddenly not talking when the subject changes to Barry Minkow, and the author's opinion is that this is because they are or were in a criminal conspiracy.
But yeah, fair enough, maybe that's what I should've written then :)
I don't know whether to bemoan the decline of literary education in recent years, or applaud the improvments in medical treatments…
American security consultant known for his history as a former confidence trickster, check forger, and impostor between the ages of 15 and 21.
Abagnale also continues to advise the FBI, with whom he has associated for over 40 years, by teaching at the FBI Academy and lecturing for FBI field offices throughout the country.
Barry Minkow (except he couldn't seem to give up his old ways and is in prison again)
Switching sides allows them to continue the game and often even continue with a good base level of wealth. This can be hard to do without an existing reputation, but their prior career should have already achieved that.
https://www.nytimes.com/2007/10/14/magazine/14syrians-t.html
http://forward.com/news/110943/an-inside-look-at-a-syrian-je...
The only instance I've heard of an accounting company truly blowing up is probably Arthur Anderson after the Enron scandal.
I was young enough when all of this went down that I remember being super sad the guy in the commercials was a criminal. And then blown away to learn he was just an actor.
I splash on beats like sauce on spaghetti
Putting MC's out of business like they're Crazy Eddie
Human Intelligence at it's core with some Social Engineering thrown in.
Brilliant line!!! Got stock options?
Bank Leumi figured big time in the crash of iBill, they took the money of a lot of merchants and never paid it out.