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Lying for Money: How Legendary Frauds Reveal the Workings of the World. Dan Davies


SharperDingaan
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So many contenders ..... so hard to choose! 

https://en.wikipedia.org/wiki/Bre-X

 

"Financial crime seems horribly complicated but there are only so many ways you can con someone out of what's theirs. In fact, there are four. A veteran regulatory economist and market analyst, Dan Davies has years of experience picking the bones out of some of the most famous frauds of the modern age. Now he reveals the big picture that emerges from their labyrinths of deceit. Along the way you'll find out how to fake a gold mine with a wedding ring, a file and a shotgun. You'll learn how fraud has shaped the entire development of the modern world economy. And you'll discover whether you have what it takes to be a white-collar criminal mastermind, if that's what you want."

 

SD

 

 

 

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Interesting. A lot of people(you can almost always pick them out of a crowd or judge them by their covers) make tremendous financial windfalls by finding the line that legally enables a fraud. Legally getting rich quick. Or at least, legally making a trade involving a small penalty in exchange for a big pay day. The financial world is filled with these folks. So is energy. The guys who pinch an extra digit selling energy to entities that pass through costs. Mortgage guys who know how to get a shaky app through or slip on an extra eighth. Stock brokers or advisers who know where you can offload those private placements......

 

Funny enough, my town, a nice, up and coming NJ suburban town, was developed in its early stages by two dudes. One had Enron money through a timely wedding, and the other part of a well orchestrated penny stock operation in the 90s. One never did a day of time, the other a small stint in the slammer and a lifetime ban but then emerged with enough wealth to buy and develop several dozen acres of waterfront land and never "really" work again. 

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In a previous life, my firm had a competitor using securitization; when it was still extremely new. We would use an ultra-low cost of funds, bid on a book of business, and consistently lose it to this competitor who would subsequently do an equity issue - at a progressively higher price. Along with some very devious folks, we had to figure out how they were doing it, and how to exploit it!

 

Sadly for them we figured it out, deliberately bled them dry, kept buying into the equity raises, and selling covered calls. The other name for securitization is 'cocaine candy', and the competitor had been booking a deals entire multi-year profit, immediately upon signing. Inflated the ROE, inflated the multiple, inflated the share price - as long as consecutive bigger and bigger deals could be signed. Once bled dry, the competitor suffered a public accounting crises, and received an offer they couldn't refuse; self-funded from gains on puts 😄

 

The competitor was merely taking a more aggressive interpretation of the accounting standard of the time, we simply recognized that it had weaknesses! Thoroughly enjoyed my time at this firm, but I couldn't hold a candle to the skill of the devious folks! 

 

SD

 

 

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