Crazy Eddie and the Art of Stock Fraud

Motley Fool Hidden Gems Investing

The Motley Fool

Investing, Business

4.3 • 3.1K Ratings

🗓️ 23 October 2022

⏱️ 29 minutes

🔗️ Recording | iTunes | RSS

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Summary

Spotting a stock fraud is extremely difficult, but finding some smoke is significantly easier. Founded by Eddie Antar, Crazy Eddie was a chain of consumer electronic stores in the Northeast. After going public in the 1980s, the stock became nearly a ten-bagger before investigators found it to be a fraud. Investors may not have suspected that the retailer boosted profit margins by manipulating a cash skim, but there were some other signs that the soaring stock price didn’t tell the whole story. Ricky Mulvey talked with Gary Weiss, author of “Retail Gangster: The Insane, Real-Life Story of Crazy Eddie” about: - Why investors bought into Eddie Antar’s hype - How criminals save money on sales tax - The eventual downfall of Crazy Eddie Host: Ricky Mulvey Guest: Gary Weiss Engineers: Rick Engdahl, Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	This little bit like a Ponzi scheme, if you begin by committing fraud, you've got to continue
0:05.1	committing fraud.
0:06.7	And that's exactly what he had to do so.
0:09.5	How do you commit fraud?
0:10.5	One of the ways you commit fraud, one of the easiest ways to boost your earnings is to
0:15.4	inflate your inventory.
0:16.4	You know, it's not known to most late people.
0:19.2	It certainly wasn't known to the people in the warehouses.
0:21.2	It's crazy.
0:22.2	But if you increase your inventories, if you inflate your inventories, you're inflating
0:26.6	profits.
0:27.6	I'm Chris Hill, and that's author Gary Weiss.
0:34.6	Before Theranos and before Enron, there was Crazy Eddie.
0:38.7	A chain of consumer electronics stores throughout the Northeast, founded by Eddie Antar.
0:44.8	The business went public in 1984, and within two years, the stock was up more than nine
0:50.1	times in value.
0:51.6	But the good times didn't last because Eddie Antar was boosting his company's margin
0:57.6	and profit growth with fraud.
1:00.8	Ricky Mulvey caught up with Gary Weiss to get the background on one of the most colorful
1:05.4	stock scams of all time, which Weiss details in his new book, Retail Gangster, the insane
1:12.7	real-life story of Crazy Eddie.
1:18.8	Joining us now is Gary Weiss.
	...

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