
Crazy Eddie Fraud - jessaustin
https://whitecollarfraud.com/crazy-eddie/crazy-eddie-fraud/
======
dredmorbius
This needs a backgrounder on what the Crazie Eddie story was, specifically.
I'm not familiar with it. The story presumes the reader is.

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](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]_

~~~
throwaway7645
I thought it was crazy Eddie from Larry Niven's "A Mote in God's Eye" (forget
the co-author).

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.

~~~
Eliezer
Clickbait title, story involved no Moties or space probes

------
jakobegger
Here's what I don't get: Why is everyone so unconcerned about making
themselves complicit in crimes like this?

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?

~~~
neves
It was also puzzling me. I think a link posted below
[[http://www.nytimes.com/2007/10/14/magazine/14syrians-t.html](http://www.nytimes.com/2007/10/14/magazine/14syrians-t.html)]
explains it. They are a closed ethnic community. Reporting it would be like
betraying not just your employer, but also your people.

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?

~~~
h4nkoslo
The flip side of strong ethnic ties and ingroup preferences enabling fraud, is
that they make it possible for, eg, Hasids to conduct an extemely high-value
diamond trade on a handshake basis internally.
[https://www.algemeiner.com/2014/05/21/new-yorks-diamond-
dist...](https://www.algemeiner.com/2014/05/21/new-yorks-diamond-district-and-
jewish-tradition/)

~~~
gaius
I don't think that's true; traders in the stock markets with no racial or
familial ties regularly make such deals, especially in the days of open outcry
markets.

------
KasianFranks
I owned a small mobile app public co a while ago for a few years. The things I
witnessed ran deep and with most listed companies on most exchanges up and
down the food chain. The fraud can go many levels deep and begins to look like
a giant complex game, and for crazies out there, Sith Lords
[https://en.wikipedia.org/wiki/Patrick_M._Byrne#Campaign_agai...](https://en.wikipedia.org/wiki/Patrick_M._Byrne#Campaign_against_naked_shorting_and_analysts)

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/](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](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.

~~~
erik998
Is this similar to penny stock financing? Did you get many calls for these
types of loans?

[https://www.bloomberg.com/news/articles/2015-03-12/josh-
saso...](https://www.bloomberg.com/news/articles/2015-03-12/josh-sason-made-
millions-from-penny-stock-financing)

Would these types of loans aggravate the situation? Are these the companies
with super high floats?

~~~
KasianFranks
My goodness, when I first started in 2010 I got calls or emails just about
every day around 6-7am PST for a year. These guys represent toxic credit
lines/loans aka convertible notes/debt or the death spiral, not the better
kind found among private startups today e.g. SAFEs. Never accept money from
someone that calls you if your a small cap unless you know someone that knows
them and they are clean. I was taught that early on by the guy that first
invested in MySpace because he had a public co which he used to make that deal
through a small NYSE issue I remember.

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.

------
skrebbel
This must be the best content marketing I ever read. The author _is_ the
convicted felon being written about and he now runs a forensic accounting
consultancy.

~~~
velodrome
This is not uncommon. This is taking tradecraft and applying it in a useful
and valuable way (for society as a whole). Frank Abagnale is one such example.

 _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._

[https://en.wikipedia.org/wiki/Frank_Abagnale](https://en.wikipedia.org/wiki/Frank_Abagnale)

[http://www.imdb.com/title/tt0264464/](http://www.imdb.com/title/tt0264464/)

~~~
kbenson
I think often what attracts these people, beyond getting a certain level of
wealth, is the game and the high from knowing they are better than those they
go up against.

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.

------
biscuitt
As an accountant, 1/3rd of the auditing class I took in college was just
reading about how different companies perpetuated fraud. It made an otherwise
boring class, pretty fun. I still currently work in public, and a couple of
the partners are incredibly jaded because they worked on clients at some point
in their careers who were committing fraud.

------
username223
The Planet Money episode talking to Sam Antar is a great listen:
[http://www.npr.org/sections/money/2009/08/into_the_mind_of_a...](http://www.npr.org/sections/money/2009/08/into_the_mind_of_a_financial_c.html)

~~~
subpixel
Another fascinating story is that of the ultra-insular Syrian Jewish
community/subculture to which the Antars belong:

[https://www.nytimes.com/2007/10/14/magazine/14syrians-t.html](https://www.nytimes.com/2007/10/14/magazine/14syrians-t.html)

[http://forward.com/news/110943/an-inside-look-at-a-syrian-
je...](http://forward.com/news/110943/an-inside-look-at-a-syrian-jewish-
enclave/)

------
spoonie
Does this reflect poorly on the auditing industry? Kind of like with the
ratings firms during the GFC. It seems that their poor practices have aided
and abetted these frauds. Has their behaviour changed?

~~~
pm90
This is a good question, and I would like to know the answers as well.
Although, seeing that the credit rating agencies that enabled the Great
Recession are still in business...it seems unlikely that they have changed
anything.

The only instance I've heard of an accounting company truly blowing up is
probably Arthur Anderson after the Enron scandal.

~~~
gefh
I believe that a lot of firms had to split their accounting and consulting
businesses after Enron, but this article shows the conflict of interest had
quietly been there, and been abused, for decades.

------
commandertso
I was a kid on Long Island when Crazy Eddie was big - it was impossible to not
know the commercials' tag line by heart - "Crazy Eddie! His prices are in-
saaaaane!"

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.

~~~
twic
I'd only heard of Crazy Eddie via a New York area local historical society,
the Beastie Boys, who boasted [1]:

    
    
      I splash on beats like sauce on spaghetti
      Putting MC's out of business like they're Crazy Eddie
    

And once made an ad for an album in the style of the Crazy Eddie ads:

[https://www.youtube.com/watch?v=3OR8O0u2fDY](https://www.youtube.com/watch?v=3OR8O0u2fDY)

[1] [https://genius.com/Beastie-boys-shazam-
lyrics](https://genius.com/Beastie-boys-shazam-lyrics)

------
AtheistOfFail
> I engaged in a calculated plan to subtly distract them with cute Crazy Eddie
> employees reporting to me. I encouraged my female employees to flirt and get
> friendly with their young male PMM counterparts and discuss audit issues
> with them over lunch and dinner on Crazy Eddie’s tab.

Human Intelligence at it's core with some Social Engineering thrown in.

------
late2part
"The gullible auditors accepted our silly explanation that our employees had
sacrificed many years working at below average wages for the opportunity to be
part of what they hoped might become a growing public company."

Brilliant line!!! Got stock options?

------
mirimir
What's funny is how pervasive these games are.

------
jacquesm
> After the funds were transferred to Panama, a family member withdrew those
> funds from Bank Leumi in the form of bank drafts or non-negotiable
> instruments, to avoid violating disclosure laws on the movement of funds
> into the country.

Bank Leumi figured big time in the crash of iBill, they took the money of a
lot of merchants and never paid it out.

