This Is What Happens to People Who Fight For Healthy Markets
Modern-day markets contain numerous stone-cold Ponzi schemes and frauds, but the authorities keep turning a blind eye
By far the most prominent exposé is Nikola Motor which first jumped onto short-sellers’ radars when the company went public via a SPAC while producing no revenue and having no physical product— just some artwork its CEO bought from a Croatian-based designer.
But it wasn’t until a day after General Motors signed a deal to buy 11% of the company that Hindenburg Research’s damning report made investors finally stop drinking the EV Koolaid and Nikola’s stock price finally began to crater. Hindenburg’s investigation into Nikola revealed CEO Trevor Milton’s questionable past in the corporate world, a history which, in more ways than one, resembles Elon Musk’s.
The contrast between Milton and Musk, however, is that Milton failed to master what writer Ben Hunt describes as the narrative machine: “The translation of reality into actual human behaviors and actual investment outcomes takes place within a larger Machine of strategic communication and game playing.” Like Trump in politics, Musk has mastered perception management, securing his place in Silicon Valley royalty as the King of EV.
“How do you get to be the King?”, says Alex Danco. “You get to be king if everyone believes you’re the king.” Musk’s connections and contacts within the government, the regulatory agencies, and the media allow him to make bold claims and commit securities fraud without facing any serious consequences or mainstream backlash. In fact, in recent mainstream articles, no one questioned Musk’s character, antics, and dealings. They only painted Milton as a villain, and without the government’s and media's backing, his takedown was simple — and inevitable.
Nikola’s and Milton’s semi-swift demise portrays a reality where exposing fraud is easy and common. But in this market, exposing deception remains an almost impossible task, and the abundance of whistleblowers — experts from biotech, finance, and other industries messaging me to help them publish exposés — is a testament to how fraud-ridden modern-day markets have become. You would think governments and regulatory authorities would want healthy markets free of crime and deception, but the opposite is true.
Exposing fraud should be simple, but it’s an ultra-risky pursuit as Viceroy Research Founder, Fraser Perring, found out when he started to blow the whistle on Wirecard: an elaborate fraud posing as Germany’s largest payment processor. Sadly for Perring, this was more than a simple accounting swindle. Powerful, high-level figures enabled corruption, lies, and deception. Politicians, governments, auditors, and various high-level employees at the company were all involved in the decades-long cover-up and wanted this swept under the rug to prevent any further repercussions.
In an interview, Perring revealed what happened to him while he tried to expose Wirecard’s dodgy dealings. Investigation firms followed him around London trying to create a narrative that he had conspired to profit with journalists. Police asked him to identify his daughter after being told she was in danger. They accused him of being on heroin. His house and apartment were broken into and robbed, his computer was hacked, and he found cameras hidden inside his house. Conspirators sent letters to British police detailing how he was a liar and how it was impossible for Wirecard to be a fraud. And if that wasn’t enough, he was attacked, his feed broken in, outside a train station.
His attempts to expose Germany’s biggest financial Ponzi scheme in a generation shows just how daring and insane you have to be to work as a professional short-seller. Most start out to make money, but in the end, with this market ripe with fraud and the authorities asleep at the wheel — or accessories to the crime itself — it becomes personal.
Society does not hail short-sellers as heroes like police officers, firefighters, or doctors just for doing their job. Being a short-seller is different. Society perceives them as a villain, a crook “looking to make a quick buck”, while the opposite is true. Anyone who tells you that short-sellers are immoral has forgotten how markets are meant to function. Short-sellers play a vital role. Their pursuit of the truth allows markets to function more efficiently. While investors buy underpriced quality, short-sellers short overpriced junk. They expose bad ideas that crony capitalism has kept alive. Their real intention lies in exposing fraud and restoring order: a world where money has value, authorities take financial investigators’ claims seriously and enforce the law rather than breaking it.
Right now, with the market’s fraudulent state, we need short-sellers more than ever. The authorities are doing a lousy job of enforcing the law and letting markets function. Central banks keep rates at zero. CEOs who commit securities fraud escape with meager fines that barely scratch their net worth. It’s possible to create a billion-dollar company, then cash out before facing any consequences.
All these modern-day market injustices stem from bad economics. The gross misallocation of capital we’re witnessing today allows bad ideas and fraud to thrive. Cheap money allows bad actors to create billion-dollar companies based on lies and to become mainstream faces of movements that promote a better world. We need to give short-sellers a platform to stop confidence men posing as influential public figures from becoming millionaires almost overnight, to stop these individuals from inevitably infiltrating government and leeching off taxpayers for personal gain.
For this, though, we need regulators who do their job, who fight for integrity in markets. We need journalists willing to challenge the narrative, not copycats who continue to feed the narrative machine, month after month, week after week. We must remember what a market is and what it’s meant to do. It’s not a mechanism to enrich a few, produce civil unrest, and exacerbate wealth inequality, but to find the right price for an asset whether that’s a share of Apple or Amazon or a carton of frozen orange juice.
Unfortunately, this is the polar opposite of what we have now. Until we wake up from this cheap money bubble, we will sink to new lows, and the farcical forces this bubble has created will not only prevail but prosper.