- Harry Markopolos, a whistleblower on the Madoff ponzi scheme, has the potential to make millions from his recent call that General Electric has committed billions of dollars in accounting fraud.
- The former financial executive is reportedly working with an undisclosed hedge fund that’s betting GE’s share price will drop, and Markopolos has an agreement to receive a portion of the trading profits, according to the Wall Street Journal.
- Markopolos’ group has also sent its 175-page report to securities regulators in the hope of claiming a cash reward through a government whistleblower program.
- GE’s stock plunged 11% on Thursday — its biggest decline in 11 years — after Markopolos’ accusatory report was made public.
- Watch General Electric trade live.
Harry Markopolos could reap millions of dollars from his recent claim that General Electric has committed billions of dollars worth of accounting fraud.
The former financial executive who made a name for himself as a whistleblower on the Madoff ponzi scheme told the Wall Street Journal that he’s working with an "undisclosed hedge fund" that’s betting GE’s stock price will fall.
The fund received access to Markopolos’s 175-page research report before they released it on Thursday, according to the WSJ. Markopolos has also entered into agreement with the fund to receive a portion of the profits from its short position on GE.
Markopolos didn’t disclose the size of the position or what portion of it he and his team will receive should GE’s stock price continue to fall.
The group has also sent its report to securities regulators in attempt to collect a cash reward through a government whistleblower program. The US Securities and Exchange Commission operates the Office of the Whistleblower, which allows people submit anonymous tips and information on possible securities violations.
The office also offers financial rewards to those who provide information that leads to sanctions of $1 million or more. The rewards can ranges from 10% to 30% of the money collected through fines, according to the SEC’s website.
Markopolos and his team claim that they’ve found $38 billion worth of accounting fraud stemming mostly from from GE’s long-term-care insurance business. The report said that after reviewing competitors in the sector they determined that GE was hiding huge losses from investors by falsifying regulatory filings. The report also said the level of fraud was "bigger than Enron and WorldCom combined."
GE’s Chief Executive Officer Larry Culp fired back at the claims calling them "market manipulation — pure and simple." Culp also reportedly purchased $2 million worth of GE’s stock following its dip on Thursday sparked by Markopolos’s report.
Despite the sharp loss, GE was still up 10% year-to-date through Thursday’s close.
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