1
00:00:29,738 --> 00:00:35,661
<i>So let's start a
long march together...</i>

2
00:00:37,829 --> 00:00:39,790
<i>not a closed march...</i>

3
00:00:40,791 --> 00:00:44,503
<i>but by different paths
that lead to the same goal.</i>

4
00:00:48,173 --> 00:00:54,137
<i>The goal of creating a world structure
of peace and justice...</i>

5
00:00:54,221 --> 00:00:55,347
RECOMMENDS BUY

6
00:00:55,430 --> 00:01:00,352
<i>that keeps us united
with the same dignity.</i>

7
00:01:00,686 --> 00:01:04,064
<i>First of all,
our markets are open to China.</i>

8
00:01:04,147 --> 00:01:07,067
<i>This agreement will open us
China markets.</i>

9
00:01:07,150 --> 00:01:09,778
<i>Our relationship with China
It's very positive...</i>

10
00:01:11,113 --> 00:01:12,698
<i>and complex.</i>

11
00:01:12,781 --> 00:01:14,199
CAPITALIZATION: 150 M

12
00:01:14,283 --> 00:01:18,829
<i>The free market is the greatest driving force
of economic progress in history.</i>

13
00:01:19,454 --> 00:01:23,417
<i>You will get many good deals
for Americans.</i>

14
00:01:23,500 --> 00:01:24,501
<i>Believe me.</i>

15
00:01:24,584 --> 00:01:26,211
THEY SCAM INVESTORS

16
00:01:41,810 --> 00:01:43,562
What is capitalism?

17
00:01:48,108 --> 00:01:50,485
Is it an economic system?

18
00:01:53,655 --> 00:01:57,242
 �Or it is a device that we can use

19
00:01:57,326 --> 00:02:01,371
to earn more money for us
and take money from others?

20
00:02:03,707 --> 00:02:05,876
I think that, deep down,

21
00:02:05,959 --> 00:02:09,046
Rewards those who make an effort.

22
00:02:09,129 --> 00:02:13,634
But it also rewards
to those who are willing...

23
00:02:15,052 --> 00:02:16,553
to take advantage of others.

24
00:02:27,648 --> 00:02:31,568
There are no good guys in this story...

25
00:02:33,487 --> 00:02:34,488
not even me.

26
00:02:47,084 --> 00:02:50,128
Rolling. I'll put the blackboard there.

27
00:02:50,212 --> 00:02:51,755
- Yes, good.
- OK.

28
00:02:52,756 --> 00:02:54,716
The first memory of your childhood?

29
00:02:54,800 --> 00:02:57,302
CO-FOUNDER OF GEO INVESTING

30
00:02:57,386 --> 00:02:58,929
It's a trick question.

31
00:02:59,513 --> 00:03:00,764
Is it?

32
00:03:00,972 --> 00:03:03,225
I didn't expect it.

33
00:03:03,725 --> 00:03:06,937
I don't know what the first memory was
from my childhood.

34
00:03:07,020 --> 00:03:10,774
I imagine that after two years
I was already discovering scams.

35
00:03:12,192 --> 00:03:13,819
<i>�This is Dan David.</i>

36
00:03:18,907 --> 00:03:20,283
<i>When I met him,</i>

37
00:03:20,367 --> 00:03:23,954
<i>we had some drinks
at a TGI Fridays in Penn Station.</i>

38
00:03:24,037 --> 00:03:26,706
<i>And he told me an almost incredible story.</i>

39
00:03:28,083 --> 00:03:29,918
THE PUBLIC DEBT CLOCK

40
00:03:30,836 --> 00:03:34,756
<i>Before the waters calmed
of the economic collapse of 2008,</i>

41
00:03:35,340 --> 00:03:39,302
<i>Wall Street already had
other colored mirrors to sell.</i>

42
00:03:40,178 --> 00:03:43,348
<i>They were designing a huge global fraud.</i>

43
00:03:44,266 --> 00:03:48,437
<i>But the scam was supported
in a lie that was totally legal.</i>

44
00:03:49,271 --> 00:03:52,649
<i>This time,
The crime was based in China.</i>

45
00:03:57,446 --> 00:03:58,572
SKIPPACK, PENNSYLVANIA

46
00:03:58,655 --> 00:04:02,075
<i>Dan begins his story here,
away from Wall Street.</i>

47
00:04:02,993 --> 00:04:06,163
<i>The investment business
that he had with his partner Maj</i>

48
00:04:06,246 --> 00:04:08,457
<i>it was lost in the market crash.</i>

49
00:04:08,540 --> 00:04:09,958
It's 3:00.

50
00:04:10,041 --> 00:04:14,588
Those who had a free investment fund
In 2008, they closed it and opened another one.

51
00:04:14,671 --> 00:04:15,756
Chris, what are you doing?

52
00:04:15,839 --> 00:04:18,383
I'm finishing what I was doing.

53
00:04:18,467 --> 00:04:20,719
We decided not to do that.

54
00:04:20,802 --> 00:04:22,804
We would give everyone their money back.

55
00:04:23,430 --> 00:04:25,682
<i>They needed big profits fast.</i>

56
00:04:25,766 --> 00:04:29,060
<i>With the Western world
on the verge of a new depression,</i>

57
00:04:29,144 --> 00:04:31,021
<i>The outlook was bleak.</i>

58
00:04:35,942 --> 00:04:38,028
<i>But there was hope elsewhere.</i>

59
00:04:38,111 --> 00:04:40,906
<i>Those in the know took Dan to China.</i>

60
00:04:41,907 --> 00:04:43,658
It was an exploding market.

61
00:04:45,494 --> 00:04:49,456
The only market that people considered
that was going to grow, was China.

62
00:04:50,499 --> 00:04:53,668
It will be the largest economy in the world.
Let's invest in it.

63
00:04:53,752 --> 00:04:55,045
It made me hallucinate, it was

64
00:04:55,128 --> 00:04:57,506
very different from what I imagined.

65
00:04:57,589 --> 00:04:58,882
It was booming.

66
00:04:59,299 --> 00:05:03,011
There are cities you go to once,
you come back the next year

67
00:05:03,094 --> 00:05:05,263
and there is a new shopping district

68
00:05:05,347 --> 00:05:06,848
that did not exist before.

69
00:05:09,226 --> 00:05:11,061
- Dynamic.
- Gold rush.

70
00:05:13,230 --> 00:05:17,776
There was practically no single company
in which you could invest in 2009,

71
00:05:17,859 --> 00:05:20,779
based in China,
that would make you lose money.

72
00:05:21,112 --> 00:05:23,323
In the eyes of an American,

73
00:05:23,406 --> 00:05:25,033
It was like, "Come on.

74
00:05:25,116 --> 00:05:29,454
China is the gold mine
of rapid economic growth".

75
00:05:29,538 --> 00:05:31,164
I thought: "Wow.

76
00:05:31,248 --> 00:05:34,501
The American century has passed. It's here."

77
00:05:40,507 --> 00:05:42,926
<i>Everyone wanted to enter China.</i>

78
00:05:43,009 --> 00:05:44,636
<i>There was just one problem.</i>

79
00:05:45,262 --> 00:05:48,974
<i>A foreigner like Dan
I couldn't invest directly.</i>

80
00:05:49,891 --> 00:05:53,770
<i>That's when the little bank appears
of California: Roth Capital.</i>

81
00:05:55,397 --> 00:05:58,400
<i>Roth found a niche
that the big banks ignored:</i>

82
00:05:58,483 --> 00:06:03,113
<i>take small Chinese companies and make them
listed on the US stock market.</i>

83
00:06:03,989 --> 00:06:06,741
<i>Now,
Dan and others like him could participate</i>

84
00:06:06,825 --> 00:06:08,827
<i>in the Chinese economic miracle.</i>

85
00:06:08,910 --> 00:06:11,329
<i>The bank's young salespeople offered</i>

86
00:06:11,413 --> 00:06:12,706
<i>another line of business.</i>

87
00:06:13,206 --> 00:06:16,209
"Hello, Jed. How are you?"
"Great. What's up?"

88
00:06:16,293 --> 00:06:18,295
"We are with a new company.

89
00:06:18,378 --> 00:06:20,505
"Can I offer you a transaction?"

90
00:06:20,589 --> 00:06:23,842
Two days pass. Five days pass.
"Are you interested?"

91
00:06:23,925 --> 00:06:27,220
We project this growth
with the acquisition.

92
00:06:27,304 --> 00:06:29,889
They are registered titles. "What do they say?"

93
00:06:29,973 --> 00:06:32,809
If they were interested, they would call you again.

94
00:06:32,892 --> 00:06:35,645
"Yes." "Yes." "Yes, I'm interested.

95
00:06:35,729 --> 00:06:37,731
Two million. Sign me up with that."

96
00:06:37,814 --> 00:06:39,899
"OK". That was it.

97
00:06:39,983 --> 00:06:43,778
I tried to swim in that current.

98
00:06:43,862 --> 00:06:45,363
It's like a flowing river.

99
00:06:45,864 --> 00:06:48,533
Twenty-one million is a good commission.

100
00:06:49,034 --> 00:06:50,368
Let's say this is...

101
00:06:50,452 --> 00:06:53,622
"I am worried that they will not be maintained
the numbers in China".

102
00:06:54,122 --> 00:06:56,249
Well, they never asked me that.

103
00:06:57,459 --> 00:06:58,877
Nobody asked that.

104
00:07:02,464 --> 00:07:07,677
Roth is a limited investment bank
second or third level in California.

105
00:07:08,345 --> 00:07:11,014
It's like a fraternity.

106
00:07:13,141 --> 00:07:15,894
Roth Capital took on small businesses

107
00:07:15,977 --> 00:07:17,771
and took them to the market.

108
00:07:18,730 --> 00:07:20,815
They were growing in 2010, 2011.

109
00:07:20,899 --> 00:07:22,651
INVESTMENT ADVICE

110
00:07:23,443 --> 00:07:28,281
Roth made agreements with China
when that interested us.

111
00:07:29,491 --> 00:07:32,953
We went to a couple of Roth's conferences.
A good moment.

112
00:07:35,121 --> 00:07:38,041
<i>Roth Capital Partners
organized conferences

113
00:07:38,124 --> 00:07:40,251
<i>for years in Orange County.</i>

114
00:07:40,335 --> 00:07:42,754
It's the best conference in the US.

115
00:07:42,837 --> 00:07:45,674
Companies You Never Heard Of

116
00:07:45,757 --> 00:07:47,634
They seek to sell to the rich.

117
00:07:50,303 --> 00:07:52,722
Their business model was simple.

118
00:07:54,724 --> 00:07:58,186
A three day event.
One hundred, 150 companies.

119
00:07:58,269 --> 00:07:59,980
The first executives said:

120
00:08:00,063 --> 00:08:02,524
"For these six, seven, ten reasons,

121
00:08:02,607 --> 00:08:06,361
we hope to increase revenue
by 75% next year."

122
00:08:06,444 --> 00:08:09,781
In recent years,
China went from interesting to important.

123
00:08:09,864 --> 00:08:12,075
And then the show.

124
00:08:14,077 --> 00:08:16,204
Snoop Dogg, Billy Idol,

125
00:08:16,287 --> 00:08:18,790
dancers, ice statues,
trojan night,

126
00:08:18,873 --> 00:08:20,834
buses, trains, planes

127
00:08:20,917 --> 00:08:24,546
<i>and the baijiu,
that looks like motor oil in a can.</i>

128
00:08:24,629 --> 00:08:25,714
Babies and babies.

129
00:08:28,049 --> 00:08:30,385
toast with someone

130
00:08:30,468 --> 00:08:32,262
that he will toast with someone else.

131
00:08:32,345 --> 00:08:33,346
It goes on and on.

132
00:08:33,430 --> 00:08:36,516
The Chinese wanted to see
what kind of person you were.

133
00:08:36,599 --> 00:08:39,394
For some, the more drunk you get,

134
00:08:39,477 --> 00:08:42,647
the more your true personality comes out.

135
00:08:46,109 --> 00:08:48,737
<i>The master of ceremonies
of these conferences</i>

136
00:08:48,820 --> 00:08:52,532
<i>He used to be the daring president of the bank:
Byron Roth.</i>

137
00:08:59,831 --> 00:09:02,375
Started in the raw materials market

138
00:09:02,459 --> 00:09:04,419
at 16 years old.

139
00:09:04,502 --> 00:09:06,421
His father had a farm.

140
00:09:06,504 --> 00:09:08,506
They went to cow auctions and that.

141
00:09:08,590 --> 00:09:10,884
He was not an unsophisticated man.

142
00:09:11,259 --> 00:09:15,555
As an investment bank,
we do different things.

143
00:09:17,557 --> 00:09:22,020
<i>To Byron Roth, Matt and Dan
Life was a party.</i>

144
00:09:22,103 --> 00:09:24,272
<i>Between 2006 and 2011,</i>

145
00:09:24,856 --> 00:09:29,736
<i>Roth gave about 12 conferences and raised
billions for Chinese companies.</i>

146
00:09:45,293 --> 00:09:48,505
<i>Roth was not the only one
that took advantage of the rise of China.</i>

147
00:09:49,089 --> 00:09:52,175
<i>In New York,
a company called Rodman and Renshaw</i>

148
00:09:52,258 --> 00:09:55,428
He did investment conferences
somewhat different,</i>

149
00:09:55,512 --> 00:09:59,641
<i>centered on their president,
the influential General Wesley Clark.</i>

150
00:10:00,809 --> 00:10:04,729
<i>In the Balkans, he negotiated
peace between bitter enemies

151
00:10:05,313 --> 00:10:08,983
<i>and led a multinational force
against terrorism.</i>

152
00:10:09,067 --> 00:10:12,654
<i>The life of Wes Clark
It's an American story.</i>

153
00:10:12,737 --> 00:10:16,116
<i>He will be an extraordinary president
from USA</i>

154
00:10:18,785 --> 00:10:21,704
First, we will ask you to tell us who you are.

155
00:10:21,788 --> 00:10:23,414
and tell your background.

156
00:10:23,498 --> 00:10:27,544
Yes. I'm retired General Wes Clark.
I graduated from West Point in 1966.

157
00:10:27,627 --> 00:10:30,255
I went to Oxford. To Vietnam. I came back on a stretcher.

158
00:10:30,338 --> 00:10:32,507
I was supreme commander of NATO.

159
00:10:32,590 --> 00:10:35,385
I ran for president in 2003-2004.

160
00:10:35,468 --> 00:10:36,803
Move on to investments.

161
00:10:38,972 --> 00:10:41,516
<i>Rodman and Renshaw had a difficult past.</i>

162
00:10:41,850 --> 00:10:45,937
<i>After a messy management,
declared bankruptcy at the end of 1990.</i>

163
00:10:46,563 --> 00:10:49,274
<i>With a luminary like General Clark,</i>

164
00:10:49,357 --> 00:10:51,860
<i>reemerged as a respectable bank</i>

165
00:10:51,943 --> 00:10:54,195
<i>of parties and sale of Chinese stocks.</i>

166
00:10:54,279 --> 00:10:55,780
CO-DIRECTING PARTNER

167
00:10:55,864 --> 00:11:00,660
They could invite presidents,
former presidents, Colin Powell,

168
00:11:00,743 --> 00:11:03,538
Diana Ross, Henry Kissinger...

169
00:11:03,621 --> 00:11:05,790
For an hour or two, Henry Kissinger,

170
00:11:05,874 --> 00:11:08,626
George Bush or Wesley Clark
They were the speakers...

171
00:11:08,710 --> 00:11:12,505
Well, gee. It's like entering
in a temple of knowledge

172
00:11:12,589 --> 00:11:15,049
with the clumsiness of a 90-year-old Kissinger.

173
00:11:15,133 --> 00:11:18,636
You see what happens there.
They rent a name for an hour or two.

174
00:11:18,720 --> 00:11:22,098
These people charge fees.
That's how they make money.

175
00:11:22,181 --> 00:11:25,435
The more luminaries speak,
the more power they will have.

176
00:11:25,852 --> 00:11:28,146
<i>In six years with Clark as president,</i>

177
00:11:28,229 --> 00:11:32,108
<i>Rodman and Renshaw brought to the market
about 40 Chinese companies</i>

178
00:11:32,191 --> 00:11:35,737
<i>with added value
more than 31 billion dollars.</i>

179
00:11:39,407 --> 00:11:43,578
<i>Although Rodman and Roth won
for bringing Chinese companies to the US,</i>

180
00:11:43,661 --> 00:11:46,539
<i>real income arrived
when they quoted</i>

181
00:11:46,623 --> 00:11:48,374
<i>in the main stock exchanges.</i>

182
00:11:48,458 --> 00:11:49,834
SOLD

183
00:11:49,918 --> 00:11:53,212
<i>Its analysts recommended
risky actions

184
00:11:53,296 --> 00:11:55,340
<i>and its salespeople, like Matt,</i>

185
00:11:55,423 --> 00:11:57,967
<i>they promoted them in their investment network.</i>

186
00:12:01,763 --> 00:12:05,600
<i>When stocks rose enough,
the banks sold

187
00:12:05,683 --> 00:12:08,144
<i>and the rest had overvalued stocks.</i>

188
00:12:09,312 --> 00:12:12,023
<i>The problem was
than to be listed on the stock market

189
00:12:12,106 --> 00:12:15,026
<i>audits and investigations were required.</i>

190
00:12:15,109 --> 00:12:17,612
<i>But the banks saw how to avoid it.</i>

191
00:12:17,695 --> 00:12:20,823
<i>They used a surreptitious process
called reverse merger.</i>

192
00:12:21,532 --> 00:12:23,868
Operates in dollars and locally:

193
00:12:23,952 --> 00:12:25,954
the New York Stock Exchange, the NASDAQ.

194
00:12:26,037 --> 00:12:28,456
It is, in general, a ghost company

195
00:12:28,539 --> 00:12:33,086
which is listed on the stock exchange,
but in the end it does not perform any operation.

196
00:12:33,169 --> 00:12:34,671
You have to go to Nevada.

197
00:12:34,754 --> 00:12:38,132
Many started as mining companies
or something like that.

198
00:12:38,216 --> 00:12:40,969
And they stayed there waiting...

199
00:12:41,052 --> 00:12:42,512
JOURNALIST

200
00:12:42,595 --> 00:12:45,264
find the partner
suitable for merging.

201
00:12:45,348 --> 00:12:46,891
You use a shell company.

202
00:12:46,975 --> 00:12:49,060
<i>This is what reverse mergers were like.</i>

203
00:12:49,143 --> 00:12:52,271
<i>The Chinese company that will be listed� 
on the US stock market</i>

204
00:12:52,355 --> 00:12:56,150
<i>Merges with the shell
of a defunct company, which no longer operates,</i>

205
00:12:56,234 --> 00:13:00,530
<i>but it still exists legally
and is listed on the stock market.</i>

206
00:13:00,613 --> 00:13:03,992
<i>The Chinese company replaces
to the ghost in the market.</i>

207
00:13:04,075 --> 00:13:05,493
Ready. You showed up.

208
00:13:05,576 --> 00:13:09,288
You are a stock listed in the US.
With your own story.

209
00:13:09,372 --> 00:13:11,124
And nobody asks anything.

210
00:13:11,207 --> 00:13:14,335
RINGING THE BELL
NEW YORK AND EURONEXT

211
00:13:14,961 --> 00:13:17,714
<i>Between 2006 and 2012,</i>

212
00:13:17,797 --> 00:13:20,842
<i>about 400 Chinese companies
were listed in the US</i>

213
00:13:22,010 --> 00:13:24,846
<i>80% were from reverse mergers.</i>

214
00:13:24,929 --> 00:13:27,390
Our exchanges monitor them.

215
00:13:27,473 --> 00:13:30,768
Our banks are investigating
to these companies.

216
00:13:30,852 --> 00:13:34,230
You don't worry
because they are on the US stock exchanges.

217
00:13:41,362 --> 00:13:42,864
Are you in Hong Kong?

218
00:13:43,531 --> 00:13:45,575
Late in the thirtieth.

219
00:13:45,658 --> 00:13:48,953
Between 2009 and mid-2010,

220
00:13:49,037 --> 00:13:52,457
the typical reverse merger company
based in China

221
00:13:53,332 --> 00:13:55,668
had risen several hundred percent.

222
00:13:55,752 --> 00:13:56,919
A common company.

223
00:13:57,003 --> 00:13:59,464
Did you tell me what happened in China last night?

224
00:13:59,547 --> 00:14:02,216
We use our investment method.

225
00:14:02,300 --> 00:14:05,219
With that method and with our guidelines,

226
00:14:05,303 --> 00:14:08,639
we locate many companies
based in China.

227
00:14:08,723 --> 00:14:11,642
And we win several hundred percent
in all.

228
00:14:12,977 --> 00:14:15,855
Longwei Petroleum.
We bought them for 1.50 dollars.

229
00:14:15,938 --> 00:14:18,274
We sold at 5 or 6.500% profit.

230
00:14:18,357 --> 00:14:20,777
LandL Energy. We bought them for 2 dollars.

231
00:14:20,860 --> 00:14:22,528
We sold between 9 and 10.

232
00:14:22,612 --> 00:14:25,406
Puda Coal. We bought at 4 and sold at 7.

233
00:14:25,490 --> 00:14:26,407
Great company.

234
00:14:26,491 --> 00:14:28,618
China Agriculture: CAGC.

235
00:14:28,701 --> 00:14:32,038
Nine dollars. We sold for 28.
All great companies.

236
00:14:34,499 --> 00:14:35,833
We recover.

237
00:14:41,339 --> 00:14:45,301
IN CLEAR WATER THERE ARE NO FISH
WHAT YOU CAN FISH

238
00:14:49,680 --> 00:14:50,890
<i>In 2010,</i>

239
00:14:50,973 --> 00:14:55,186
<i>Dan and the people of Roth and Rodman
They got rich with Chinese actions.</i>

240
00:14:57,563 --> 00:15:00,733
<i>It seemed to never end.
Maybe it wouldn't have finished

241
00:15:00,817 --> 00:15:03,778
<i>if it weren't for a young businessman
American</i>

242
00:15:03,861 --> 00:15:07,824
<i>who went to Shanghai in search
of a very different kind of fortune.</i>

243
00:15:10,368 --> 00:15:14,580
Founded the first self-storage
from mainland China.

244
00:15:14,664 --> 00:15:17,083
It was called Love Box Self Storage.

245
00:15:17,667 --> 00:15:18,667
World size.

246
00:15:19,669 --> 00:15:23,131
We won the award for best self-storage
of the year.

247
00:15:23,214 --> 00:15:25,091
Before founding it, I was co-author

248
00:15:25,174 --> 00:15:27,552
<i>from Doing Business in China For Dummies.</i>

249
00:15:30,346 --> 00:15:33,599
<i>Carson's father
He was a stock broker in the US.</i>

250
00:15:33,683 --> 00:15:35,476
<i>And I would invest in Orient Paper,</i>

251
00:15:35,560 --> 00:15:39,772
<i>a company that Roth Capital
brought to market with a reverse merger.</i>

252
00:15:40,356 --> 00:15:44,068
<i>The company declared
who earned 100 million a year</i>

253
00:15:44,152 --> 00:15:47,405
<i>and sold tons of quality paper
to all of China.</i>

254
00:15:47,488 --> 00:15:51,033
<i>It was one of the booming companies
which was sold by Roth and Rodman</i>

255
00:15:51,117 --> 00:15:53,494
<i>and that investors like Dan bought.</i>

256
00:15:53,578 --> 00:15:55,913
The goal was to investigate if it was legitimate.

257
00:15:55,997 --> 00:15:57,165
REPORTER

258
00:15:57,248 --> 00:15:59,125
His father would write the report.

259
00:15:59,208 --> 00:16:02,962
It was an easy business to understand
and analyze.

260
00:16:03,045 --> 00:16:05,840
The opposite of a software company
from USA

261
00:16:06,924 --> 00:16:09,010
<i>Carson and a friend saw the factory.</i>

262
00:16:09,093 --> 00:16:11,304
<i>Immediately, something was wrong.</i>

263
00:16:11,387 --> 00:16:14,140
It was a country road. It was in bad condition.

264
00:16:14,223 --> 00:16:18,519
That path could not sustain
the huge trucks

265
00:16:18,603 --> 00:16:22,190
that they had to enter and leave the plant
all day

266
00:16:22,273 --> 00:16:23,691
We enter the factory.

267
00:16:28,321 --> 00:16:29,864
It was a garbage dump.

268
00:16:29,947 --> 00:16:32,783
Half of the machines were broken,
It didn't work.

269
00:16:33,868 --> 00:16:37,705
Garbage rotted in the backyard.
There was no signage.

270
00:16:37,788 --> 00:16:39,707
And it was its main plant.

271
00:16:39,790 --> 00:16:43,669
There was water everywhere.
It was a trash can.

272
00:16:44,545 --> 00:16:48,674
The company had declared profits
for 100 million dollars

273
00:16:48,758 --> 00:16:51,010
in the previous year.

274
00:16:51,093 --> 00:16:53,554
How can this grow 50% a year?

275
00:16:53,638 --> 00:16:58,684
In the balance sheet they declared about 5 million
of dollars in raw materials.

276
00:16:59,393 --> 00:17:04,148
And stacked in front were
mountains of old corrugated cardboard.

277
00:17:04,232 --> 00:17:05,858
My friend got on one

278
00:17:05,942 --> 00:17:09,779
to calculate the extension
of rotten cardboard.

279
00:17:09,862 --> 00:17:11,531
When he came down, he told me:

280
00:17:11,614 --> 00:17:13,783
"If this is worth 5 million dollars,

281
00:17:13,866 --> 00:17:16,577
the world is a richer place
than I thought."

282
00:17:16,661 --> 00:17:20,873
Carson and his dad looked at each other and said:

283
00:17:20,957 --> 00:17:23,459
"You can do something with those actions,

284
00:17:23,543 --> 00:17:25,336
but not buy them."

285
00:17:25,419 --> 00:17:28,381
MUDDY WATERS RESEARCH

286
00:17:28,464 --> 00:17:32,843
WE ARE SURE THAT
ORIENT PAPER INC. IT'S A FRAUD

287
00:17:32,927 --> 00:17:35,137
OVERVALUES ITS ASSETS TEN TIMES

288
00:17:35,221 --> 00:17:37,932
That business was a farce.

289
00:17:38,015 --> 00:17:41,852
This is nothing. It's a fraud.
I've never seen anything like it.

290
00:17:42,770 --> 00:17:44,814
<i>Carson wrote a report</i>

291
00:17:44,897 --> 00:17:47,066
<i>and announced that to support his statements</i>

292
00:17:47,149 --> 00:17:50,820
<i>bet in the market
that the shares were going to collapse.</i>

293
00:17:50,903 --> 00:17:53,948
<i>That changed the course of his life.
And most importantly,</i>

294
00:17:54,031 --> 00:17:58,077
<i>it was the first time that someone
found a flaw in the Chinese miracle.</i>

295
00:17:58,160 --> 00:18:02,164
I published it online at the end of June
of 2010.

296
00:18:02,248 --> 00:18:04,375
I stayed up until closing.

297
00:18:04,458 --> 00:18:08,796
Near the close, it went down a bit.

298
00:18:08,879 --> 00:18:13,634
When I went to sleep, I asked myself
if it had not been a reaction to the report.

299
00:18:13,718 --> 00:18:17,722
The next day I had the answer.
It was down 25%

300
00:18:17,805 --> 00:18:21,267
And it ended up down 55% less

301
00:18:21,350 --> 00:18:23,185
than when we uploaded the report.

302
00:18:23,269 --> 00:18:25,813
Although it is China and a growing economy,

303
00:18:25,896 --> 00:18:28,524
Cows don't fly in China and I think...

304
00:18:28,608 --> 00:18:31,027
There is a Chinese proverb:

305
00:18:31,110 --> 00:18:33,404
"In murky waters it is easier to fish."

306
00:18:39,201 --> 00:18:41,579
TEACHER
UNIVERSITY OF HONG KONG

307
00:18:41,662 --> 00:18:43,414
It means water.

308
00:18:43,497 --> 00:18:46,000
"There are no fish in clear waters."

309
00:18:47,335 --> 00:18:50,504
The saying "in troubled waters"
"It's easier to fish,"

310
00:18:50,588 --> 00:18:52,965
explains a lot of what happens in China.

311
00:18:55,926 --> 00:19:00,222
Opacity opens opportunities
to earn money.

312
00:19:00,931 --> 00:19:03,934
It is China's vision. Cloudy waters.

313
00:19:04,018 --> 00:19:08,189
It seemed like a good name to me.
for the company and chose him.

314
00:19:17,198 --> 00:19:20,826
<i>His report was the first major denunciation
from a Chinese company

315
00:19:20,910 --> 00:19:23,954
<i>and it began to resonate in the industry,</i>

316
00:19:24,038 --> 00:19:27,875
<i>especially at Roth Capital,
who was the architect of the agreement.</i>

317
00:19:29,877 --> 00:19:32,046
Target price: less than a dollar.

318
00:19:32,129 --> 00:19:33,964
There are photos of dirty factories.

319
00:19:34,048 --> 00:19:36,759
There are photos of recycled paper on the floor.

320
00:19:36,842 --> 00:19:39,470
There are people climbing. Photos.

321
00:19:41,472 --> 00:19:43,349
A 150 million company.

322
00:19:46,102 --> 00:19:47,561
It's insane.

323
00:19:49,438 --> 00:19:51,941
I had sold 22 million in shares.

324
00:19:57,321 --> 00:20:01,117
I went to Byron's office and asked:
"What's going on here?"

325
00:20:01,200 --> 00:20:05,371
<i>What happened was that the company
had made the classic move

326
00:20:05,454 --> 00:20:07,456
<i>from the reverse fusion manual:</i>

327
00:20:07,540 --> 00:20:10,167
<i>have the seal of a reliable source.</i>

328
00:20:10,251 --> 00:20:12,920
Deloitte and Touche
they did their research

329
00:20:13,003 --> 00:20:16,674
and they said that the financial statements
They were exact.

330
00:20:16,757 --> 00:20:18,342
<i>In the mortgage crisis,</i>

331
00:20:18,426 --> 00:20:21,971
<i>the banks shielded themselves
in risk measurement agencies.</i>

332
00:20:22,054 --> 00:20:26,308
<i>Orient Paper used
a more recognizable screen:</i>

333
00:20:26,392 --> 00:20:28,602
<i>one of the four global audits.</i>

334
00:20:30,312 --> 00:20:32,022
Every day, in the world,

335
00:20:32,106 --> 00:20:34,567
Deloitte professionals influence.

336
00:20:34,650 --> 00:20:38,738
<i>It turns out that dozens of reverse mergers
Chinese used that trick:</i>

337
00:20:38,821 --> 00:20:41,824
hide shady finances
in influential audits.</i>

338
00:20:41,907 --> 00:20:46,078
<i>How to give investors
a file with the label: "Believe me".</i>

339
00:20:47,037 --> 00:20:49,498
Because, as for our goal,

340
00:20:49,582 --> 00:20:51,250
It all starts with integrity.

341
00:20:53,669 --> 00:20:56,422
Whether it is Deloitte or PwC,

342
00:20:56,505 --> 00:21:00,468
The investor expects that these brands
have considerable value

343
00:21:00,551 --> 00:21:02,178
in all parts of the world.

344
00:21:02,261 --> 00:21:05,931
But, in reality, these societies
are structured in such a way

345
00:21:06,015 --> 00:21:09,810
that each office is a separate entity.

346
00:21:09,894 --> 00:21:13,856
This was how they could rent their name
without problems.

347
00:21:13,939 --> 00:21:16,776
They were just waiting
that the company would not collapse.

348
00:21:19,361 --> 00:21:22,782
Many of them said:
"Price Waterhouse audits us."

349
00:21:22,865 --> 00:21:24,241
No, it's not like that.

350
00:21:24,325 --> 00:21:26,744
They are audited by Price Waterhouse China,

351
00:21:26,827 --> 00:21:30,247
which is like a franchise.
It's not Price Waterhouse.

352
00:21:33,793 --> 00:21:37,421
In the US, when we discovered
a large scale fraud...

353
00:21:37,505 --> 00:21:38,714
FOUNDER

354
00:21:38,798 --> 00:21:40,800
They asked me: "Who audits?"

355
00:21:40,883 --> 00:21:42,468
He responded: "What does it matter?"

356
00:21:44,178 --> 00:21:47,515
You have to understand, and people don't know,

357
00:21:47,598 --> 00:21:50,309
that the management
prepares the financial statements,

358
00:21:50,392 --> 00:21:52,353
not the auditors.

359
00:21:53,813 --> 00:21:57,775
Auditors review
the work of management.

360
00:21:57,858 --> 00:22:00,194
And if the management wants to hide something

361
00:22:00,277 --> 00:22:03,239
or has commissioned auditors,
They will hide it.

362
00:22:04,198 --> 00:22:07,368
<i>If concealment doesn't work,
They will go to plan B:</i>

363
00:22:07,451 --> 00:22:08,786
<i>take a good lawyer.</i>

364
00:22:09,578 --> 00:22:12,540
<i>Orient Paper hired Mitch Nussbaum
by Loeb and Loeb</i>

365
00:22:12,623 --> 00:22:15,167
<i>to respond to Muddy Waters.</i>

366
00:22:15,918 --> 00:22:18,546
<i>Mitch defended dozens
from Chinese companies</i>

367
00:22:18,629 --> 00:22:19,880
<i>and he knew how to defend himself.</i>

368
00:22:19,964 --> 00:22:23,634
There are short sellers
who take short positions

369
00:22:23,717 --> 00:22:26,637
and then they do all kinds
of accusations against...

370
00:22:26,720 --> 00:22:28,764
<i>Nussbaum's firm investigated</i>

371
00:22:28,847 --> 00:22:32,935
<i>and it is not surprising that they concluded
that Carson's accusation was false</i>

372
00:22:33,018 --> 00:22:34,812
<i>and his report was a slander.</i>

373
00:22:34,895 --> 00:22:36,981
How do I know they are telling me the truth?

374
00:22:37,064 --> 00:22:39,149
- It's a big problem.
- Very big.

375
00:22:39,233 --> 00:22:40,693
MANAGING PARTNER

376
00:22:40,776 --> 00:22:44,280
Let's talk about a case
where they did forensic investigation:

377
00:22:44,363 --> 00:22:45,363
Orient Paper.

378
00:22:45,948 --> 00:22:48,117
I could not, in those circumstances,

379
00:22:48,200 --> 00:22:51,161
discuss or present additional information

380
00:22:51,245 --> 00:22:55,499
of which we made public,
Well, it wouldn't be appropriate.

381
00:23:00,462 --> 00:23:03,924
<i>Chinese companies
They made a lot of profit for Loeb and Loeb.</i>

382
00:23:04,508 --> 00:23:06,969
<i>But that company's shady paperwork</i>

383
00:23:07,052 --> 00:23:09,722
<i>it was a problem for Nussbaum
and his colleagues.</i>

384
00:23:10,306 --> 00:23:14,101
<i>They would need a lot of diligence
to satisfy regulators.</i>

385
00:23:15,394 --> 00:23:17,605
Forget the lawyer and the banker.

386
00:23:17,688 --> 00:23:20,190
The banker does not see the firm's books.

387
00:23:20,274 --> 00:23:22,901
Lawyers don't look at the books either.

388
00:23:22,985 --> 00:23:27,489
We do not check
whether shipments were received or not.

389
00:23:27,573 --> 00:23:29,658
We do not visit the client's home.

390
00:23:29,742 --> 00:23:33,662
No law firm does that. None.

391
00:23:33,746 --> 00:23:36,707
<i>This is the part
in which I had to react.</i>

392
00:23:36,790 --> 00:23:38,959
<i>The people we consider guardians,</i>

393
00:23:39,043 --> 00:23:41,629
<i>the lawyers, the bankers,
the auditors,

394
00:23:41,712 --> 00:23:44,882
<i>those who make money
controlling the markets,

395
00:23:45,466 --> 00:23:47,676
<i>they weren't doing any of that.</i>

396
00:23:47,760 --> 00:23:50,137
<i>They processed the necessary paperwork,</i>

397
00:23:50,220 --> 00:23:52,056
<i>they got paid and moved on to something else.</i>

398
00:23:52,681 --> 00:23:54,892
<i>If companies lied, what a remedy.</i>

399
00:23:59,355 --> 00:24:02,107
The responses I was receiving

400
00:24:02,191 --> 00:24:06,111
were insufficient
to calm my worries

401
00:24:06,904 --> 00:24:10,366
and they didn't seem to me
thorough enough.

402
00:24:13,077 --> 00:24:16,830
That's when everything changed for me
significantly.

403
00:24:17,331 --> 00:24:20,000
My eyes were opened to the concept

404
00:24:20,084 --> 00:24:23,212
that there was another aspect to that company.

405
00:24:27,716 --> 00:24:29,051
I know what my job is.

406
00:24:29,134 --> 00:24:32,721
I knew what I shouldn't do
to continue working.

407
00:24:32,805 --> 00:24:35,974
What was appropriate was to resign,

408
00:24:36,058 --> 00:24:38,394
take a break and see what happens.

409
00:24:39,144 --> 00:24:40,229
I went on a safari.

410
00:24:46,318 --> 00:24:48,445
SKIPPACK, PENNSYLVANIA

411
00:24:48,529 --> 00:24:51,156
I'm at a conference
by Rodman and Renshaw

412
00:24:51,740 --> 00:24:56,870
and a law firm called Muddy Waters
launches a report on Orient Paper.

413
00:24:57,663 --> 00:24:59,832
And they go down considerably.

414
00:24:59,915 --> 00:25:03,544
It's the first time we hear

415
00:25:03,627 --> 00:25:06,213
that there is a report and there is talk of fraud.

416
00:25:06,296 --> 00:25:07,589
MEETING WITH THE EAST

417
00:25:07,673 --> 00:25:11,885
We decided we were good
in what we do

418
00:25:11,969 --> 00:25:13,637
or we were lucky.

419
00:25:13,721 --> 00:25:16,432
And if we were lucky, we were going to go bankrupt.

420
00:25:16,515 --> 00:25:18,976
I need to talk to the manager or director.

421
00:25:19,059 --> 00:25:20,978
We put together our own team.

422
00:25:21,895 --> 00:25:23,897
And our team went to China

423
00:25:23,981 --> 00:25:27,276
to investigate the companies
accused of fraud.

424
00:25:27,359 --> 00:25:30,070
Let's talk about China Green Agriculture.

425
00:25:30,154 --> 00:25:34,742
China Green Agriculture
caught our attention in 2009.

426
00:25:34,825 --> 00:25:36,285
LONG

427
00:25:36,368 --> 00:25:40,748
We invest for the long term
in an apparent fertilizer company.

428
00:25:40,831 --> 00:25:42,708
Its shares rose.

429
00:25:42,791 --> 00:25:45,711
The press releases
They talked about agreements

430
00:25:45,794 --> 00:25:47,463
with Nestlé and some others.

431
00:25:48,797 --> 00:25:51,717
<i>Dan calculated
that to fulfill those contracts

432
00:25:51,800 --> 00:25:55,721
<i>dozens of trucks had to load
and download all day.</i>

433
00:25:56,638 --> 00:25:59,933
<i>Although monitoring private companies
It is illegal in China,

434
00:26:00,017 --> 00:26:01,894
<i>his team risked his freedom</i>

435
00:26:01,977 --> 00:26:05,439
<i>to put surveillance cameras
in front of the factory.</i>

436
00:26:05,773 --> 00:26:10,402
We filmed them for 344 days.

437
00:26:10,486 --> 00:26:14,615
The filming showed little activity,
Few employees came and went.

438
00:26:17,201 --> 00:26:20,037
<i>For Dan, if he did what he said he would do,</i>

439
00:26:20,120 --> 00:26:23,415
<i>would have hundreds of employees
and dozens of truck drivers.</i>

440
00:26:23,957 --> 00:26:29,004
We send our investigator
as a tea seller.

441
00:26:29,087 --> 00:26:32,090
It was with a briefcase
full of tea samples,

442
00:26:32,174 --> 00:26:37,179
He said he was a tea seller
and I wanted to leave free samples for everyone.

443
00:26:37,262 --> 00:26:39,598
There were 40 employees in total, right?

444
00:26:39,681 --> 00:26:42,351
That's right. 40 employees on the payroll.

445
00:26:42,434 --> 00:26:45,062
Can you please write the figure here?

446
00:26:45,145 --> 00:26:47,272
Well, I'll score 40 people.

447
00:26:47,356 --> 00:26:51,860
"Tell me how many employees there are here."
so we can give you enough samples."

448
00:26:51,944 --> 00:26:52,986
We have the figure.

449
00:26:53,070 --> 00:26:54,070
Truckers?

450
00:26:54,112 --> 00:26:55,906
- Only one?
- Yes.

451
00:26:55,989 --> 00:26:59,076
What did it mean
that they had only one truck driver?

452
00:26:59,701 --> 00:27:04,665
It meant that the volume
It was much smaller than what they said they had.

453
00:27:04,748 --> 00:27:07,417
NUMBER OF TRUCKS: ONE

454
00:27:10,838 --> 00:27:12,714
The first half of this year,

455
00:27:12,798 --> 00:27:16,802
Yongye increased its profits
and net income at 100%

456
00:27:16,885 --> 00:27:20,013
<i>Questioning China Green Agriculture
was to question

457
00:27:20,097 --> 00:27:23,433
<i>the integrity of those who took advantage
the Chinese movement

458
00:27:23,517 --> 00:27:24,893
<i>as Crocker Coulson,</i>

459
00:27:24,977 --> 00:27:28,522
<i>a stock promoter who sold that stock
and dozens like that.</i>

460
00:27:28,605 --> 00:27:31,441
How about China Green Agriculture?

461
00:27:31,525 --> 00:27:34,820
It's another story of fertilizers that...

462
00:27:35,362 --> 00:27:37,030
It was a long time ago.

463
00:27:37,114 --> 00:27:38,448
FORMER PRESIDENT, INVESTOR

464
00:27:38,532 --> 00:27:41,034
I think it was an organic fertilizer.

465
00:27:41,118 --> 00:27:42,619
I was supposed to have...

466
00:27:44,162 --> 00:27:46,748
I don't remember much about that company.

467
00:27:46,832 --> 00:27:48,166
What we discovered was

468
00:27:48,250 --> 00:27:50,669
that it did 10% of what it said it did.

469
00:27:50,752 --> 00:27:52,129
And the fight began.

470
00:27:53,338 --> 00:27:59,136
He releases a press release that calls us
of terrorists, saboteurs, criminals...

471
00:27:59,720 --> 00:28:02,472
Five finance professors
from Beijing they said

472
00:28:02,556 --> 00:28:05,893
how rich and sophisticated
foreign short sellers

473
00:28:05,976 --> 00:28:10,856
they robbed small Chinese investors
and ignored the risk of instability.

474
00:28:10,939 --> 00:28:12,983
They did not cite any evidence.

475
00:28:13,066 --> 00:28:17,738
Just to be clear, we try very hard
on discarding companies

476
00:28:17,821 --> 00:28:19,656
before representing them

477
00:28:19,740 --> 00:28:23,911
and in pointing out serious problems
if we came to them.

478
00:28:23,994 --> 00:28:27,915
It was impossible to know who they were
the good ones and who the bad ones.

479
00:28:30,083 --> 00:28:33,170
A guardian knows what is happening.

480
00:28:35,297 --> 00:28:37,007
We went to investment banks.

481
00:28:37,591 --> 00:28:40,135
We bring them evidence.
"Look what we have.

482
00:28:41,094 --> 00:28:43,263
If they hire us for the diligence,

483
00:28:43,347 --> 00:28:46,558
they will have a better product
to sell in the USA."

484
00:28:47,059 --> 00:28:48,685
They said, "Forget it.

485
00:28:49,478 --> 00:28:52,689
They want us to pay them
not to collect 10%

486
00:28:52,773 --> 00:28:55,567
in every transaction made with this bank.

487
00:28:55,651 --> 00:28:57,903
The less we know, the better.

488
00:28:57,986 --> 00:29:01,448
By the way,
If they report this, we will sue them.

489
00:29:01,990 --> 00:29:03,283
Go back to Skippack."

490
00:29:05,619 --> 00:29:07,329
We returned to Skippack.

491
00:29:07,829 --> 00:29:09,623
We publish the research.

492
00:29:11,291 --> 00:29:15,837
<i>Dan's report laid out his accusation
to China Green Agriculture.</i>

493
00:29:15,921 --> 00:29:18,215
Quote for one dollar today.

494
00:29:20,259 --> 00:29:22,594
It turns out that no one believes them.

495
00:29:22,928 --> 00:29:24,680
What happened to the president?

496
00:29:25,180 --> 00:29:27,891
Nothing. He kept the money.

497
00:29:28,642 --> 00:29:30,352
And that's what it's all about.

498
00:29:30,435 --> 00:29:34,147
There are 113 million that disappeared...

499
00:29:35,148 --> 00:29:38,068
because they never produced that volume.

500
00:29:39,486 --> 00:29:43,907
<i>Dan was tormented by making money
of the lies of companies,</i>

501
00:29:44,324 --> 00:29:46,785
<i>I knew I had crossed what many see</i>

502
00:29:46,868 --> 00:29:49,871
<i>like the dark side of finance,
short selling.</i>

503
00:29:53,667 --> 00:29:57,004
SHORT SELLING IN A FEW WORDS

504
00:29:57,087 --> 00:29:59,464
What is short selling? Let's see.

505
00:29:59,548 --> 00:30:01,174
FINANCE JOURNALIST

506
00:30:01,258 --> 00:30:04,219
It's a difficult question, but the short...
What is...

507
00:30:05,262 --> 00:30:09,057
The first short sale
It was possibly a transaction

508
00:30:09,141 --> 00:30:11,310
between two Croma��n men

509
00:30:11,393 --> 00:30:15,814
that they promised another Croma��n
a part of a saber-toothed tiger.

510
00:30:15,897 --> 00:30:18,608
<i>Jim Chanos.
Dean of short sellers.</i>

511
00:30:19,443 --> 00:30:22,904
<i>Broken down some of the biggest frauds
of history.</i>

512
00:30:22,988 --> 00:30:24,406
Short selling includes

513
00:30:24,489 --> 00:30:26,950
all kinds of commercial transactions.

514
00:30:27,034 --> 00:30:30,120
If an airline sells you a ticket
in advance,

515
00:30:30,203 --> 00:30:32,164
sells you a seat short.

516
00:30:32,247 --> 00:30:35,292
Selling short is gambling
because the stock will go down

517
00:30:35,375 --> 00:30:36,793
instead of going up.

518
00:30:36,877 --> 00:30:41,173
Sell a stock short, there are those who
He calls it borrowing shares.

519
00:30:41,256 --> 00:30:43,425
<i>This is where people get confused.</i>

520
00:30:43,508 --> 00:30:45,469
<i>There is an easy way to see it.</i>

521
00:30:46,053 --> 00:30:48,013
<i>You want to sell sugar short.</i>

522
00:30:48,096 --> 00:30:49,890
<i>I think it's overrated</i>

523
00:30:49,973 --> 00:30:53,894
<i>and that within six months
It will cost less than today.</i>

524
00:30:54,436 --> 00:30:56,063
<i>I see an opportunity.</i>

525
00:30:56,146 --> 00:30:58,899
<i>I ask my neighbor for a kilo of sugar.</i>

526
00:30:58,982 --> 00:31:01,318
<i>Then I sell that sugar</i>

527
00:31:01,401 --> 00:31:03,653
<i>at the current price of one dollar per kilo.</i>

528
00:31:04,154 --> 00:31:08,492
<i>After six months, when I must return
the kilo of sugar to my neighbor,</i>

529
00:31:08,575 --> 00:31:12,079
<i>I buy it on the open market
where the price went down</i>

530
00:31:12,162 --> 00:31:13,997
<i>and it only costs me 50 cents.</i>

531
00:31:14,081 --> 00:31:17,876
<i>I return the kilo of sugar
or a little more for interest</i>

532
00:31:17,959 --> 00:31:20,087
<i>and I keep the 50 cents.</i>

533
00:31:20,170 --> 00:31:23,465
<i>She got her sugar back and I made money.</i>

534
00:31:23,965 --> 00:31:25,467
JOURNALIST

535
00:31:25,550 --> 00:31:29,221
You want those who bought that stock
they believe you

536
00:31:29,304 --> 00:31:31,348
If you think it's fraudulent

537
00:31:31,431 --> 00:31:33,850
or you think the company is lying about something.

538
00:31:33,934 --> 00:31:35,852
Those who sell short

539
00:31:35,936 --> 00:31:38,647
They are the ones who fell headlong at birth.

540
00:31:38,730 --> 00:31:40,482
They are iconoclasts.

541
00:31:40,565 --> 00:31:44,403
Yes I think it motivates them
justice for the world?

542
00:31:44,486 --> 00:31:46,696
No, I think they are motivated by making money.

543
00:31:46,780 --> 00:31:50,325
It is cleaning financial markets.
It is preventing fraud.

544
00:31:50,409 --> 00:31:53,620
I want to extend my hand...

545
00:31:53,703 --> 00:31:56,998
<i>Do you remember Dick Fuld?
He ran Lehman Brothers,

546
00:31:57,082 --> 00:32:00,752
<i>the bank whose collapse
caused the 2008 financial crisis.</i>

547
00:32:00,836 --> 00:32:02,629
<i>Talk about short sellers.</i>

548
00:32:02,712 --> 00:32:06,049
Rip out their hearts
and eat it before they die.

549
00:32:08,051 --> 00:32:11,638
There are many problems here.
Many problems.

550
00:32:12,472 --> 00:32:14,850
When I bet against a company,

551
00:32:14,933 --> 00:32:19,020
It's because I think they are misrepresenting.

552
00:32:19,104 --> 00:32:21,982
And I don't care about his trend at all.

553
00:32:22,441 --> 00:32:26,111
I am someone who bets against fraud.

554
00:32:30,991 --> 00:32:34,453
<i>Dan and Carson were looking
Chinese stocks to sell short,</i>

555
00:32:34,536 --> 00:32:37,289
<i>Matt had just returned from his safari.</i>

556
00:32:37,372 --> 00:32:41,293
<i>I wanted to give it a meaning
to what he had been a part of.</i>

557
00:32:41,376 --> 00:32:45,255
<i>He asked his friend Soren,
New York financial lawyer,</i>

558
00:32:45,338 --> 00:32:47,340
<i>to go to the mountains</i>

559
00:32:47,424 --> 00:32:51,470
<i>to see some documents
that he kept from his time in Roth.</i>

560
00:32:51,553 --> 00:32:52,762
<i>During this process,</i>

561
00:32:52,846 --> 00:32:56,391
<i>they discovered a new way
to see the perspective of fraud.</i>

562
00:32:56,892 --> 00:32:58,226
CO-FOUNDER

563
00:32:58,310 --> 00:33:00,854
Matt said:
"Look at the companies, what do you say?"

564
00:33:06,151 --> 00:33:09,696
LandL Energy was, in name only,
a coal company.

565
00:33:12,908 --> 00:33:15,076
Typical of a merger fraud,

566
00:33:15,160 --> 00:33:17,996
His finances were very good.
to be true.

567
00:33:23,919 --> 00:33:29,090
The idea that a small reverse merger
from rural China

568
00:33:29,174 --> 00:33:32,761
could extract and process coal
efficiently,

569
00:33:32,844 --> 00:33:36,389
much better than the best companies
of coal in the world,

570
00:33:36,473 --> 00:33:37,599
It was not credible.

571
00:33:39,309 --> 00:33:40,852
<i>When reviewing the papers,</i>

572
00:33:40,936 --> 00:33:44,147
<i>they discovered a new way
to understand what was happening

573
00:33:44,231 --> 00:33:47,859
<i>with hundreds of Chinese companies
that operated in the USA</i>

574
00:33:48,443 --> 00:33:51,905
We find the ones that call
statements before the SAIC.

575
00:33:51,988 --> 00:33:54,908
They are statements
from the state office of...

576
00:33:54,991 --> 00:33:57,536
God! I can't believe I don't remember.

577
00:33:57,619 --> 00:33:59,204
The state office of...

578
00:33:59,287 --> 00:34:02,332
State Administrative Office. Right?

579
00:34:02,415 --> 00:34:04,751
The interesting part was that

580
00:34:04,834 --> 00:34:10,674
statements in China
tended to be very accurate or more accurate

581
00:34:10,757 --> 00:34:13,552
that fictitious statements made

582
00:34:13,635 --> 00:34:15,595
to the Securities and Exchange Commission.

583
00:34:16,471 --> 00:34:20,684
<i>In China, a company can say
who has won ten million dollars</i>

584
00:34:20,767 --> 00:34:24,104
<i>at the same time as in the US.
He reports that there were 100 or more.</i>

585
00:34:24,980 --> 00:34:27,023
Those statements were solid.

586
00:34:27,107 --> 00:34:29,109
They showed exactly what was happening.

587
00:34:32,696 --> 00:34:34,948
And that is the cultural difference.

588
00:34:35,949 --> 00:34:40,662
We can't find auditors in China
to help us.

589
00:34:40,745 --> 00:34:44,791
Because let me tell you that,
If we found those people,

590
00:34:44,874 --> 00:34:47,377
The Chinese government would kill them.

591
00:34:47,460 --> 00:34:50,880
They would stop them
and they would shoot them in the fucking head.

592
00:34:53,049 --> 00:34:55,218
That was, from the beginning, a fraud.

593
00:34:55,302 --> 00:34:58,930
Their goal was to deceive
from the first day.

594
00:34:59,014 --> 00:35:03,310
And we've never seen anything like it on that scale.
in the US market.

595
00:35:03,393 --> 00:35:06,062
That's why it took them all by surprise.

596
00:35:06,855 --> 00:35:10,066
<i>That included Matt,
whose reaction was important.</i>

597
00:35:10,567 --> 00:35:12,986
<i>Maybe it talks about human nature,</i>

598
00:35:13,069 --> 00:35:15,488
<i>why we get into those troubles.</i>

599
00:35:16,364 --> 00:35:18,199
<i>He saw that the hundreds of millions</i>

600
00:35:18,283 --> 00:35:21,578
<i>which he sold in Chinese reverse mergers
They were frauds.</i>

601
00:35:21,661 --> 00:35:25,373
<i>I didn't react with shame
but with pragmatism.</i>

602
00:35:25,457 --> 00:35:28,710
<i>He wanted to make sure to crush
everything possible.</i>

603
00:35:28,793 --> 00:35:32,339
<i>I changed sides
and became a short seller like Dan.</i>

604
00:35:33,715 --> 00:35:37,427
I did it and earned 78% on...

605
00:35:38,803 --> 00:35:39,929
four days.

606
00:35:46,811 --> 00:35:48,813
In the end, L and L Energy collapsed.

607
00:35:49,773 --> 00:35:51,775
<i>For sellers like Dan and Matt,</i>

608
00:35:51,858 --> 00:35:54,361
<i>the statements were a key part,</i>

609
00:35:54,444 --> 00:35:56,696
<i>not just the evidence of a company,</i>

610
00:35:56,780 --> 00:35:59,532
<i>but the data of all the companies.</i>

611
00:35:59,616 --> 00:36:03,495
<i>For the first time they saw
the extent of deception.</i>

612
00:36:03,578 --> 00:36:06,873
I don't know the number,
but they are billions of dollars

613
00:36:06,956 --> 00:36:08,500
that they lost in the US

614
00:36:08,583 --> 00:36:10,835
I think the figure was 30 billion.

615
00:36:10,919 --> 00:36:12,337
- Twenty.
- Fifty.

616
00:36:12,420 --> 00:36:15,715
They are between 20 and 50 billion
capitalization

617
00:36:15,799 --> 00:36:18,718
of stocks listed in the US

618
00:36:18,802 --> 00:36:20,261
Which could be worth zero.

619
00:36:20,345 --> 00:36:23,723
The average investor
of common funds

620
00:36:23,807 --> 00:36:26,518
I invested in those Chinese companies.

621
00:36:26,601 --> 00:36:31,356
That is, it affects
to the person on the street too.

622
00:36:33,942 --> 00:36:36,194
If that company is so fraudulent...

623
00:36:37,779 --> 00:36:39,781
What can we say about the rest of the market?

624
00:36:41,825 --> 00:36:46,746
Over 300 reverse mergers
with businesses operating in China.

625
00:36:48,915 --> 00:36:51,042
All of this could be fraudulent.

626
00:36:52,252 --> 00:36:54,295
That money may not be recovered.

627
00:36:54,379 --> 00:36:57,507
And if they caught you,
there would be no consequences.

628
00:36:58,508 --> 00:37:01,386
when you speak
from large investment banks,

629
00:37:01,469 --> 00:37:05,724
fraud is built in
to the income statement.

630
00:37:06,766 --> 00:37:12,313
How many investment banks
Did they pay fines for fraud this year?

631
00:37:13,773 --> 00:37:16,109
Wells Fargo? Yes.

632
00:37:16,818 --> 00:37:18,778
Bank of America has done it. Yes.

633
00:37:18,862 --> 00:37:21,322
Morgan Stanley has done it. Yes.

634
00:37:21,406 --> 00:37:23,950
Nobody went to jail. It's a fine.

635
00:37:24,033 --> 00:37:28,705
It becomes part of your budget.

636
00:37:28,788 --> 00:37:30,915
You allocate money for fraud.

637
00:37:34,335 --> 00:37:38,298
<i>Dan's obsession with fraud
would come from Flint, Michigan,

638
00:37:38,381 --> 00:37:41,342
<i>where he grew up:
a city victim of fraud.</i>

639
00:37:43,428 --> 00:37:46,514
<i>Large companies made promises
to the neighbors.</i>

640
00:37:46,598 --> 00:37:48,975
<i>In the end, they could not fulfill them.</i>

641
00:37:50,185 --> 00:37:53,062
<i>Dan knows how to lie
of senior management

642
00:37:53,146 --> 00:37:55,648
<i>they affect people on the street.</i>

643
00:37:56,399 --> 00:37:58,985
<i>Where other financiers see machinations,</i>

644
00:37:59,068 --> 00:38:01,946
<i>Dan sees his hometown broken...</i>

645
00:38:02,947 --> 00:38:04,157
<i>full of ghosts.</i>

646
00:38:16,377 --> 00:38:18,755
That was a very nice area 30 years ago.

647
00:38:30,058 --> 00:38:31,643
That was a school.

648
00:38:35,021 --> 00:38:37,023
By today's standards, it was violent.

649
00:38:39,359 --> 00:38:41,277
I can't even imagine

650
00:38:41,361 --> 00:38:44,864
children of ten, 11 and 12 years old hitting each other
with baseball bats.

651
00:38:54,040 --> 00:38:56,751
I was happy in my childhood here, of course.

652
00:39:02,632 --> 00:39:03,967
Companies lie.

653
00:39:05,760 --> 00:39:07,136
Companies lie.

654
00:39:11,307 --> 00:39:14,352
Companies defend
their own interests,

655
00:39:15,311 --> 00:39:17,772
nor those of the community or those of the people.

656
00:39:18,648 --> 00:39:21,526
People have to defend their interests.

657
00:39:22,110 --> 00:39:24,946
OWNER SELLS

658
00:39:26,155 --> 00:39:29,367
Flint was always a fabulous city.

659
00:39:31,744 --> 00:39:33,288
Very hardworking people.

660
00:39:34,664 --> 00:39:36,207
Very hardworking people.

661
00:39:41,963 --> 00:39:43,047
Well, look.

662
00:39:46,301 --> 00:39:51,014
I imagined myself growing up in Flint.
and living there forever.

663
00:39:53,474 --> 00:39:55,184
But there was no more work.

664
00:40:05,945 --> 00:40:08,990
<i>Dan had investigated the companies
to the maximum.</i>

665
00:40:09,073 --> 00:40:12,410
<i>Matt saw that the statements
They were not controlled.</i>

666
00:40:12,493 --> 00:40:16,623
<i>Together they discovered
how outrageously simple everything was.</i>

667
00:40:17,957 --> 00:40:20,460
Let's say you want to set up a fraud.

668
00:40:20,543 --> 00:40:23,046
HOW DOES THIS M WORK?

669
00:40:23,129 --> 00:40:26,382
You have a factory. You have a president.

670
00:40:27,008 --> 00:40:29,636
Then they look for someone. A guardian.

671
00:40:29,719 --> 00:40:32,931
An intermediary says:
"This is your business.

672
00:40:33,723 --> 00:40:35,892
"What would you do with 100 million?"

673
00:40:35,975 --> 00:40:38,269
I would help you with contacts, auditors,

674
00:40:38,353 --> 00:40:40,438
third level legal banks.

675
00:40:40,980 --> 00:40:45,109
The company in China would say:
"Well, it would be revolutionary.

676
00:40:45,193 --> 00:40:48,112
I would buy from my competitors.
I would do this and that.

677
00:40:48,196 --> 00:40:49,447
It will be huge."

678
00:40:49,530 --> 00:40:50,949
You go to the USA

679
00:40:51,032 --> 00:40:53,785
The guy or company in China would say:
"Well.

680
00:40:53,868 --> 00:40:57,455
I'll get you 100 million.
But you have to do this.

681
00:40:57,538 --> 00:41:00,917
tell the people
"You're already that big."

682
00:41:01,000 --> 00:41:03,586
You had to check all the boxes

683
00:41:03,670 --> 00:41:05,755
to make it sell.

684
00:41:05,838 --> 00:41:09,801
"Don't worry.
If they see that we lie, you will not go to prison,

685
00:41:09,884 --> 00:41:11,302
"You are in China."

686
00:41:11,386 --> 00:41:13,805
You need the collusion of two actors

687
00:41:13,888 --> 00:41:15,390
and scam whoever you want.

688
00:41:15,473 --> 00:41:18,059
"If we get the money and they discover you,

689
00:41:18,142 --> 00:41:19,560
you keep the money.

690
00:41:19,644 --> 00:41:22,647
In other words, there are no risks here.
I do the work.

691
00:41:22,730 --> 00:41:24,899
"You keep telling the lie."

692
00:41:26,943 --> 00:41:29,362
The CEO of a company

693
00:41:29,445 --> 00:41:30,697
He has an education...

694
00:41:31,906 --> 00:41:35,076
He went to university, got a master's degree.

695
00:41:35,159 --> 00:41:37,412
Those guys had nothing.

696
00:41:38,287 --> 00:41:40,248
Zero, many of those guys.

697
00:41:40,331 --> 00:41:43,292
They came from cities in China
second, third.

698
00:41:43,376 --> 00:41:46,212
They came in a different way
of doing business.

699
00:41:48,047 --> 00:41:50,675
They had businesses like candy stores.

700
00:41:52,552 --> 00:41:56,514
A Chinese chicken farmer
doesn't wake up one day

701
00:41:56,597 --> 00:42:01,019
and suddenly he understands how to scam
to US capital markets.

702
00:42:01,102 --> 00:42:04,272
Since the creation
of those small companies,

703
00:42:04,355 --> 00:42:06,399
everything is a scam on the stock market.

704
00:42:06,482 --> 00:42:08,317
RINGING THE BELL
NEW YORK

705
00:42:08,401 --> 00:42:10,028
<i>Dan, Matt and other sellers</i>

706
00:42:10,111 --> 00:42:12,780
<i>they discovered what Chinese frauds were like</i>

707
00:42:12,864 --> 00:42:15,366
<i>and they began to tear down one by one.</i>

708
00:42:16,492 --> 00:42:20,246
Puda Coal. The president
stole shares from investors.

709
00:42:20,955 --> 00:42:23,124
But Clean Energy. Super technology.

710
00:42:23,207 --> 00:42:25,835
The company puts ads on buses.

711
00:42:25,918 --> 00:42:29,797
They pulverize the coal,
They mix it with water and that is energy.

712
00:42:30,673 --> 00:42:31,674
Phenomenal.

713
00:42:32,216 --> 00:42:36,471
They hired none other than Loeb and Loeb
to sue us.

714
00:42:36,554 --> 00:42:38,097
China Integrated Energy.

715
00:42:38,931 --> 00:42:41,809
For weeks nothing happened
in that company.

716
00:42:41,893 --> 00:42:45,229
Suddenly, the lights turn on.
They start working.

717
00:42:45,313 --> 00:42:46,439
SOURCE IS ON

718
00:42:46,522 --> 00:42:50,568
The next day, Rodman and Renshaw
He takes a bus with investors.

719
00:42:51,944 --> 00:42:55,573
They pay a visit to the factory,
They get back on the bus, they leave,

720
00:42:55,656 --> 00:42:57,492
everything goes off again.

721
00:42:58,451 --> 00:42:59,911
PRESIDENT

722
00:42:59,994 --> 00:43:01,788
There was a lot of investment.

723
00:43:02,872 --> 00:43:06,751
Interesting anomalies continue to appear
in China.

724
00:43:06,834 --> 00:43:08,920
I spoke with people who provided the gas

725
00:43:09,003 --> 00:43:10,463
for a steel mill.

726
00:43:10,546 --> 00:43:12,298
"We're making money."

727
00:43:12,381 --> 00:43:14,634
And they added: "But there is a problem.

728
00:43:14,717 --> 00:43:17,470
It seems that the indicators were wrong.

729
00:43:17,553 --> 00:43:21,265
And we don't provide all the gas

730
00:43:21,349 --> 00:43:23,518
that we charge the steel company".

731
00:43:23,601 --> 00:43:26,938
I asked when they discovered it.
"Last week".

732
00:43:27,021 --> 00:43:29,065
I said, "How big was the mistake?"

733
00:43:29,148 --> 00:43:31,943
"The exact amount of our profit."

734
00:43:33,528 --> 00:43:34,946
It's very strange.

735
00:43:36,322 --> 00:43:43,913
<i>GUANXI OR EXCHANGE OF FAVORS</i>

736
00:43:43,996 --> 00:43:46,958
If you respect me, I will respect you.

737
00:43:47,041 --> 00:43:48,876
CHINESE ENTERPRISES ASSOCIATION

738
00:43:48,960 --> 00:43:52,755
If profits determine
the restitution of respect, I give them up.

739
00:43:52,839 --> 00:43:55,466
They tell me that I speak with the honorable Ho,

740
00:43:55,550 --> 00:43:57,969
whose family was the glory of their region.

741
00:43:58,052 --> 00:43:59,387
I am the humble Ho,

742
00:43:59,470 --> 00:44:03,683
whose name is eclipsed
before this honorable company.

743
00:44:03,766 --> 00:44:06,561
In China, business is done

744
00:44:06,644 --> 00:44:10,148
according to tradition
of not having a strong legal system.

745
00:44:10,231 --> 00:44:11,732
UNIVERSITY OF BEIJING

746
00:44:11,816 --> 00:44:15,945
People rely more on trust
and personal relationships.

747
00:44:16,028 --> 00:44:19,448
Your trust will make me worthy
in the eyes of the company.

748
00:44:19,907 --> 00:44:23,035
There is an interest
in strengthening those relationships

749
00:44:23,119 --> 00:44:25,329
to achieve that trust.

750
00:44:25,413 --> 00:44:29,625
<i>The Chinese call guanxi
to the network of personal relationships.</i>

751
00:44:29,709 --> 00:44:31,627
I give you small gifts,

752
00:44:31,711 --> 00:44:34,505
I do you favors
and you remain indebted to me.

753
00:44:34,589 --> 00:44:36,757
Today for you, tomorrow for me.

754
00:44:38,176 --> 00:44:42,555
If you do enough favors,
you can ask people

755
00:44:42,638 --> 00:44:45,725
a favor that could be
inconvenient for them.

756
00:44:46,684 --> 00:44:50,479
And that they feel the obligation to grant.

757
00:44:54,442 --> 00:44:57,778
<i>The notion that guanxi
It's not just exchanging favors</i>

758
00:44:57,862 --> 00:45:00,781
<i>but it represents something more powerful,
It's crucial.</i>

759
00:45:02,950 --> 00:45:06,621
<i>Dan told me to go against Chinese companies
It would be dangerous.</i>

760
00:45:06,704 --> 00:45:09,040
<i>And, when he told me about Alfred Little,</i>

761
00:45:09,123 --> 00:45:11,584
<i>I understood very well what he meant.</i>

762
00:45:12,293 --> 00:45:14,587
When reports began to become known,

763
00:45:14,670 --> 00:45:16,297
there was the Alfred Little site.

764
00:45:17,256 --> 00:45:20,468
He began to publish research
very interesting

765
00:45:20,551 --> 00:45:22,053
and traditional style:

766
00:45:22,136 --> 00:45:26,057
"We sat in front of that factory
and look what we discovered."

767
00:45:27,975 --> 00:45:31,354
The site described Alfred Little

768
00:45:31,437 --> 00:45:34,774
as an investor
with 35 years of experience.

769
00:45:34,857 --> 00:45:37,276
I think he worked at Deloitte.

770
00:45:37,360 --> 00:45:40,112
Maybe he lived in Shanghai.
Nothing else was known.

771
00:45:41,906 --> 00:45:45,868
He said that all those Chinese companies
They are fraudulent...

772
00:45:46,953 --> 00:45:49,956
wholesale trade,
and I gave it little importance.

773
00:45:50,039 --> 00:45:52,625
I don't remember the date,
but I received an email:

774
00:45:53,209 --> 00:45:56,629
"I'll be in New York. Let's meet."

775
00:45:56,712 --> 00:46:00,007
I responded: "Good." I went to the hotel.

776
00:46:00,091 --> 00:46:03,678
And a guy tells me: "I'm Jon Carnes.

777
00:46:03,761 --> 00:46:07,056
"I'm the guy who does... I'm Alfred Little."

778
00:46:16,273 --> 00:46:20,444
<i>As a Westerner who worked
as a short seller in China,</i>

779
00:46:20,528 --> 00:46:23,572
<i>Carnes knew how to be careful
and leave no traces.</i>

780
00:46:24,365 --> 00:46:26,909
<i>Going by Alfred Little had served him well.</i>

781
00:46:28,202 --> 00:46:32,540
<i>When he became interested in Silvercorp,
a mining company in rural Henan,

782
00:46:33,416 --> 00:46:37,086
<i>�he and his people saw
the dark side of guanxi.</i>

783
00:46:37,169 --> 00:46:39,547
Some companies are very aggressive.

784
00:46:39,630 --> 00:46:44,719
Overall, I found
that the more truthful the report,

785
00:46:44,802 --> 00:46:47,847
the more difficult it will be for a company

786
00:46:47,930 --> 00:46:51,392
explain those negative truths,

787
00:46:52,143 --> 00:46:57,023
and the more likely it will be
to take some form of retaliation.

788
00:46:57,106 --> 00:47:01,944
Well, if a company cannot respond
the seller's questions in short,

789
00:47:02,028 --> 00:47:07,533
I will look for other means
to curb negative reporting.

790
00:47:10,161 --> 00:47:13,330
<i>When Alfred Little questioned
to Silvercorp,</i>

791
00:47:13,414 --> 00:47:15,875
<i>the price of the shares began to fall.</i>

792
00:47:15,958 --> 00:47:19,295
<i>Managers asked for favors
of local authorities.</i>

793
00:47:19,670 --> 00:47:23,090
<i>The police threatened
to the head of investigations Kun Huang.</i>

794
00:47:24,133 --> 00:47:26,886
<i>He was detained for hours or days at a time</i>

795
00:47:26,969 --> 00:47:29,680
<i>and they demanded that he say
who he worked for.</i>

796
00:47:31,474 --> 00:47:34,310
<i>Sabor meats
that he couldn't count on anyone.</i>

797
00:47:34,393 --> 00:47:35,895
<i>At the Stock Exchange Commission</i>

798
00:47:35,978 --> 00:47:38,731
<i>they told him they couldn't
nor call China,</i>

799
00:47:38,814 --> 00:47:40,816
<i>much less protect your team.</i>

800
00:47:42,735 --> 00:47:45,571
<i>Sent another researcher
to record evidence</i>

801
00:47:45,654 --> 00:47:48,908
<i>that the police worked
for Silvercorp.</i>

802
00:47:48,991 --> 00:47:52,661
<i>I used the videos to try to prevent
that Kun went to prison.</i>

803
00:47:53,287 --> 00:47:55,206
Did you have contact with Kun Huang?

804
00:47:55,289 --> 00:47:56,123
No.

805
00:47:56,207 --> 00:47:57,750
I had no further contact with him.

806
00:47:57,833 --> 00:48:00,377
Kun Huang is insignificant.
A little stone.

807
00:48:03,172 --> 00:48:06,217
You throw one and no one cares.

808
00:48:06,300 --> 00:48:10,513
He is a Chinese citizen
who commits a crime in China.

809
00:48:10,596 --> 00:48:16,602
This question, if Silvercorp
I wouldn't have made such a scandal,

810
00:48:16,685 --> 00:48:19,146
It would have been finished by the end of the year.

811
00:48:20,439 --> 00:48:23,901
Don't worry, we won't condemn an ​​innocent person.

812
00:48:42,419 --> 00:48:47,049
We begin to investigate Silvercorp

813
00:48:47,133 --> 00:48:50,886
in May or June 2011.

814
00:48:50,970 --> 00:48:55,599
Other investors informed us

815
00:48:55,683 --> 00:49:00,729
that Silvercorp ran silver mines
in china

816
00:49:01,147 --> 00:49:06,360
and that he was very respected.

817
00:49:08,529 --> 00:49:12,158
<i>Kun had videos where Silvercorp
underexploited the mines

818
00:49:12,241 --> 00:49:14,869
<i>and the officials he had bribed.</i>

819
00:49:14,952 --> 00:49:18,164
<i>Suffered two brief arrests
at the end of 2011,</i>

820
00:49:18,247 --> 00:49:19,957
<i>and they promised to leave him alone</i>

821
00:49:20,040 --> 00:49:22,668
<i>if he denounced Alfred Little.</i>

822
00:49:23,002 --> 00:49:26,213
<i>He refused, and that same year
They stopped him at the border

823
00:49:26,297 --> 00:49:28,257
<i>when he wanted to flee to Hong Kong.</i>

824
00:49:29,425 --> 00:49:33,345
Nobody told me I had the right

825
00:49:33,429 --> 00:49:35,764
to talk to a lawyer.

826
00:49:35,848 --> 00:49:39,226
When he entered the detention center,
nobody knew anything.

827
00:49:39,310 --> 00:49:42,396
It was impossible to get in touch
with someone outside.

828
00:49:44,732 --> 00:49:48,986
I knew that the interrogators
They colluded with Silvercorp

829
00:49:49,069 --> 00:49:51,405
and they wanted revenge.

830
00:49:56,619 --> 00:50:02,291
I arrived at midnight
and they put me in a cell.

831
00:50:02,374 --> 00:50:06,503
It was barely 30 square meters.

832
00:50:12,843 --> 00:50:16,263
The cell was full of people
who slept on the floor.

833
00:50:19,266 --> 00:50:21,727
I was terrified.

834
00:50:21,810 --> 00:50:25,064
I didn't know for how long
They were going to lock me up.

835
00:50:26,690 --> 00:50:30,736
He hadn't done anything illegal.

836
00:50:30,819 --> 00:50:34,615
I ended up locked up in a Chinese prison
for two years.

837
00:50:39,995 --> 00:50:42,206
It was a big disaster for me.

838
00:50:43,290 --> 00:50:45,668
It was devastating for my family.

839
00:50:48,963 --> 00:50:52,549
But I think I did the right thing.

840
00:50:54,885 --> 00:51:00,808
Good ultimately triumphs over evil.

841
00:51:13,696 --> 00:51:14,780
There were 500.

842
00:51:18,409 --> 00:51:21,161
What...? How many shares am I missing?

843
00:51:26,667 --> 00:51:27,918
Don't tell me.

844
00:51:30,254 --> 00:51:32,965
<i>Before unmasking Jon
as Alfred Little,</i>

845
00:51:33,048 --> 00:51:35,175
<i>Dan thought he was a nutcase.</i>

846
00:51:35,259 --> 00:51:39,805
<i>Now, together with Carson, Matt and Soren,
They are part of a very disparate tribe.

847
00:51:40,431 --> 00:51:43,517
<i>from short sellers
who look for scams in China.</i>

848
00:51:44,351 --> 00:51:45,978
<i>Many are realistic</i>

849
00:51:46,061 --> 00:51:48,772
<i>and they believe that the market will regulate itself�.</i>

850
00:51:49,732 --> 00:51:51,317
<i>Dan is different.</i>

851
00:51:51,650 --> 00:51:53,527
<i>He takes it personally.</i>

852
00:51:54,945 --> 00:51:58,032
Kun keeps going to the psychologist
once a week.

853
00:51:59,700 --> 00:52:01,660
It was fantastic what you did.

854
00:52:03,287 --> 00:52:07,499
Don't leave him alone,
help him while he was there.

855
00:52:09,501 --> 00:52:11,670
How many would have left him alone?

856
00:52:12,755 --> 00:52:14,214
We owe him a lot.

857
00:52:15,174 --> 00:52:17,593
<i>Kun's prison changed Dan.</i>

858
00:52:17,676 --> 00:52:22,139
<i>For him, it was no longer just about discovering scams.</i>

859
00:52:22,765 --> 00:52:24,725
<i>But about what is right or wrong.</i>

860
00:52:26,769 --> 00:52:30,898
<i>His friend had gone to jail
and millions were defrauded.</i>

861
00:52:30,981 --> 00:52:32,691
<i>I wanted government action</i>

862
00:52:32,775 --> 00:52:36,028
<i>even if it meant his ruin
and that of other sellers.</i>

863
00:52:36,111 --> 00:52:37,571
<i>I hired a lobbyist</i>

864
00:52:37,654 --> 00:52:41,200
<i>and designed a plan
so that Congress would pay attention.</i>

865
00:52:41,283 --> 00:52:44,745
Toomey and Casey are
in the Senate Finance Committee.

866
00:52:45,496 --> 00:52:48,290
He asked for a Senate Finance hearing.

867
00:52:48,374 --> 00:52:51,710
They are collaborators
who go from meeting to meeting.

868
00:52:51,794 --> 00:52:54,046
People don't know this happened.

869
00:52:54,129 --> 00:52:56,590
I talk to people in the stock market who don't know.

870
00:52:56,673 --> 00:52:57,673
People don't know.

871
00:52:57,716 --> 00:53:00,094
It's frustrating. It was the first meeting

872
00:53:00,177 --> 00:53:02,221
with Toomey collaborators.

873
00:53:02,971 --> 00:53:04,681
He suggested,

874
00:53:04,765 --> 00:53:07,226
After an hour and a half, send letters.

875
00:53:07,309 --> 00:53:10,813
Number one, well, welcome to 2016.

876
00:53:12,564 --> 00:53:16,819
But I guess cards work.
Two, I spent an hour explaining

877
00:53:16,902 --> 00:53:19,238
that no one knows that they are being deceived.

878
00:53:19,321 --> 00:53:22,449
How do I get people to write?
what you don't know about?

879
00:53:22,533 --> 00:53:26,245
If we give up,
Do you know what happens outside of Washington? Nothing.

880
00:53:26,829 --> 00:53:28,914
You will go to the hearing as an expert.

881
00:53:28,997 --> 00:53:31,917
That's why we go to Washington
to change things.

882
00:53:34,545 --> 00:53:37,339
It's very frustrating. And I...

883
00:53:39,299 --> 00:53:41,885
I don't want to hear anymore that the world is like that.

884
00:53:49,726 --> 00:53:51,186
<i>Dan had a plan.</i>

885
00:53:55,357 --> 00:53:57,818
<i>The hearing raised whether the Chinese economy</i>

886
00:53:57,901 --> 00:54:00,112
<i>constitutes a strategic danger.</i>

887
00:54:00,946 --> 00:54:04,241
<i>I used it as an opportunity
to see Toomey, their senator,</i>

888
00:54:04,324 --> 00:54:06,368
<i>and get him to listen to it.</i>

889
00:54:06,452 --> 00:54:09,121
- Would you vote for him now?
-How would you vote?

890
00:54:09,204 --> 00:54:11,206
It's okay. I'm sorry.

891
00:54:11,290 --> 00:54:14,126
I have an informal chat with you
and I forget it.

892
00:54:15,627 --> 00:54:18,839
Let me tell you something.
I won't vote for the son of a bitch.

893
00:54:32,644 --> 00:54:36,940
I think there are many people
whose job it is to take care of.

894
00:54:37,024 --> 00:54:39,651
If you are running as a candidate

895
00:54:39,735 --> 00:54:44,072
with the promise to protect the interests
of the citizens,

896
00:54:44,823 --> 00:54:48,994
the rights of citizens,
So, do your job.

897
00:54:49,077 --> 00:54:50,162
Thank you, sir.

898
00:54:51,163 --> 00:54:53,999
Or let someone else say they will
and do it.

899
00:54:54,082 --> 00:54:56,585
AUDIENCE
FROM THE HOUSING AND CREDIT COMMITTEE

900
00:55:13,852 --> 00:55:17,564
Today the Committee will hear testimony
about the chinese economy

901
00:55:17,648 --> 00:55:20,817
and the risk it may represent
for USA

902
00:55:20,901 --> 00:55:21,902
MR. TOOMEY

903
00:55:21,985 --> 00:55:26,615
For some, the rise of China
after the 2008 crisis

904
00:55:26,698 --> 00:55:31,787
left the financial system with a high
percentage of bad debts.

905
00:55:31,870 --> 00:55:35,290
China did not make a transition
to a market economy.

906
00:55:35,374 --> 00:55:38,752
He did not respect his commitment
when it joined the WTO.

907
00:55:38,835 --> 00:55:43,215
The Chinese government props up its companies
state, or SOE for its acronym,

908
00:55:43,298 --> 00:55:46,718
design� private firms
and gave limited access to the market

909
00:55:46,802 --> 00:55:48,428
to foreign companies.

910
00:55:49,429 --> 00:55:51,306
<i>Dan thought Toomey would talk</i>

911
00:55:51,390 --> 00:55:54,184
<i>of the questions
that he formulated with his collaborator,</i>

912
00:55:54,518 --> 00:55:56,311
<i>but he left the hearing early.</i>

913
00:55:57,646 --> 00:55:59,565
<i>And everything got worse from there.</i>

914
00:55:59,648 --> 00:56:02,484
I'm not sure I see this as something

915
00:56:02,568 --> 00:56:05,237
that we should worry too much.

916
00:56:05,320 --> 00:56:07,698
What we have to worry about the most

917
00:56:07,781 --> 00:56:11,702
is the continuation
of the imbalances in China

918
00:56:11,785 --> 00:56:13,829
and what that could imply...

919
00:56:20,836 --> 00:56:23,505
How fast is the Chinese economy growing?

920
00:56:23,589 --> 00:56:27,092
I don't know exactly.
We do not have reliable figures.

921
00:56:27,175 --> 00:56:31,096
I agree
in which China is not growing at 6.7%

922
00:56:31,179 --> 00:56:33,724
I would say it grows at something like 4%

923
00:56:33,807 --> 00:56:37,894
If the Chinese credit bubble bursts,

924
00:56:37,978 --> 00:56:40,147
be it sooner or later,

925
00:56:40,230 --> 00:56:43,150
dragging the Chinese economy with it,

926
00:56:43,233 --> 00:56:46,570
what kind of vulnerability
could we see?

927
00:56:46,653 --> 00:56:49,072
I don't see that the impact is through

928
00:56:49,156 --> 00:56:51,867
from direct exposure
to US companies

929
00:56:51,950 --> 00:56:57,331
 �Not worried about exposure
through derivatives that, for example,

930
00:56:57,414 --> 00:57:02,669
they compromise our banks a lot
in terms of raw material prices

931
00:57:02,753 --> 00:57:05,130
or other financial transactions?

932
00:57:05,213 --> 00:57:07,716
Not through China.

933
00:57:15,057 --> 00:57:18,060
I'm Dan David.
I think Tom gave him my book.

934
00:57:18,477 --> 00:57:19,478
- Yes.
- Good.

935
00:57:19,978 --> 00:57:21,104
<i>- I...
-The China Hustle.</i>

936
00:57:21,188 --> 00:57:23,106
That's right.

937
00:57:23,190 --> 00:57:26,318
If you read it and are interested,
I would like to talk to you about that.

938
00:57:26,401 --> 00:57:29,780
It's a 200 billion scam
of dollars and continues.

939
00:57:29,863 --> 00:57:32,074
I didn't finish. Continue every day.

940
00:57:32,157 --> 00:57:33,533
- Brilliant.
- Yes.

941
00:57:36,536 --> 00:57:39,790
Very superficial, lackadaisical

942
00:57:39,873 --> 00:57:41,875
and generic. Anecdotal.

943
00:57:41,959 --> 00:57:45,045
The only thing I heard at the end was Shelby,
who said:

944
00:57:45,128 --> 00:57:47,965
"Let's face reality." That was it.

945
00:57:48,048 --> 00:57:50,175
The reality is that they will not do anything.

946
00:57:50,258 --> 00:57:51,093
TRUE.

947
00:57:51,176 --> 00:57:52,678
The oldest... You know...

948
00:57:52,761 --> 00:57:55,555
It is certain that we will lose
if we don't do anything.

949
00:57:55,639 --> 00:57:56,640
That's right.

950
00:58:01,770 --> 00:58:03,897
Why did you come to Washington?

951
00:58:04,398 --> 00:58:08,944
I expected to advance in defense
of investor rights

952
00:58:09,027 --> 00:58:13,490
and see what is actually done
at a committee hearing.

953
00:58:14,700 --> 00:58:17,953
- What happened at the hearing?
- Not much.

954
00:58:23,709 --> 00:58:25,335
I think what Dan does,

955
00:58:25,419 --> 00:58:30,507
to try to get Congress to act,
It's good.

956
00:58:32,009 --> 00:58:34,678
Do I think the problem is solved like this?
No.

957
00:58:35,429 --> 00:58:36,722
I don't believe it.

958
00:58:38,640 --> 00:58:43,270
The people at the Securities and Exchange Commission
He didn't discover more than one or two scams.

959
00:58:43,854 --> 00:58:47,691
A bunch of short sellers
They discovered 40 or 50 scams.

960
00:58:54,906 --> 00:58:58,577
DAN'S DAD'S HOUSE
MICHIGAN

961
00:58:58,660 --> 00:59:01,329
- Coach, do you want one?
- Yes.

962
00:59:02,914 --> 00:59:06,460
Excuse me. Can I serve you something?
A soft drink, water, beer?

963
00:59:07,210 --> 00:59:09,379
Dad, can you give Sean a beer?

964
00:59:10,005 --> 00:59:13,050
No. Let him help himself. He is a big man.

965
00:59:16,261 --> 00:59:18,013
-Geo Investing.
- G-O?

966
00:59:18,096 --> 00:59:19,222
GEO.

967
00:59:20,932 --> 00:59:24,603
I will bet against you.
You will write a report and publish it.

968
00:59:25,187 --> 00:59:28,231
I will say that they are fraudulent
and I sell short.

969
00:59:29,107 --> 00:59:31,860
When they reach zero, I win...

970
00:59:33,111 --> 00:59:34,571
but you lose.

971
00:59:34,654 --> 00:59:36,073
We lose everything.

972
00:59:36,656 --> 00:59:38,116
It started well.

973
00:59:38,200 --> 00:59:40,994
It is a scam that comes out
from everyone's accounts.

974
00:59:41,078 --> 00:59:42,496
They are everyone's cents...

975
00:59:43,789 --> 00:59:46,541
which add up to hundreds of billions.

976
00:59:46,625 --> 00:59:49,628
Do you campaign to make something happen?

977
00:59:50,629 --> 00:59:52,756
So you don't make money again.

978
00:59:53,173 --> 00:59:55,842
You're a good man, Danny.
I always thought so.

979
00:59:55,926 --> 00:59:57,344
No.

980
00:59:57,719 --> 00:59:59,805
And I'm not.

981
00:59:59,888 --> 01:00:02,766
I don't like this. That's all.

982
01:00:03,517 --> 01:00:06,394
Explain to me why you make money
and we don't.

983
01:00:06,478 --> 01:00:08,522
I bet against, I sell short.

984
01:00:09,314 --> 01:00:10,315
Well.

985
01:00:11,858 --> 01:00:14,027
Graduated with a 1.6...

986
01:00:17,864 --> 01:00:19,908
- It's a joke.
- There are two things.

987
01:00:19,991 --> 01:00:22,077
I didn't know I had graduated.

988
01:00:26,456 --> 01:00:27,999
Carol read something

989
01:00:28,708 --> 01:00:32,504
about what's happening in China now,
where they discovered...

990
01:00:33,630 --> 01:00:36,341
what could be aliens.

991
01:00:36,424 --> 01:00:38,802
- At great depth.
- Very deep.

992
01:00:40,387 --> 01:00:42,264
It could be a new trick.

993
01:00:42,764 --> 01:00:45,684
What we have done in three years,
it would be useless.

994
01:00:46,143 --> 01:00:48,687
- Thousands of years ago.
- Yes.

995
01:00:49,729 --> 01:00:52,399
You wouldn't come home whole.

996
01:01:00,490 --> 01:01:03,785
Investors who count
with which the Stock Exchange Commission

997
01:01:04,369 --> 01:01:09,499
save them from their own fault
of due diligence, or of your greed,

998
01:01:09,583 --> 01:01:11,543
they deceive themselves.

999
01:01:11,626 --> 01:01:14,462
There are more opportunities
in our markets.

1000
01:01:14,546 --> 01:01:16,423
But, at the same time,

1001
01:01:16,506 --> 01:01:20,677
we don't have a regulator
Let him look at our statements and say:

1002
01:01:20,760 --> 01:01:22,846
"I want to protect the public from that."

1003
01:01:24,097 --> 01:01:26,057
Our system is to declare it.

1004
01:01:26,141 --> 01:01:29,144
The Stock Exchange Commission reads the information,
he comments on it.

1005
01:01:29,227 --> 01:01:31,479
It does not determine whether it is viable to quote.

1006
01:01:31,563 --> 01:01:35,192
They don't make that determination.
It is in the hands of the free market.

1007
01:01:36,026 --> 01:01:39,738
The Securities and Exchange Commission
must look after investors.

1008
01:01:39,821 --> 01:01:40,822
MS. WARREN

1009
01:01:40,906 --> 01:01:43,658
They put the interests
of the Chamber of Commerce

1010
01:01:43,742 --> 01:01:47,329
and big companies
at the top of your priorities.

1011
01:01:47,412 --> 01:01:48,413
JUDGE MARY JO WHITE

1012
01:01:49,289 --> 01:01:52,459
<i>The Securities and Exchange Commission
protects the investor.</i>

1013
01:01:52,542 --> 01:01:54,461
<i>But its statutes date back to 1930,</i>

1014
01:01:55,045 --> 01:01:57,797
<i>when the stock price
be printed</i>

1015
01:01:57,881 --> 01:01:59,758
<i>and the market closed at 4:00.</i>

1016
01:02:00,342 --> 01:02:02,802
<i>Now they are overwhelmed and without resources</i>

1017
01:02:02,886 --> 01:02:05,805
<i>like the rural police
chasing the Enterprise.</i>

1018
01:02:06,389 --> 01:02:11,019
Although the Securities and Exchange Commission
had all the company documents

1019
01:02:11,102 --> 01:02:13,521
and sufficient evidence to investigate

1020
01:02:13,605 --> 01:02:17,150
to the people responsible for this,
In China they don't care.

1021
01:02:17,234 --> 01:02:18,860
If someone breaks the law here,

1022
01:02:18,944 --> 01:02:22,405
there is a process
for which he must be held accountable.

1023
01:02:22,489 --> 01:02:26,701
Responsibility, in companies
based in China, is limited.

1024
01:02:26,785 --> 01:02:28,620
And its limit is the ocean.

1025
01:02:28,703 --> 01:02:31,581
<i>It is one of the first things
What Dan told me.</i>

1026
01:02:31,665 --> 01:02:35,293
<i>In China, it is not illegal
steal from foreign investors.</i>

1027
01:02:36,711 --> 01:02:40,799
<i>The Securities and Exchange Commission
would not approve the listing of companies

1028
01:02:40,882 --> 01:02:43,134
<i>if I had no way to control them.</i>

1029
01:02:43,969 --> 01:02:47,222
<i>Someone from the state agency
financial news</i>

1030
01:02:47,305 --> 01:02:49,975
<i>he risked confirming the truth.</i>

1031
01:02:52,102 --> 01:02:55,939
I'm Summer, finance journalist
of state regulators.

1032
01:02:56,022 --> 01:02:59,526
As far as I know,
if a company gives false information

1033
01:02:59,609 --> 01:03:02,988
about your financial statement
in the US market,

1034
01:03:03,071 --> 01:03:06,533
China's regulatory authorities

1035
01:03:06,616 --> 01:03:10,870
They have no power to punish that.

1036
01:03:10,954 --> 01:03:15,667
The law punishes me
If I make counterfeit products in China,

1037
01:03:15,750 --> 01:03:17,544
theoretically speaking.

1038
01:03:17,627 --> 01:03:21,506
If I lie to you abroad
to foreign investors,

1039
01:03:21,589 --> 01:03:24,509
the chinese authorities
they can't do anything.

1040
01:03:30,015 --> 01:03:33,310
The Chinese government
and the US government,

1041
01:03:33,393 --> 01:03:36,062
on many levels,
They don't work well together.

1042
01:03:38,231 --> 01:03:40,608
You can't force someone

1043
01:03:40,692 --> 01:03:45,322
who stole many millions of dollars from them
to US investors

1044
01:03:45,405 --> 01:03:46,865
To come here from China.

1045
01:03:47,866 --> 01:03:49,826
You can't force him to testify.

1046
01:03:51,328 --> 01:03:52,662
You can't even find it.

1047
01:03:53,872 --> 01:03:55,165
<i>Forget the common man</i>

1048
01:03:55,248 --> 01:03:58,543
<i>who thinks his agent
or the Commission will protect it.</i>

1049
01:03:58,626 --> 01:04:02,130
<i>Someone like Crocker Coulson,
who worked in the system,</i>

1050
01:04:02,213 --> 01:04:05,717
<i>he couldn't figure out what was happening
with those Chinese companies.</i>

1051
01:04:05,800 --> 01:04:07,427
It's an alternative universe.

1052
01:04:07,510 --> 01:04:10,347
There is a struggle to do the simplest.

1053
01:04:10,430 --> 01:04:12,223
You don't see the account statement.

1054
01:04:12,307 --> 01:04:14,768
You can't go to the bank and ask them.

1055
01:04:15,477 --> 01:04:17,395
The local bank manager

1056
01:04:17,479 --> 01:04:20,065
usually reschedules the client's books

1057
01:04:20,148 --> 01:04:22,901
to make them seem better than they are.

1058
01:04:24,486 --> 01:04:29,407
When you have a country like China
where it is not easy to obtain information,

1059
01:04:29,491 --> 01:04:32,327
a society like that is a greater risk.

1060
01:04:32,410 --> 01:04:33,828
RETIRED SPECIAL AGENT

1061
01:04:33,912 --> 01:04:36,623
In the US we can order from a company

1062
01:04:36,706 --> 01:04:38,625
the records, with a court order.

1063
01:04:38,708 --> 01:04:41,211
It is more difficult to get them from China,

1064
01:04:41,294 --> 01:04:42,796
If not it is impossible.

1065
01:04:44,172 --> 01:04:46,716
If you want to have a criminal career,

1066
01:04:46,800 --> 01:04:51,012
the best place to be a criminal
It is a place without police.

1067
01:04:51,096 --> 01:04:54,224
And that was China. It was the Wild West.

1068
01:05:32,345 --> 01:05:34,180
I arrived.

1069
01:05:34,973 --> 01:05:38,643
I'm at the airport.
I head towards the hotel.

1070
01:05:49,779 --> 01:05:52,073
<i>Dan was Nicolas Cage in the film</i>

1071
01:05:52,157 --> 01:05:55,285
<i>where is the only one who knows
that the world will end.</i>

1072
01:05:55,785 --> 01:05:58,496
<i>He shouts it at the top of his voice,
but no one cares.</i>

1073
01:06:00,290 --> 01:06:03,960
<i>Auditors, bankers,
Congress, the Stock Exchange Commission...</i>

1074
01:06:05,462 --> 01:06:09,299
<i>no one sees the financial tsunami
that Dan sees coming from China.</i>

1075
01:06:10,592 --> 01:06:13,553
<i>And he decides to do the only thing he can do:</i>

1076
01:06:13,636 --> 01:06:15,221
<i>take the criminal's money.</i>

1077
01:06:28,151 --> 01:06:30,904
The number of shares multiplied

1078
01:06:30,987 --> 01:06:34,157
of 4.9 billion shares
four years ago

1079
01:06:34,240 --> 01:06:37,202
to 6.5 billion shares today.

1080
01:06:37,285 --> 01:06:39,245
It seems that the only way

1081
01:06:39,329 --> 01:06:42,749
to sustain your business
It is multiplying the actions.

1082
01:06:48,505 --> 01:06:51,216
<i>Dan often posts his reports online.</i>

1083
01:06:51,841 --> 01:06:54,594
<i>But this time there is too much at stake.</i>

1084
01:06:54,677 --> 01:06:57,889
<i>A company worth almost two billion:
Tech Pro.</i>

1085
01:06:58,598 --> 01:07:01,893
<i>He believes that his president
diverts shareholders' money

1086
01:07:01,976 --> 01:07:03,978
<i>to personal projects.</i>

1087
01:07:04,062 --> 01:07:07,273
<i>If it convinces the markets,
will end the company.</i>

1088
01:07:07,357 --> 01:07:09,484
<i>It will be your biggest short sale.</i>

1089
01:07:09,901 --> 01:07:12,153
I don't know what the others interpret,

1090
01:07:12,237 --> 01:07:14,739
but something is happening there.

1091
01:07:14,822 --> 01:07:18,159
Our diligence
It is full of warning signs.

1092
01:07:18,243 --> 01:07:21,371
Signs of black smoke
that come from that company.

1093
01:07:21,454 --> 01:07:22,705
It's a fire.

1094
01:07:24,499 --> 01:07:26,167
You have to investigate it.

1095
01:08:04,372 --> 01:08:06,708
With us, in the bag, Dan David.

1096
01:08:06,791 --> 01:08:10,420
He is co-founder of the errand company
Geo Investing.

1097
01:08:10,503 --> 01:08:12,922
They specialize in China, I see.

1098
01:08:13,006 --> 01:08:16,175
Yes. My presentation at Sohn in June
It was about Tech Pro.

1099
01:08:16,259 --> 01:08:17,760
Tech Pro down 91%

1100
01:08:17,844 --> 01:08:21,180
 �It is a claim
see a stock collapse like that?

1101
01:08:21,264 --> 01:08:24,350
It was inevitable.
That stock had to collapse.

1102
01:08:24,934 --> 01:08:28,187
 �We must be optimistic about China
or is it just a...?

1103
01:08:32,233 --> 01:08:33,860
What is capitalism?

1104
01:08:36,654 --> 01:08:39,365
Is it an economic system?

1105
01:08:39,449 --> 01:08:42,493
 �Or it is a device that we can use

1106
01:08:42,577 --> 01:08:46,205
to earn more money for us
and take money from others?

1107
01:08:46,706 --> 01:08:49,417
MERRILL LYNCH SAYS
THAT THE POSITION IS STILL STRONG

1108
01:08:49,500 --> 01:08:51,044
Deep down,

1109
01:08:51,127 --> 01:08:53,713
Rewards those who make an effort.

1110
01:08:54,172 --> 01:08:59,344
But it also rewards those who are
willing to take advantage of others.

1111
01:09:00,970 --> 01:09:07,060
RETIREMENT FUNDS AND PUBLIC PENSIONS
THEY LOST AN ESTIMATED 14 BILLION

1112
01:09:07,143 --> 01:09:11,439
BY MERGERS
FRAUDULENT CHINESE INVESTMENTS

1113
01:09:13,024 --> 01:09:15,401
<i>When we describe a fraud like this,</i>

1114
01:09:15,902 --> 01:09:19,197
<i>we call it administrative crime
to distinguish it.</i>

1115
01:09:22,200 --> 01:09:24,202
<i>But it's simply a robbery</i>

1116
01:09:24,994 --> 01:09:27,997
<i>so violent
like being mugged on the street.</i>

1117
01:09:30,416 --> 01:09:33,461
<i>It is traumatic to track
personal losses...</i>

1118
01:09:35,505 --> 01:09:38,549
<i>and how much was stolen from
each pension fund,</i>

1119
01:09:38,633 --> 01:09:40,426
<i>to each retirement fund,</i>

1120
01:09:41,010 --> 01:09:42,261
<i>to each one of us.</i>

1121
01:09:44,514 --> 01:09:47,850
The true story
It is the added value.

1122
01:09:48,476 --> 01:09:52,105
They are investors
which were mostly retailers.

1123
01:09:52,188 --> 01:09:55,441
They were people who bet on the market
and they believed

1124
01:09:55,525 --> 01:09:57,694
in financial statements.

1125
01:09:58,820 --> 01:10:03,866
That money is money that belonged
to individual investors

1126
01:10:03,950 --> 01:10:08,496
who thought: "I want to be part
of China's historical growth".

1127
01:10:08,579 --> 01:10:12,875
And they were fund shares
real estate investment company like Vanguard

1128
01:10:12,959 --> 01:10:17,588
<i>who manages the money of, for example,
The New York Times, right?</i>

1129
01:10:17,672 --> 01:10:20,258
The employees. My pension fund.

1130
01:10:21,175 --> 01:10:23,511
we believed

1131
01:10:23,594 --> 01:10:27,807
in the myth of China
as a really compelling market,

1132
01:10:27,890 --> 01:10:31,978
a nation that wanted the leveling effect
of free trade.

1133
01:10:34,021 --> 01:10:35,356
We should have realized it.

1134
01:10:35,440 --> 01:10:38,317
"I wouldn't pay that if I had my money."
at Fidelity?

1135
01:10:38,401 --> 01:10:39,736
Why do I pay them?

1136
01:10:39,819 --> 01:10:42,321
I don't pay them. I don't give them my money.

1137
01:10:45,283 --> 01:10:48,995
It's like the game of chairs.
When the music stops,

1138
01:10:49,078 --> 01:10:53,166
If you stay with the paper in your hand,
If you stay with the shares,

1139
01:10:53,249 --> 01:10:54,667
you are the victim.

1140
01:11:01,132 --> 01:11:02,967
Well. My name is David Yee.

1141
01:11:03,593 --> 01:11:05,762
and I live in Atlanta, Georgia.

1142
01:11:05,845 --> 01:11:07,680
My name is Ray Snader.

1143
01:11:07,764 --> 01:11:12,518
I am a journalist of the written press
and TV in Newport, Tennessee.

1144
01:11:12,602 --> 01:11:16,314
Tom Snodgrass of Spring, Texas.

1145
01:11:17,231 --> 01:11:20,860
From Chinese stocks,
I was attracted to high performance.

1146
01:11:20,943 --> 01:11:24,405
They promoted them a lot
and a lot of attention was paid to them.

1147
01:11:24,989 --> 01:11:28,826
I was hoping to increase my savings
For when I retire,

1148
01:11:28,910 --> 01:11:30,787
for my wife and me.

1149
01:11:31,287 --> 01:11:35,082
I don't have a retirement plan
in my work.

1150
01:11:35,166 --> 01:11:38,669
My wife does not have a retirement plan
in his work.

1151
01:11:39,212 --> 01:11:43,508
Roth Capital recommended buying.

1152
01:11:43,591 --> 01:11:47,386
The first company
What caught my attention was AgFeed.

1153
01:11:47,470 --> 01:11:51,557
He was supposed to be the biggest producer
of Chinese food.

1154
01:11:52,058 --> 01:11:57,480
The last stocks I bought
They cost 9 dollars each.

1155
01:12:01,234 --> 01:12:05,696
They reimbursed us 12 cents per share.

1156
01:12:05,780 --> 01:12:10,326
And we had a total
of around 26,000 shares.

1157
01:12:12,119 --> 01:12:15,164
How much loss did it represent for you?
in the end?

1158
01:12:15,665 --> 01:12:19,669
It represented about 150,000 dollars.

1159
01:12:21,045 --> 01:12:24,924
I think I lost a lot more
of 100,000 dollars.

1160
01:12:25,007 --> 01:12:27,552
My investment in Chinese companies

1161
01:12:27,635 --> 01:12:30,763
represented at least 50%
of my assets.

1162
01:12:30,847 --> 01:12:32,181
Prices fell,

1163
01:12:32,265 --> 01:12:37,228
In the end they stopped trading on the stock market
and they were no longer negotiable.

1164
01:12:38,145 --> 01:12:41,023
- Zero value.
- Zero dollars per share.

1165
01:12:41,107 --> 01:12:44,861
We had faith in the market,

1166
01:12:44,944 --> 01:12:47,196
when our government controlled it.

1167
01:12:47,280 --> 01:12:51,826
They scammed us from all angles

1168
01:12:51,909 --> 01:12:54,453
in that particular transaction.

1169
01:12:56,080 --> 01:13:00,167
Roth Capital had recommended buying.

1170
01:13:01,878 --> 01:13:05,548
I don't think they visited the plant.
in China.

1171
01:13:05,631 --> 01:13:07,842
In fact, today,

1172
01:13:08,718 --> 01:13:13,389
I'm not sure it existed
that China Electric Motor Company.

1173
01:13:16,142 --> 01:13:17,727
How old is he, Ray?

1174
01:13:17,810 --> 01:13:19,770
I am 68 years old.

1175
01:13:24,817 --> 01:13:26,485
<i>And where did the money go?</i>

1176
01:13:29,363 --> 01:13:32,158
<i>To the bankers and lawyers
who set up the sale...</i>

1177
01:13:33,701 --> 01:13:37,455
<i>and Chinese executives
who made millions from bankruptcies.</i>

1178
01:13:37,538 --> 01:13:39,248
THEFT OF 116 MILLION

1179
01:13:39,332 --> 01:13:40,833
EMBELLISHMENT: 72 MILLION

1180
01:13:40,917 --> 01:13:44,211
<i>What is worse?
Does the law not reach executives?</i>

1181
01:13:44,295 --> 01:13:47,632
<i>�Or that Wall Street enablers
They respected the law

1182
01:13:47,715 --> 01:13:48,841
<i>and did they do their job?</i>

1183
01:13:48,925 --> 01:13:50,509
SHARES FOR 401 MILLION

1184
01:13:50,593 --> 01:13:54,305
<i>Any way you look at it,
almost all of them went unpunished.</i>

1185
01:13:54,931 --> 01:13:57,725
<i>An exception was Rodman and Renshaw.</i>

1186
01:13:57,808 --> 01:13:59,894
- Do you have a minute, general?
- No.

1187
01:14:00,645 --> 01:14:03,022
<i>At the height of reverse mergers,</i>

1188
01:14:03,105 --> 01:14:07,151
They distributed almost 18 million
in bonuses to its executives.</i>

1189
01:14:07,234 --> 01:14:09,612
<i>Then came the problems.</i>

1190
01:14:09,695 --> 01:14:16,160
<i>In 2012, they paid a fine of 315,000,
They lost their stockbroker's license.</i>

1191
01:14:16,243 --> 01:14:18,537
<i>Shortly afterwards, they declared bankruptcy.</i>

1192
01:14:20,122 --> 01:14:24,210
I want you to understand me.
My investment bank is called Enverra.

1193
01:14:24,293 --> 01:14:26,045
It's not Rodman and Renshaw.

1194
01:14:26,128 --> 01:14:30,216
I was the president of Rodman and Renshaw,
not the owner of the bank.

1195
01:14:30,299 --> 01:14:34,136
I had nothing to do with the transactions
financial in China.

1196
01:14:34,220 --> 01:14:38,015
That wasn't me. I was the one who said:
"They have a problem with that."

1197
01:14:38,099 --> 01:14:42,979
And he left the company 18 months later
for the board to do that.

1198
01:14:43,062 --> 01:14:44,689
My question is:

1199
01:14:45,690 --> 01:14:47,191
Who did he tell?

1200
01:14:47,274 --> 01:14:49,568
How about this? "I went to Washington,

1201
01:14:49,652 --> 01:14:53,447
I saw the people I know
from when I was a candidate for president

1202
01:14:53,531 --> 01:14:55,533
and I told them what was happening."

1203
01:14:55,616 --> 01:15:00,871
I don't want to be in the movie.
It would be like calling for them to attack me.

1204
01:15:00,955 --> 01:15:03,332
I don't need it. I'm going to create a company.

1205
01:15:03,416 --> 01:15:05,960
I don't want to be attacked.
I didn't do anything wrong.

1206
01:15:06,043 --> 01:15:09,296
He is president of the board.
Was he non-executive president?

1207
01:15:09,380 --> 01:15:12,925
Did he run the business?
"It was there as a decorative figure

1208
01:15:13,009 --> 01:15:16,345
to give credibility to that situation?

1209
01:15:16,429 --> 01:15:18,139
That's classic.

1210
01:15:18,222 --> 01:15:21,100
It's like Monica Lewinsky.
Forget Monica Lewinsky.

1211
01:15:21,183 --> 01:15:24,353
It doesn't matter what is said.
It's a bad story.

1212
01:15:24,437 --> 01:15:28,107
Let's cancel the session.
I'm sorry for the loss of time.

1213
01:15:28,190 --> 01:15:30,234
Am I blaming people?

1214
01:15:31,027 --> 01:15:34,030
I say they should be ashamed
why not ask?

1215
01:15:34,113 --> 01:15:36,741
To the auditors for allowing this shit?

1216
01:15:36,824 --> 01:15:38,701
�To the regulators for not doing

1217
01:15:38,784 --> 01:15:41,287
More rigorous and difficult are the requirements?

1218
01:15:41,370 --> 01:15:43,622
Don't you think we have a problem?

1219
01:15:43,706 --> 01:15:46,459
And you want to blame one or two people?

1220
01:15:46,542 --> 01:15:48,627
Ridiculous. It's ridiculous.

1221
01:15:48,711 --> 01:15:50,880
The damage is in everything.

1222
01:15:51,797 --> 01:15:53,090
It is damaged.

1223
01:15:53,174 --> 01:15:55,718
We have to get out. It's a mistake for me.

1224
01:15:55,801 --> 01:15:57,720
And for those who depend on me.

1225
01:15:57,803 --> 01:16:00,848
I have a company,
people who work for me.

1226
01:16:00,931 --> 01:16:04,560
I owe them the best opportunity
to be able to maintain.

1227
01:16:04,643 --> 01:16:07,104
And this doesn't help. This hurts.

1228
01:16:07,188 --> 01:16:08,564
I want to get out.

1229
01:16:09,857 --> 01:16:13,444
I'm not... I'm not attacking you, sir.

1230
01:16:13,527 --> 01:16:16,739
- It's not...
- It's not my intention, nor that...

1231
01:16:16,822 --> 01:16:19,241
I thought I could do it academically.

1232
01:16:19,325 --> 01:16:21,494
But I see that I can't.

1233
01:16:26,624 --> 01:16:29,335
China is, fundamentally,

1234
01:16:29,418 --> 01:16:32,546
a broken or screwed social system.

1235
01:16:32,630 --> 01:16:38,010
The people who reach the top,
He reaches the top by violating rules.

1236
01:16:38,094 --> 01:16:40,471
To the good people who want to respect them,

1237
01:16:40,554 --> 01:16:42,640
They step on it and push it to the bottom.

1238
01:16:42,723 --> 01:16:44,934
This has nothing to do with China.

1239
01:16:45,017 --> 01:16:48,312
The American managements,
With that kind of incentive,

1240
01:16:48,395 --> 01:16:51,482
would cause the same amount
of frauds here.

1241
01:16:51,565 --> 01:16:53,442
For them it was not a mystery.

1242
01:16:53,526 --> 01:16:56,821
Optimistic bulls against pessimistic bears
constantly.

1243
01:16:56,904 --> 01:16:58,989
And now that they say I'm a bear,

1244
01:16:59,698 --> 01:17:03,077
I don't know if I can ever come back
on the side of the bulls.

1245
01:17:07,790 --> 01:17:09,750
I didn't regret working for them.

1246
01:17:10,709 --> 01:17:12,419
My clients made money.

1247
01:17:16,006 --> 01:17:17,591
that people lose,

1248
01:17:17,675 --> 01:17:19,885
I think it happens everywhere.

1249
01:17:19,969 --> 01:17:25,808
But in China everything has
a great multiplier effect.

1250
01:17:25,891 --> 01:17:29,854
There are 1.3 billion people.
The multiplier effect is enormous.

1251
01:17:29,937 --> 01:17:34,108
We have never seen a buildup
of credit like the current one in China

1252
01:17:34,191 --> 01:17:38,571
that has not had as a consequence
a great financial crisis.

1253
01:17:38,654 --> 01:17:40,406
In other words, be attentive.

1254
01:17:41,115 --> 01:17:44,201
We have the most dynamic markets
of the world.

1255
01:17:44,285 --> 01:17:45,494
Without a doubt.

1256
01:17:45,578 --> 01:17:47,204
And that freedom,

1257
01:17:47,288 --> 01:17:50,791
leaving those decisions
in the hands of the private sector,

1258
01:17:50,875 --> 01:17:53,419
frees up a lot of capital.

1259
01:17:53,502 --> 01:17:56,422
This is the biggest financial crime
in 25 years

1260
01:17:56,505 --> 01:17:58,257
except for Bernie Madoff.

1261
01:17:58,340 --> 01:18:02,094
It's still easy
for the bad boys of finance

1262
01:18:02,178 --> 01:18:04,555
keep Washington at bay.

1263
01:18:04,638 --> 01:18:06,557
We are cutting regulations.

1264
01:18:06,640 --> 01:18:10,060
I would say that 70% of the regulations
can be deleted.

1265
01:18:11,353 --> 01:18:15,107
I think there are similarities
between the mortgage crisis of 2008

1266
01:18:15,191 --> 01:18:17,109
and the Chinese situation.

1267
01:18:17,193 --> 01:18:20,154
we had the opportunity
of the post-global crisis,

1268
01:18:20,237 --> 01:18:22,072
In my opinion, and we lost it.

1269
01:18:22,156 --> 01:18:24,825
It was a kind of appetizer

1270
01:18:24,909 --> 01:18:27,620
because they were small and bad companies

1271
01:18:27,703 --> 01:18:29,914
which used to be demonstrable frauds.

1272
01:18:29,997 --> 01:18:34,084
The goal is 50 billion.
It is an empirical figure.

1273
01:18:34,168 --> 01:18:36,712
With that figure, we can say "bang".

1274
01:18:36,795 --> 01:18:39,131
We can target that fraud and that one,

1275
01:18:39,215 --> 01:18:41,508
and tie them with a pretty bow.

1276
01:18:41,926 --> 01:18:44,887
What we don't talk about

1277
01:18:44,970 --> 01:18:48,140
is in the hundreds of thousands
of millions of dollars

1278
01:18:48,224 --> 01:18:50,267
that we can't even touch,

1279
01:18:51,018 --> 01:18:55,856
and the fraud that can be perpetrated
through China by other means.

1280
01:18:56,357 --> 01:19:00,611
It's not 50 billion.
And they are not investment banks.

1281
01:19:00,694 --> 01:19:03,322
It's not some people in the US.

1282
01:19:03,656 --> 01:19:06,825
They are all. It's every bank...

1283
01:19:15,125 --> 01:19:16,961
whether they know it or not.

1284
01:19:18,045 --> 01:19:21,840
Alibaba, e-commerce giant
Chinese, it was a success.

1285
01:19:21,924 --> 01:19:23,259
GRAND OPENING

1286
01:19:23,342 --> 01:19:26,929
The company began trading
on the New York Stock Exchange.

1287
01:19:27,012 --> 01:19:29,682
Share price up 38%

1288
01:19:29,765 --> 01:19:31,141
The perfect storm.

1289
01:19:33,102 --> 01:19:34,561
The perfect storm.

1290
01:19:34,645 --> 01:19:37,147
It can against eBay, Amazon and PayPal.

1291
01:19:37,231 --> 01:19:39,358
But is it a Netflix, a Groupon?

1292
01:19:39,441 --> 01:19:41,235
Hence, the perfect storm.

1293
01:19:41,318 --> 01:19:43,654
It is the first Chinese Internet company

1294
01:19:43,737 --> 01:19:45,364
listed in the US

1295
01:19:48,575 --> 01:19:51,412
They say that the biggest lie on Wall Street

1296
01:19:51,495 --> 01:19:53,539
It's just that this time it's different.

1297
01:19:53,622 --> 01:19:59,378
Alibaba's profits in the second
quarter they rose 179% to 2,000 million.

1298
01:19:59,461 --> 01:20:02,548
It's a perfect storm. That is.

1299
01:20:02,631 --> 01:20:05,551
You don't have the capacity to investigate it.

1300
01:20:05,634 --> 01:20:07,636
You buy lottery tickets.

1301
01:20:07,720 --> 01:20:09,596
Alibaba is lottery tickets.

1302
01:20:10,347 --> 01:20:14,935
Its charismatic founder Jack Ma has
the presence of a technological icon.

1303
01:20:15,019 --> 01:20:17,062
Should we buy Alibaba shares?

1304
01:20:17,146 --> 01:20:19,273
Yes. It's China.

1305
01:20:19,356 --> 01:20:22,609
Is something worse coming than that?

1306
01:20:22,693 --> 01:20:24,153
That's what I say.

1307
01:20:24,778 --> 01:20:27,239
Jack Ma met with the president.

1308
01:20:27,323 --> 01:20:30,075
Jack and I will do great things.

1309
01:20:30,159 --> 01:20:31,910
- Thanks, Jack.
- Thank you.

1310
01:20:33,162 --> 01:20:37,333
Jack Ma, CEO of Alibaba,
He says, "Just trust us."

1311
01:20:37,416 --> 01:20:38,416
In this country...

1312
01:20:39,376 --> 01:20:41,128
When they say, "Just trust,"

1313
01:20:41,211 --> 01:20:43,839
The first thing you grab is your wallet.

1314
01:20:43,922 --> 01:20:46,133
You don't trust anyone.

1315
01:20:46,216 --> 01:20:50,095
And you don't trust anything you can't see
and investigate yourself.

1316
01:20:50,179 --> 01:20:51,472
That goes for Alibaba.

1317
01:20:55,225 --> 01:20:57,936
- And why do you insist?
- Screw them.

1318
01:21:00,064 --> 01:21:01,148
They lie.

1319
01:21:09,031 --> 01:21:13,744
Roth Capital Partners continues organizing
investment conferences.

1320
01:21:13,827 --> 01:21:16,413
Loeb and Loeb is its sponsor.

1321
01:21:16,497 --> 01:21:18,874
I want to toast all of us.

1322
01:21:18,957 --> 01:21:21,251
Here's to a fabulous 2015.

1323
01:21:21,335 --> 01:21:24,880
Rodman filed for bankruptcy
merged with a competitor

1324
01:21:24,963 --> 01:21:27,674
and returned to investment banking.

1325
01:21:27,758 --> 01:21:30,386
Above. Raise your arms.

1326
01:21:35,974 --> 01:21:38,435
A little music. Let the party continue.

1327
01:21:43,023 --> 01:21:44,650
Carson is still at Muddy Waters.

1328
01:21:44,733 --> 01:21:47,319
He is a successful short seller in the US.

1329
01:21:47,820 --> 01:21:51,031
Matt and Soren
They continue to discover fraud.

1330
01:21:51,115 --> 01:21:53,951
They opened their own company in Texas.

1331
01:21:54,034 --> 01:21:58,038
Wesley Clark joined the board of 18 firms
open capital.

1332
01:21:58,122 --> 01:22:00,541
He continues giving investment conferences.

1333
01:22:00,624 --> 01:22:04,086
Jon and Kun continue working together.

1334
01:22:04,169 --> 01:22:06,797
Kun sued Silvercorp,

1335
01:22:06,880 --> 01:22:09,383
He wants them to compensate for his unjust imprisonment.

1336
01:22:09,466 --> 01:22:15,472
Dan continues shorting
and insists with his crusade in Washington.

1337
01:22:17,474 --> 01:22:20,644
Of the 400 Chinese companies
that came to the market

1338
01:22:20,727 --> 01:22:22,729
in the rise of reverse mergers,

1339
01:22:22,813 --> 01:22:24,815
only one director went to prison.

1340
01:22:25,649 --> 01:22:28,110
In 2016, the Stock Exchange Commission was investigating

1341
01:22:28,193 --> 01:22:30,195
Alibaba's accounting practices.

1342
01:22:30,279 --> 01:22:32,906
En 2017, Trump nombr� a Jay Clayton,

1343
01:22:32,990 --> 01:22:36,243
who was a lawyer for Alibaba,
to lead the Commission.

1344
01:22:37,953 --> 01:22:41,373
Today, more than 100 Chinese companies
listed in the US

1345
01:22:41,457 --> 01:22:44,376
Its total market value
exceeds 1.1 trillion.