How Fraud Became A Winning Strategy

What's driving the markets this week? What's on investors' minds as they look ahead? Find out on the Markets Podcast from Goldman Sachs. A breakdown of market moves and macro signals in 10 minutes or less. The Markets Podcast from Goldman Sachs. Listen now. Company spending is complex. Managing it should be simple. This is Amex Corporate, a single platform connecting cards, expenses, and payments to streamline the way you work. Flexible controls for when priorities shift, support around the clock, all backed by American Express, so you can stay focused on what matters most. Built to simplify, designed to scale. This is Amex Corporate. Get started at go.amex.com. Terms apply. On 11 or later required. Based on Apple-conducted study of heart rate accuracy, August 2026. Visit apple.com slash applewatchseries12. Welcome to Simply Put. I'm Ed Elson. This week, the golden age of fraud. Before we begin, though, this newsletter has been nominated for a Signal Award. Please go vote for us at vote.signalaward.com. We'll also leave a link in the description. Two weeks ago, Premier League Football Club, Manchester City, was found guilty on 114 counts of financial fraud. According to the findings, the club had misrepresented its financial statements by roughly £900 million, with sham contracts, and it had been doing so since 2009. Now, as a football fan, full disclosure, Chelsea, this news was an outrage, because over the past 15 years, Manchester City won eight Premier League titles, making it the most successful English team, of the modern era. But it's no longer clear if any of those trophies were valid. Simply put, the team's success was a function of its cheating. Now, this story isn't new. In fact, we've seen it many times before. Not just in football, but in business, on Wall Street, in Washington. It's the story of unbridled success, only to later be revealed as the product of corruption. Manchester City is a £900 million, and it's the first time in a decade that a team has been able to achieve such a success. It's the first time in a decade that a team has been able to achieve such a success. We are living in the golden age of fraud. Wherever you look, winners are cheating their way to success, and more importantly, getting away with it. Let's start with sports. This scandal is the second mass financial fraud story in less than a month. Just weeks ago, the NBA's Los Angeles Clippers were punished for fraud as well. The team's owner, Steve Ballmer, intentionally faked financial endorsements so that he could pay star players more than the league allowed. Ballmer isn't the first to play outside the rules. Earlier this year, Atlanta Hawks head of finance admitted to a $3.7 million fraud charge. And last year, a Miami investment firm that owned stakes in football clubs across Europe and South America was indicted for a $500 million fraud scheme. In sum, sports fraud is on the rise. Now, if you think that's bad, go look at Wall Street. We've seen numerous fraud scandals in the past year, including First Brand's multi-billion dollar Ponzi scheme and Tricolor's billion dollar meltdown. Those two made the most headlines, but there were many more. In February, a mortgage lender called MFS collapsed after defrauding multiple banks out of a billion dollars. In September, the founder of Linkdo, a platform that sold shares in pre-IPO companies, was indicted. For a $450 million fraud built on lying about the prices of those shares. And that's just the criminal cases. Investors filed 118 securities fraud lawsuits in the first half of 2026 alone, which puts this year on pace for the most since 2020. Silicon Valley is no saint either. Recent technology frauds include a Google engineer who used confidential search data to win $1.2 million on PolyMarket, as well as the founder of Text.com, a startup, Castle, who told investors her company had earned $66 million when it had actually lost $81 million. And don't forget about Nate, either, the VC-backed AI shopping app that raised more than $40 million on the promise of automated checkout, which turned out to be in reality hundreds of people in a call center in the Philippines. The Forbes 30 under 30, which used to be a prestigious list for up-and-comers, has devolved into a who's who of fraudsters. From Sam Bankman-Fried to Charlie Javis, many of Text's most legendary criminals have received the honor. I should also note that I, myself, made the list last year. I can't wait for prison. The fraud we see today should not surprise us, as our habits are informed by our leadership. How did 100 members of Congress beat the S&P last year? Are they incredible fund managers? Or do they know something that we don't? Congressional stock trading is one of America's greatest frauds, the good news is that our president wants to ban it. The bad news is he wants to make an exemption for himself. But the fish rots from the head down, and right now the head is rancid. Since taking office in 2025, President Trump has made more than 28,000 stock trades, more than every member of Congress combined. Many of those trades happened right before he initiated market-moving events. For example, he bought Nvidia shares in January, a week after his administration cleared the campaign, to sell chips to China. And $5 million more in February, days before Nvidia announced a major deal with Meta. He also bought Intel bonds right around the time he announced the US government would take a stake in the company. These were insider trades, plain and simple. And yet, nothing has been done about them. But insider trading is only the beginning of the story. Trump netted more than a billion dollars on crypto last year, including profits from his meme coin on which 800,000 people lost a collective of $2 billion. He also created a $100,000 per month API that granted Wall Street early access to his social media. His sons invested in tactical drone startups right before they received government contracts from the Pentagon. And recently it was revealed that John Jr. accepted money from a Putin ally who helped pay for his wedding. These are just a few recent examples, but I could go on forever. Fraud is so common today because our justice system increasingly protects it. White collar crime prosecutions have been sliding for years, but Trump's inauguration sealed the deal. In his first week, the president fired 17 federal inspectors general, i.e. the people whose job is to catch fraudsters. He then reduced headcount at the Justice Department's anti-corruption unit from 36 lawyers to two lawyers. Later, he reached a settlement with the IRS that meant the agency could no longer audit him, his sons, or any of their businesses ever again. Despite outrage and a public rebuke by a federal judge, the audit ban remains in place. Trump has realized that the best way to help fraudsters is to fire the cops. It worked. SEC enforcement actions have fallen more than 90% this year. More than $1.7 billion in fraud-related fines and restitution charges have been waived. In his first year back, more than half of Trump's pardons went to white collar criminals, wiping out nearly $300 million in fines and restitution. There has never been a better time in history to be a scammer. Gallup asked Americans this spring whether corruption is widespread in their government. And 89% said yes. That's up 10 points in a year, and the highest reading since the question was first asked in 2005. The US now ranks first among OECD nations on this measure. Fraud is bad for many reasons. It's illegal. It's immoral, etc. But there's another, more important problem, which is that it causes fundamental distrust in the system itself. Why would you keep watching the Premier League, for example, if you believe that the competition is rigged? By the same token, why would you keep participating in the US economy if you believe that the market underlying it is rigged, too? This is the question many Americans ask themselves today. People wonder why half of young people no longer believe in capitalism. They wonder why so many are becoming NEETs. Individuals not employed. Enrolled. Or in training. The reason is simple: young people believe the game is rigged. From crypto rug pulls to insider trading, their financial nihilism is a function of the corruption they've grown so accustomed to. Some may accuse them of pushing some grand conspiracy theory here, but similar to the billionaire pedophile ring conspiracy theory, this one is true. "Show me the incentive," Charlie Munger once said, "and I'll show you the outcome." The reason fraud is so pervasive is that on a risk-adjusted basis it now yields great returns. Get caught and you might get a slap on the wrist. Get away with it and you could make millions. Scamming people in 2026 is in many ways a no-brainer. The only thing that might get in the way is having morals. If we agree that fraud is bad, then we should create a solution. Thankfully, it's simple. We can enforce the law. That doesn't mean just fines. It means license suspension, prison time, and permanent reputational damage. The downside risk of committing fraud should significantly outweigh the upside. That way, people would be more afraid to do it than excited. Unfortunately, our current system has it backwards. Fraudsters are rewarded, not punished. The Premier League has not yet announced what Manchester City's punishment will be. Some think they'll have points deducted. Others think they'll receive a fine. I don't know what will happen. But I do know what will happen. Manchester City should be handed the severest sanctions available. That means stripping the club of its titles, issuing a significant fine, and possibly relegating them from the Premier League. Some will say that that is too harsh. But remember what's at stake here. This isn't just about a club. It's about the integrity of the entire game. This is football's moment to show the world what happens when you cheat. Make an example of Manchester City. Manchester City and others may think twice before cheating. Let them off the hook and the corruption will deepen. Scandals are like crises. They are a terrible thing to waste. This edition of Simply Put was produced by Claire Miller and Alison Weiss and edited by Natalia Cabrera and engineered by Benjamin Spencer. Our research associate is Dan Chillon. Our design editor is Olivia Rini-Hall. Special thanks to Vivian Zhang and Rohit Bhola. Thanks for listening to Simply Put by Ed Elson. You can find this piece and more on Substack. Just go to edwardelson.substack.com. And one last thing. We've been nominated for a Signal Award. So if you enjoyed this, please vote for us at the link in the episode's description. At ZocDoc, we know you care about your health. You wouldn't do that early morning cardio if you didn't. So the fact that your annual physical is overdue just shows how hard it can be to get through it. So if you're in a situation where you're not able to get through it, just vote for us at the link in the episode's description. And one last thing. We're sorry that doctor's not a network. Press one for more options. You've reached us outside normal business hours. The next availability is in three months. But ZocDoc makes finding the right doctor easy. Download the app and search by specialty, insurance, and availability. Read real patient reviews. Then book instantly. ZocDoc. Ready to be seen? 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