ITT we discuss financial frauds and ask questions about them.
Pic related, how could this happen? How did nobody notice? I watched the documentary 'The Smartest Guys in the Room', but what I don't understand is how their auditors didn't spot things.
One of the main reasons was because the upper leadership was detached from the chairman. For example, they testified later on that they were shocked when finding out the blockbuster deal didn't actually exist.
>what I don't understand is how their auditors didn't spot things.
This is a big part of it OP. It used to be called "the big 5" and now it's the "big 4", guess who disappeared?
>How did nobody notice?
They did notice. Remember the phone call where the CEO called someone an asshole? That guy noticed and called the CEO out. Short sellers are the harbingers of the market, they dispense information that others will not. Others notice but don't sell short, they tend to stay quiet and wait- people like seth klarman. His firm spent several years examining enron and when the company went bankrupt he bought the undervalued bonds and tripled his money. There are many people who notice, all of them trying to make money in their own way whether that's shorting stock, buying CDS or buying undervalued assets in bankruptcy.