American Consequences - August 2017

he would distill his arguments down to internet-friendly length. The word “blog” was just starting to enter the lexicon. Left registered a domain name. He decided to stay in California. He would come to talk about frauds the way surfers talk about waves. In 2015, Left got a call from one of his frequent collaborators, Xuhua Zhou, a 25-year-old Ph.D.-program dropout who had graduated from Emory in two years with a double major (accounting and finance) and a minor (math). Zhou was also a finance blogger and trader himself. He had taken note of Martin Shkreli, the 32-year-old chief executive of Turing Pharmaceuticals, who had been in the news for buying the rights to Daraprim, an antiparasitic drug often prescribed to AIDS patients, and raising its price 56-fold. The story persuaded Zhou that “something was fiercely wrong” with a much larger and more important player in the same sector, Valeant Pharmaceuticals. To its fans on Wall Street, Valeant represented a brand-new model for the drug business. It didn’t spend money on research and development, as most drug companies did. Instead, it bought valuable patents for drugs that others had developed, then jacked up the prices. To critics, Valeant was an abusive acquisition machine that produced nothing of value and would choke on its own debt. Senator Bernie Sanders lambasted it. Shares traded above $200. On September 28, 2015, Left released his first report on the company. “This article is not for you hedge-fund managers who think that this quarter’s profit is more important than human decency,” it read. “This article is

Maybe – if you’re good at it. Left was not. He would meander off script and lose the sale. He quit after nine months, ejecting himself into the mid-’90s froth, where there was very little oversight and, almost everywhere you looked, a thick layer of scumminess. These were the years when the future “Wolf of Wall Street” author Jordan Belfort ran a brokerage firm on Long Island, taking small companies public. Left started flipping penny-stock IPOs, including Belfort’s – he would call up the “bucket shops,” or storefront stock exchanges, ask for shares before a company went public whoever would buy them. The typical scam involved inflating the price by lying to your customers, then selling your own shares as close to the peak as possible before those customers got wiped out. (In 1999, a judge sentenced Belfort to four years for fraud. He served 22 months.) In the back of Left’s mind, a realization glimmered. With the money he had saved from a few successful trades, he started shorting Belfort and the others, covering his positions after the price bottomed out – in effect profiting from their fraud. He was just getting the hang of it when the market crashed. He moved to California. In the mid-’90s, traders were just beginning to publish their theses online. An idea occurred to Left: Take the short positions he wielded against the Long Island companies and aim them up at big companies, the more elite the better, using the internet to disseminate the research. Instead of writing in the mode of a traditional stock analyst, and then sell them later at a profit. At the time, the Long Island bucket shops were pumping obscure stocks to

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