Famed Short-Seller Carson Block Warns That Emerging Market-Based Issuers Are “Rife With Fraud”

Block will join the former Chief Commissioner of the Malaysian Anti-Corruption Commission and other experts at the 2020 ACFE Fraud Conference Asia-Pacific this month.

Carson Block, the founder and Chief Investment Officer of Muddy Waters Capital LLC, made headlines at the beginning of 2020 when he posted a report to Twitter accusing Chinese coffee company Luckin Coffee Inc. of fraudulently inflating sales. In April, the company admitted that more than $300 million of its sales from 2019 were fabricated. Block told the ACFE that when he’s looking at companies to short, he starts with the basics. “It usually starts with companies or stories that seem ‘too good to be true,’” he said. “Then we read transcripts of senior managers speaking to see how promotional the management seems to be.”

He believes that fraud is unfortunately a common problem in certain markets. “This really needs to be looked at in the context of emerging and frontier market-based issuers,” he said. “Those environments are rife with fraud, and their public companies reflect that. When the companies are listed in developed markets, the regulators’ reach is quite limited, which provides even less disincentive to commit fraud.” Block will address attendees at the virtual 2020 ACFE Fraud Conference Asia-Pacific, 24-25 September. He said that he hopes he can show attendees that “investors’ perception is easily manipulated.”

Block will be joined by other experts including the former Chief Commissioner of the Malaysian Anti-Corruption Commission Latheefa Koya, social scientist Dr. Attracta Lagan, expert on the future of work Su-Yen Wong and others.

Dr. Lagan, the co-principal of Managing Values, told the ACFE that one of the most common mistakes business leaders make is overlooking the importance of establishing an ethical culture. “Behavior science research shows us that rather than depending on character training, it is more effective to begin with a clear strategy for how leaders will intentionally design their organizational policies and systems to enable an ethical culture to emerge,” she said.

“Assuming fraud is the consequence of policy failure instead of seeing fraud as a symptom of an unethical culture enables fraud to flourish.” Dr. Lagan wants attendees to challenge their assumptions about what leads to fraud. “Fraud examiners need to be aware of just how influential organizational culture can be … their members either do not recognize their ethical slippages or they feel they have no choice.”

Concurrent sessions will include discussions about anti-money laundering, emerging cyber risk factors, smart contracts and more. This conference is an invaluable opportunity to hear from today’s anti-fraud leaders.

Visit FraudConference.com/AsiaPac for more information.