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- The Darth Vader of Retail 📟
The Darth Vader of Retail 📟
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Finlay Williams
August 27, 2024
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2 minute wacky businesses, you can tell your buddies about 🧠
Until yesterday, I’d never heard of Crazy Eddie, this story blew my mind. At its peak in the 1980s, this electronics retailer was pulling in over $350 million a year (sort of…). Crazy Eddie was an infamous consumer electronics chain that made millions and lost it all, with fraud that would make Bernie Madoff quake.
As Crazy Eddie’s peak was in the 1980s, this search volume chart shows the gradual decline
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Fraud as a Business Model 🧐
Crazy Eddie was founded in 1971 by Eddie Antar, a man who redefined what it meant to cook the books. It started out as a regular electronics store in Brooklyn, but quickly turned into something else entirely. Eddie didn’t just want to compete, he wanted to dominate, and he didn’t care how he did it. What makes Crazy Eddie worth discussing isn’t just the success, but the method behind it, a cocktail of illegal activities that would eventually bring the empire crashing down.
Let’s be clear, Crazy Eddie wasn’t successful despite its illegal activities, it thrived because of them. From the get-go, Eddie was skimming profits right off the top, underreporting income to avoid taxes. As the business grew, so did the scope of the fraud. It didn’t just stop at skimming, he started inflating sales figures to make the company appear more profitable than it was, all while pocketing the difference.
What are the nuggets? 💎
📟 Origin: Crazy Eddie started as a small family business, but Eddie Antar always had bigger, more fraudulent aspirations. Early on, Eddie and his family were skimming 5-10% of sales off the books—small-time fraud for a small-time business.
📟 Funding: Technically, Crazy Eddie raised $8 million from its IPO. However, In 1984 before Antar took the company public, investors grabbed nearly 2 million shares of Crazy Eddie for $8 apiece. The stock climbed 35% in just a year, driven by record profits. But the company’s growth, you guessed it, was another con. By reducing how much they skimmed from sales — the off-the-books cash flow that Antar hid under his floorboards and in mattresses — it created the false impression that profits were skyrocketing. It’s reported that between 1982 and 1983, real-world profits climbed 9 percent (not the 35% shown on the ticker).
📟 Audacious Play: By exaggerating the amount of stock on hand, Eddie made the company look more valuable to investors. In 1987 a hostile takeover revealed that the company had $80M in non-existent stock. At one point, to maintain the illusion of high inventory, Eddie even ran a scheme where the same stock was moved between warehouses just before auditors arrived.
📟 Insurance Scams: He also profited from insurance scams. If any of his stores had water damage from leaking roofs or pipes that froze and burst during the winter, he had his employees collect any merchandise that wasn’t selling and move them into the flooded store
📟 Dad's Devious Plot: Eddie Antar's father, Sam, wasn’t thrilled that his son had outshined him in the business. So, he devised a plan to oust Eddie by exploiting his (also shady) personal life. Eddie was cheating on his wife, Debbie, with another woman also named Debbie, referred to as “Debbie II” to avoid confusion (lol). Sam believed that if Debbie I divorced Eddie, he could fire his son and protect his one-third stake in Crazy Eddie, preventing it from falling into Debbie I’s hands when Eddie ultimately went to jail.
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