The Story of “Crazy Eddie” and Eddie Antar

Bernie Madoff ran his fraud for 17 years,

but this fraudster wasn’t caught for almost 30 years.

Here is the story of “Crazy Eddie” and Eddie Antar: pic.twitter.com/IOCxI2txWY

— Kurtis Hanni (@KurtisHanni) April 11, 2023

In 1969, Eddie Antar founded his consumer electronics retailer, Sight and Sound, with his father and cousin.

Eddie became known for his aggressive selling tactics and was given the nickname "Crazy Eddie."

When he became the majority owner, he changed the store's name to match. pic.twitter.com/MUJniD1Arp

— Kurtis Hanni (@KurtisHanni) April 11, 2023

Lack of funds = creativity

Early on, Eddie couldn’t afford to run TV ads, so he partnered with a local radio disc jockey to run radio ads instead.

The ads had a very particular style to them, ending with “OUR PRICES ARE INSAAAAANE.” pic.twitter.com/yjBfbXcHtS

— Kurtis Hanni (@KurtisHanni) April 11, 2023

They eventually created TV ads, running them overnight to get cheaper slots.

The ads were a hit and helped them grow to over 40 stores with more than $300 million in sales at their peak.

Watch the ads here: https://t.co/AIc1sFR1Pn

— Kurtis Hanni (@KurtisHanni) April 11, 2023

But things were never as they seemed.

From very early on, Crazy Eddie was not being run above board.

They:

1. Collected sales tax, but didn’t pay it
2. Paid workers in cash to avoid payroll taxes
3. Claimed old & previously claimed inventory to overstate insurance losses

— Kurtis Hanni (@KurtisHanni) April 11, 2023

In 1980, the desire for continued growth meant they needed to go public.

But, they were skimming profits, thus making them appear minimally profitable.

— Kurtis Hanni (@KurtisHanni) April 11, 2023

Eddie’s nephew Sam Antar, was made CFO and stopped profit skimming.

This took profits from $1.7 million in 1980 to $8 million in 1984.

No one knew… but they stopped defrauding the IRS to start defrauding Wall Street. pic.twitter.com/H12iptKElL

— Kurtis Hanni (@KurtisHanni) April 11, 2023

In September 1984, the initial public offering sold shares for $8.

In 1985 same store sales went up 20%, so the stock shot up to almost $80/share.

But then same-store sales were only up 4% in Jan/Feb 1986, where the target was 10%.

— Kurtis Hanni (@KurtisHanni) April 11, 2023

The difference between these numbers was about $2.2 million.

To cover for this, they came up with the “Panama Pump.”

Eddie took his previously skimmed money and deposited it into the business as sales to cover the difference.

— Kurtis Hanni (@KurtisHanni) April 11, 2023

This kept the stock high and the Antar’s used this to their benefit, selling over $20 million in stock shortly thereafter.

Eventually, they pocketed over $90 million (equivalent to $240 million today) from the sale of stocks.

— Kurtis Hanni (@KurtisHanni) April 11, 2023

But the highs of 1986 were short-lived.

Store sales started to slow as increased competition and prices of consumer electronics put pressure on the business.

To keep the fraud going they tried everything:

— Kurtis Hanni (@KurtisHanni) April 11, 2023

- Convinced a vendor, Wren, to help them inflate inventory ($5-10 million)

- Faked in-store inventory numbers (knowing auditors couldn't check them all)

- Wined & dined the auditors

- Generated over $20 million of phony debit memos (understating AP & overstating income)

— Kurtis Hanni (@KurtisHanni) April 11, 2023

Despite all of this, they still had to report losses.

By May 1987, the stock had plummeted to $5/share.

To make bad times worse, 2 different events spelled doom for Crazy Eddie:

- Eddie fired 2 long-time employees
- The lower stock price made them a hostile takeover target

— Kurtis Hanni (@KurtisHanni) April 11, 2023

The employees went to the SEC to report the fraud and only revealed Eddie’s involvement in the fraud.

Then, in Nov 1987, Elias Zinn bought the company and removed the Antar’s from their leadership roles.

Zinn soon found over $40 million in inventory shortages.

— Kurtis Hanni (@KurtisHanni) April 11, 2023

Eddie fled to Israel, but eventually went to prison.

Only 3 of the Antar’s were arrested and put on trial, despite many more being involved. pic.twitter.com/agEtLh7Z0j

— Kurtis Hanni (@KurtisHanni) April 11, 2023

In the end, Eddie only spent 4 years in prison and paid more than $120 million in fines and restitution.

Most of it from secret bank accounts around the world.

Eddie passed away in 2016 at the age of 68.

— Kurtis Hanni (@KurtisHanni) April 11, 2023

The story of Eddie Antar & Crazy Eddie is a crazy one.

It’s also a great example of how to protect against fraud:

1. Segregation of duties
2. Review transaction-level data
3. Internal & External audits
4. Validate inventory
5. Culture of integrity

— Kurtis Hanni (@KurtisHanni) April 11, 2023

I share a few more ways in my last newsletter.

You can check it out below.

Join 15k+ and subscribe while you’re at it:https://t.co/8NUhUcYNGP

— Kurtis Hanni (@KurtisHanni) April 11, 2023

Thanks for reading!

If you want to learn more, check out "Retail Gangster" by Gary Weiss.

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1. Follow me @KurtisHanni for more of these
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— Kurtis Hanni (@KurtisHanni) April 11, 2023