The Fraud That Goes Unnoticed

Dealbook NYT by Andrew Ross Sorkin
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On a recent visit to Salt Lake City, Alexander Dyck ordered Chinese takeout and received a branded fortune cookie wishing him wealth and promoting FTX, presumably packaged before the crypto empire’s epic collapse. “I should have saved it,” he said regretfully.

Dyck is a professor of finance at the University of Toronto, who just published a provocative new study on the pervasiveness of corporate fraud. The study has been passed around in the world of academia in recent weeks, and has become a fascination among general counsels, corporate leaders and investors.

It suggests that only about a third of frauds in public companies actually come to light, and that fraud is disturbingly common. Dyck and his co-authors estimate that about 40 percent of companies are committing accounting violations and that 10 percent are committing what is considered securities fraud, destroying 1.6 percent of equity value each year — about $830 billion in 2021.

“What people don’t get is how widespread the problem of corporate fraud is,” Dyck said about his study, which was published in the Review of Accounting Studies this month.


In another thread I noted that retail losses due to theft were 1.5% of sales. Is 1-2% loss due to crime broadly true across society, sort of an 80/20 kind of thing? It sounds like it’s much higher in the Russian military supply chain, but maybe everyday corruption isn’t crime. Maybe only 1-2% of Russian military officers committed crimes and went beyond the everyday corruption. Maybe those are the people falling out of windows.