Great frauds in history: Crazy Eddie Antar

Eddie Antar and his relatives set up discount electronics store, fiddled the books and lost investors millions.


Eddie Antar was born in New York in 1947 and with his relatives set up discount electronics store Sight and Sound in 1969. It was unsuccessful to begin with, but its fortunes took a turn for the better when Antar (pictured) took majority control in 1971 and changed the name to Crazy Eddie. He also launched an aggressive marketing campaign, with a series of attention-grabbing commercials, many starring Antar himself. By 1984 the firm had grown so much that Antar decided to list it on Nasdaq. Initially its shares soared, and its market capitalisation rose from $40m to $600m by 1986.

What was the scam?

Eddie's distinguished itself by engaging in two completely opposite types of fraud. During its first decade of operation, Antar under-reported profits in order to dodge taxes, skimming the difference and putting it into secret bank accounts. He also paid some employees in cash, in order to reduce his tax bill further. After the firm went public, he stopped doing this and went in the opposite direction, exaggerating profits and even temporarily injecting some of the laundered cash into the company, in order to keep the share price high.

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What happened next?

The explosion in the stock price put pressure on the owners to maintain the pace of growth, which they found impossible to do, given growing competition and the falling price of electronic goods. The shares quickly returned to their flotation level. Antar tried to take the company private again, only for a businessman to launch a counter-offer. By November 1987 the firm was taken over and the Antar family removed. Around 18 months later, facing large amounts of debt, Crazy Eddie was formally wound up.

Lessons for investors

The fallout from the fraud resulted in Eddie Antar, along with several family members, serving time in jail. Other family members were able to avoid prosecution by agreeing to testify against Antar. While the takeover ensured that shareholders didn't lose everything, those who had invested at the peak would sustain losses of up to 85% on their investment. The big lesson from the demise of Crazy Eddie is the importance of a strong board of directors and strong internal controls, to make sure the firm is being run in the interests of all shareholders. It's also a bad idea to rely solely on the opinion of auditors.



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