Friday 15 August 2014

Gowex: web of lies

Well researched article by Reuters:

"Special Report - Web of lies: How a Spanish tech star fooled the world"

The tech industry (in which I have been involved for a long time) is unfortunately overrepresented in fraud cases. Malaysia had its fair share of cases related to companies listed on the Mesdaq and ACE market.

Some snippets of the Reuters article:


"Basically, we started with three companies and what we do is: One company bills to Gowex, Gowex bills to another company and the third company bills to the previous one. It is a triangle," Garcia Martin told the court. “Basically, the structure enabled us to make capital increases."

.... Some investors and analysts later expressed skepticism about the company’s performance. In a note in March 2013, NFinance Securities analyst Pierre Schang said he was “disturbed” that Gowex was turning big profits while competitors were registering losses or much smaller profits. Schang did not answer a request to comment further.

Others questioned the firm’s amateurish corporate structure, with a board composed of Garcia Martin, his wife, Florencia Mate, and CFO Marugan.

.... At his court hearing, former CFO Marugan said only about 10 percent of the company’s revenues were real.

.... In the end, it was not Spanish regulators who uncovered the deception, but activist U.S. investor Gotham City Research LLC. On July 1, Gotham City said Gowex accounts were false and set a target price of zero on the stock.

In two days, the company’s market value dropped 870 million euros.

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