General Electric plunged earlier this week.  

The stock plummeted after whistleblower Harry Markopolos claimed the company was hiding its financial problems and would need to significantly raise insurance reserves.  “My team has spent the past 7 months analyzing GE’s accounting and we believe the $38 Billion in fraud we’ve come across is merely the tip of the iceberg,” Markopolos said, as quoted by CNBC.

He went as far as calling General Electric a “bigger fraud than Enron, capping it off with allegations this could all plunge GE into bankruptcy.  

However, Markopolos was also paid by a hedge fund to look into these practices.

But he can’t name the fund.  “I can’t – I promised confidentiality,” he said, as quoted by CNBC. “It’s a mid-sized U.S. based hedge fund.”  And, he noted he’s receiving a “decent percentage” of profits that the hedge fund would make from betting against GE.

General Electric say the allegations are false, driven by market manipulation.  

“GE will always take any allegation of financial misconduct seriously. But this is market manipulation – pure and simple,” Lawrence Culp, chairman and CEO of GE told CNBC. “Mr. Markopolos’s report contains false statements of fact and these claims could have been corrected if he had checked them with GE before publishing the report.”

Analysts are Supporting General Electric

The allegations of fraud at General Electric are “at best disingenuous”, and, “at worst highly inaccurate,” according to Nick Heymann with the William Blair financial services firm, as quoted by CNBC. “You got the stock on sale yesterday for absolutely no basis. This is why all the insiders are buying.”

In fact, CEO Larry Culp just bought nearly $2 million worth of shares on Thursday.

Reportedly, he paid an average of $7.93 a share for 252,200 shares.  He now owns 1.17 million GE shares, and another 12,592 shares through trusts.