_{CHEATERS SOMETIMES PROSPER?}

A Look at Cheating Scandals and Share Price

I once interviewed for a hedge fund before I realized that watching my net worth change in real time probably wasn’t good for my health, but one thing that a PM said to me once will always stick with me. He said “you can have the best model, but you can’t predict if the CFO will do cocaine with Cramer on CNBC”.

While Jensen didn’t do cocaine with Cramer, he did something that got him pushed out of the company he founded, and history suggests it could actually be more bullish for NVDA’s share price than people are giving it credit for.

For those of you who happen to live under a rock, the TL;DR is that Jensen was effectively honeypotted by a Chinese spy who got him to cheat on his wife. Two more alleged affairs later, Nvidia’s board accepted his “resignation” and named CFO Colette Kress interim CEO. That got me thinking that surely in the history of CEOs, he can’t be the first one to lose his job and have to give up half his shareholding in a divorce because of a lapse in judgement.

I can’t say this is totally surprising, the guy was signing women’s chests like prime Axl Rose while being the sole support of the US economy, so maybe there were signs.

So, Jensen - welcome to Buysiders. Let’s see the club you are joining.

Jeff Bezos published the blackmail emails himself.

In January 2019, the National Enquirer ran a story on Jeff Bezos and Lauren Sanchez. The relationship was real. What happened next was not what the Enquirer expected.

AMI, the Enquirer's parent company, sent Bezos's lawyers a list of demands. Stop investigating how the Enquirer obtained his private messages. Publicly state that the story was not politically motivated. In exchange, AMI would not publish a set of intimate photographs. Bezos published AMI's demand letter himself on Medium, word for word, titled it "No thank you, Mr. Pecker," and accused the publisher of "extortion and blackmail." He won the news cycle so decisively that the Enquirer became the story.

The divorce came in April 2019. MacKenzie Scott received 25 million Amazon shares, worth approximately $38 billion at the time, the largest divorce settlement in history. She signed the divorce papers and soon after announced she was giving most of it away. Amazon’s stock was up ~15% in the twelve months after the story broke. The blackmailers were investigated by federal prosecutors. No charges were filed.

Bezos and Lauren Sanchez got engaged in 2023 and married in 2025.

Bill Gates’s affair with a Microsoft engineer.

The affair began around 2000. In 2019, the engineer wrote to Microsoft’s board describing a sexual relationship with Gates over several years. The board hired a law firm to investigate, and some directors decided it was no longer appropriate for him to stay on.

Twenty years after the affair began, Melinda Gates had spent two years quietly preparing for a divorce before filing in May 2021. Days after the divorce was announced, the Wall Street Journal reported on the board’s 2019 investigation. Gates resigned from the board in March 2020, saying he wanted to focus on philanthropy. His spokesperson said the resignation was unrelated.

A Gates spokesperson acknowledged “an affair almost 20 years ago which ended amicably,” and Gates said his “separation from Melinda is painful and sad.” The settlement was never fully disclosed, which is extraordinary given that Gates’s net worth at the time exceeded $130 billion. Filings showed billions in stock moving to Melinda, and she later received $12.5 billion when she left the Gates Foundation in 2024.

Microsoft’s stock was up ~13% in the twelve months after the divorce announcement.

Sergey Brin’s wife allegedly had an affair with Elon Musk.

In 2022, the Wall Street Journal reported that Nicole Shanahan, Brin’s then-wife (and later RFK Jr.’s 2024 running mate), had an affair with Elon Musk in late 2021. Musk denied it. Brin and Musk had been close friends. After learning of the affair, Brin reportedly told his advisers to sell his personal Tesla shares. The two men reportedly patched things up later, though the nature of that reconciliation was described as professional rather than personal.

The divorce was finalized in May 2023. Settlement terms were not disclosed. Brin’s net worth at filing was approximately $90 billion. Shanahan received an undisclosed amount.

Brin’s takeaway from the entire episode appears to have been: sell the Tesla stock, reconcile with the billionaire, keep building Google. Google’s stock was up 55% in the two years following the report.

McDonald’s fired its CEO, gave him $42 million, then sued him to get $105 million back.

Steve Easterbrook became CEO of McDonald's in 2015. He oversaw the most successful turnaround in the company's recent history: the all-day breakfast launch, delivery partnerships, digital ordering. The stock roughly doubled during his tenure.

In November 2019, McDonald's fired him for a consensual relationship with an employee. The board gave him a severance package initially valued at $42 million in cash and equity, plus a non-disparagement agreement and an agreement not to sue. The relationship disclosed in the investigation was consensual. The parting was described as amicable. McDonald's stock barely moved.

Then the board kept investigating. What they found: relationships with three other employees that Easterbrook had not disclosed. Evidence that he had deleted them from his phone. Stock grants to one of the employees during the relationship. Lies told during the internal probe.

McDonald’s filed suit in August 2020 to claw back the severance. By the time of the settlement in December 2021, the stock had risen 37% from the original firing date, so the $105 million recovered reflected both the original package and the appreciation. The clawback was one of the largest and most successful in corporate history. Almost no company has ever recovered executive compensation after the fact. McDonald’s sued the person who had been lauded as a turnaround CEO, accused him of fraud, and got the money back.

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_{THE BEST TRADE DEAL IN THE HISTORY OF TRADE DEALS}

The Best Trades in History

In a similar spirit to the above, while MacKenzie Scott got out with arguably the best trade deal ever, I wanted to go back through the archives and look at what the actual best trades ever made were. This is probably a contentious list, so let me know if you think I missed any. Like I said, I never ended up working for a hedge fund so I could be missing some obvious ones here.

George Soros made $1 billion in a single day by betting against the British government.

In 1992, the United Kingdom was a member of the European Exchange Rate Mechanism, an agreement to keep European currencies within a fixed band relative to the Deutsche Mark. The problem: UK inflation was higher than Germany’s, its economy was weakening, and the pound was overvalued within the band. Soros, advised by Stanley Druckenmiller at Quantum Fund, concluded that the peg would break.

Starting in August and accelerating into September, Soros built a short position in the pound of approximately $10 billion. The British government spent billions in foreign currency reserves in a single day defending the peg. The Chancellor of the Exchequer raised interest rates from 10% to 12% and then announced a planned increase to 15%, all in one day, trying to make it more expensive to hold short sterling positions. None of it worked. That evening, on September 16, 1992, the British government announced it was withdrawing from the ERM. The day became known as Black Wednesday.

Quantum Fund’s profit: approximately $1 billion in a single day, and roughly $2 billion over the full trade. Druckenmiller sized the position. Soros told him to go bigger. The British government described the event as a national humiliation. Soros described it as a trade. He was right that the peg was wrong, and right that it would break, and right on the timing. All three things being right simultaneously is rarer than it looks.

Michael Burry pulls in 489% net of fees in the housing crisis.

In 2005, Michael Burry, a one-eyed physician turned fund manager running a small fund called Scion Capital out of Cupertino, read thousands of pages of mortgage bond prospectuses and concluded that the U.S. housing market was built on fraud. Lenders were issuing adjustable-rate mortgages with teaser rates that borrowers couldn’t afford when the rates reset. The bonds packaging these mortgages were rated AAA. Nobody had bought credit default swaps on them because nobody had bothered to read what was inside them.

Burry called Goldman Sachs, Deutsche Bank, and others and asked them to create the instruments so he could buy them. They thought he was eccentric. They sold him the swaps anyway, happy to take his premium payments.

For two years, the housing market kept going up. Burry kept paying premiums. His fund was down on paper. His investors, who had given him money to pick stocks, not to bet on a housing collapse, demanded explanations, then demanded their money back. He refused to return the capital, citing the fund’s redemption terms. Some threatened to sue. He side-pocketed the positions to prevent redemptions and kept the trade.

In 2007, the market broke. Scion Capital returned 489% net of fees from its inception in 2000 through mid-2008. Burry’s personal profit was approximately $100 million. His investors made ~$700 million. He closed the fund shortly after, saying the experience had been too stressful. He later reopened it and has been making large macro calls ever since, most of which get enormous attention and mixed results. The housing short remains the one trade no one argues with.

John Paulson also made $15 billion shorting mortgages.

In 2006, John Paulson became convinced that the U.S. housing market was in a bubble and that mortgage-backed securities were mispriced. He wanted to buy credit default swaps, essentially insurance against mortgage bonds failing. His investors were skeptical. His analysts were uncertain. The trade cost money every month in premiums while it waited to pay off, and it had been waiting for over a year.

He had learned about the trade partly from Greg Lippmann, a Deutsche Bank trader who had been pitching the trade and couldn’t get his own employer to fully commit to it. Paulson committed. He raised a fund specifically for the purpose and ran it while his existing investors questioned the thesis at every meeting.

The housing market began turning in 2007. The credit default swaps paid off. By the end of 2007, Paulson’s funds had generated approximately $15 billion in profit. His personal take was approximately $4 billion, the largest one-year personal income in Wall Street history at the time. The book about it is called The Greatest Trade Ever.

The investors who had tried to talk him out of it did not publicly comment.

David Tepper bought bank stocks when everyone thought the banks were being nationalized. He made $7 billion.

In early 2009, the U.S. government was debating whether to nationalize Citigroup and Bank of America. If nationalization happened, common equity holders would likely be wiped out. Preferred shareholders might fare better, but the outcome was uncertain. The stocks reflected that uncertainty: Citigroup preferred was trading at cents on the dollar.

David Tepper at Appaloosa Management concluded the government would not nationalize, that the political and economic cost was too high and that the stress tests being run would provide a path to recapitalization instead. He bought Citigroup and Bank of America preferreds heavily in February and March 2009.

The government announced it was not nationalizing the banks. The stress tests in May 2009 showed the banks could survive. The preferreds recovered. Appaloosa’s fund returned more than 120% in 2009. Tepper’s personal compensation was approximately $4 billion. A year later, he went on CNBC and argued stocks would rise no matter what the Fed did. The market rallied while he was talking, a move that became known as the “Tepper rally.”

He subsequently bought the Carolina Panthers NFL franchise for $2.275 billion in 2018, the highest price ever paid for an NFL team at the time. He paid for it with a fortune the 2009 trade had supercharged.

Bill Ackman turned $27 million into $2.6 billion in 30 days after crying on CNBC.

On March 18, 2020, Bill Ackman appeared on CNBC and delivered what became one of the most watched financial television moments in years. “Hell is coming,” he said. He described a scenario in which hotels, restaurants, and businesses shut down entirely for 30 days, the economy froze, and markets collapsed further. He appeared to be near tears. Stocks fell during the interview.

What was not mentioned on air: Ackman had already made the trade. Starting in late February, he had spent $27 million buying credit default swaps on investment-grade and high-yield corporate bond indexes, essentially insurance against a broad corporate credit collapse. The position was sized to pay off massively if credit markets seized.

Guess what? They seized. By late March, Pershing Square had unwound the hedge for proceeds of approximately $2.6 billion, a ~100x return in roughly 30 days. Ackman used the proceeds to buy beaten-down stocks including Hilton, Berkshire Hathaway, and Lowe’s at March 2020 prices. Those positions recovered as the market did.

The CNBC appearance generated significant criticism. Some called it market manipulation, suggesting he talked down markets while holding a short position. Ackman maintained he was expressing a genuine view and had already begun buying stocks by the time of the interview. The SEC did not pursue action. The trade was legal, asymmetric, and extraordinarily well-timed. The 30-day return of ~100x on the hedge alone is essentially without precedent in institutional investing at that scale.