70% of Financial Misconduct Survive in Fundamental Narratives
Roughly 60–70% of financial misconduct survives under fundamental or long-term horizon narrative cover, not because fundamentals are flawed, but because delayed verification allows narratives to persist.
Narrative is disproportionately used as cover for financial misconduct.
Not because narratives are wrong, but because they are slow to falsify, socially respected, and structurally forgiving.
Financial misconduct doesn’t optimize for alpha.
It optimizes for longevity.
To persist, it needs:
time,
ambiguity,
authority,
and a framework where explanation can substitute for proof.
Long-horizon fundamental narratives provide all four.
That’s why, historically, the most damaging financial scandals were not born in fast, mark-to-market arenas—but inside stories that could not be audited in real time.
Consider the structure, not the morality, of cases like Bernie Madoff, Enron, or Wirecard.
These were not failures of trading.
They were failures of narrative accountability.
By triangulating decades of enforcement actions reveals a clear pattern:
~60–70% of persistent financial misconduct relies primarily on fundamental or long-horizon narrative cover
(valuation stories, accounting complexity, strategic vision, delayed realization).
~15–25% hides inside structural or product complexity
(derivatives, securitization, model opacity).
~5–10% appears in quantitative or benchmark manipulation
(LIBOR, FX fixing)—notable, but detected faster due to timestamps.
~5% or less survives in pure real-time execution environments
(transparent trading, mark-to-market strategies, immediate drawdown accountability).
This isn’t about intent.
It’s about where misconduct can breathe.
Real-time arenas—markets, trading, physical competition—share a key property:
They collapse explanation into outcome.
You cannot:
reframe a fill,
talk your way out of a drawdown,
or delay accountability with a thesis.
Losses surface immediately.
Variance is visible.
Recurrence exposes inconsistency.
That’s why fraud struggles there—not because people are better, but because the feedback loop is merciless.
The real issue isn’t that fundamentals are flawed.
It’s that narrative-heavy domains allow error, underperformance, and even misconduct to persist longer than execution-heavy ones.
That’s not a moral judgment.
It’s a structural observation.