November 8, 2001 (September 23, 2001 in the lunar calendar), the Enron incident in the United States. The Enron Incident refers to the Enron bankruptcy case and related scandals that occurred in the United States in 2001. Enron was once one of the world's largest energy, goods and services companies, ranked seventh on Fortune magazine's "Top 500 America" and claims to be a global leader. However, on December 2, 2001, Enron suddenly filed for bankruptcy protection with the New York Bankruptcy Court, making the case the second largest corporate bankruptcy case in U.S. history. It has seriously damaged the recovery of the U.S. economy, damaged the confidence of investors and the public, and attracted the attention of the U.S. government and Congress. Enron was a giant company in the United States with more than 3000 affiliated companies. However, it collapsed almost overnight. Its collapse set three records in the U.S. economy. That is, the total bankruptcy assets are US$49.8 billion, making it the largest bankruptcy filing in the history of the United States; The stock price plunged more than 75% in one day, setting the largest single-day decline in the history of the New York Stock Exchange and the Nasdaq Market; the stock price dropped from the previous US$90.75 to US$0.26 per share, shrinking nearly 350 times, setting the fastest company bankruptcy in the history of the United States. The Enron incident started in early 2001 when Jim Cheos, the owner of a short-term investment institution with a good reputation, publicly expressed doubts about Enron's profit model. He pointed out that although Enron's business looks brilliant, it actually makes little money, and no one can explain how Enron makes money. According to his analysis, Enron's profit margin was 5% in 2000, but dropped below 2% in early 2001. For investors, the return on investment was only about 7%. Cheos also noticed that some documents involved the partnerships behind Enron, which had unclear behind-the-scenes transactions with Enron. As Enron's CEO, Skilling had been selling out Enron shares-and he kept claiming that Enron shares would rise from around $70 at the time to $126. Moreover, according to U.S. law, members of the company's board of directors cannot sell out the company's shares they hold unless they leave the board of directors. Perhaps this was what Enron advertises bankruptcy process that triggered people's doubts about Enron and began to truly pursue Enron's profits and cash flows. By mid-August 2001, there were growing questions about Enron, which eventually led to a decline in the stock price. On August 9, 2001, Enron's share price had fallen to US$42 from around US$80 at the beginning of the year. On October 16, 2001, Enron released its second-quarter 2001 financial report (the third-quarter financial statement), announcing a total loss of US$618 million, or a loss of US$1.11 per share. At the same time, it was revealed for the first time that due to improper management of Chief Financial Officer Andrew Fasow and the partnership, the company's shareholder assets had shrunk by US$1.2 billion. On October 22, 2001, the U.S. Securities and Exchange Commission targeted Enron and required the company to automatically submit details of certain transactions. A formal investigation into Enron and its partners finally began on October 31. On November 1, 2001, Enron mortgaged some of the company's assets and obtained a $1 billion credit line guarantee from J.P. Morgan and Solomon Smith Barney, but Merrill Lynch and Standard & Poor's still downgraded their ratings on Enron again. On November 8, 2001, Enron was forced to admit that it had made false accounts, and the figures were jaw-dropping: since 1997, Enron had falsely reported profits totaling nearly $600 million. On November 9, 2001, Dinoki announced that it was preparing to acquire Enron for US$8 billion and assume US$13 billion in debt. Enron's share price fell $0.16 at noon that day. On November 28, 2001, Standard & Poor's downgraded Enron's debt rating to "junk bond" status. On November 30, 2001, Enron's share price fell to US$0.26, and its market value fell from US$80 billion at its peak to US$200 million. On December 2, 2001, Enron formally applied for bankruptcy protection with the bankruptcy court. The assets listed in the bankruptcy list reached US$49.8 billion, making it the largest bankrupt company in U.S. history. On the same day, Enron also filed a lawsuit in court claiming that Dinoki suspended its merger irregularities and demanded compensation. Enron founder Kenneth Lay's development was first questioned by Enron's management, including the board of directors, the supervisory board, and the company's senior management. They face charges of negligence, false accounting, misleading investors and seeking personal gain. Enron's financial results were something all investors enjoyed until it reported its second-quarter results on October 16, 2001. Look at Enron's past financial reports: In the fourth quarter of 2000,"the company's natural gas business growth tripled, and the company's energy services company retail business quadrupled"; In the first quarter of 2001,"quarterly revenue grew fourfold, marking the 21 consecutive fiscal quarters of earnings growth"... At Enron, the unit of business growth is not a percentage, but a multiple, which makes all investors smile. In the second quarter of 2001, the company suddenly lost money, and the loss reached US$618 million! Then, the partnership that had been hidden behind Enron began to emerge. After investigation, most of these partnerships were controlled by senior Enron officials. Enron's huge external loans were often included in these companies rather than on Enron's balance sheet. In this way, Enron's huge debt of US$13 billion would not be known to investors, and some Enron officials would also seek personal gain from these partnerships. What makes investors even more angry is that it is clear that Enron's top management is very familiar with the problems that arise in the company's operations, but they have ignored them or even deliberately concealed them for a long time. Many board members, including CEO Skilling, are secretly selling the company's shares while advocating that the stock price will continue to rise. Seven of the company's 14 supervisory board members have a special relationship with Enron. They are either trading with Enron or work for non-profit organizations supported by Enron and turn a blind eye to Enron's various misdeeds. Former executive of Enron in the United States was convicted of false accounting problems Enron's false accounting problems also put its audit company Arthur Andersen in danger of being sued. Arthur Andersen, the world's number one accounting firm, as auditor of Enron's financial reports, neither audited Enron's false profits nor discovered its huge debts. In June 2001, Arthur Andersen was fined $7 million by the US Securities and Exchange Commission for fraud in its audit work. Enron's core business is the trading of energy and related products, but at Enron, this kind of trading is called "energy trading." According to reports, this kind of business is built on the basis of credit, that is, energy suppliers and consumers use Enron as a medium to establish contracts and promise to fulfill their contractual obligations in a few months or years. In such transactions, Enron acts as a "middleman" to improve performance in a short period of time. Since this kind of business is based on the credit of the middleman, once any scandal occurs, its credit will be greatly reduced and the business will be in danger of being suspended immediately. In addition, this business model also has a significant impact on Enron's cash flow. Most Enron's business is based on "future market" contracts. Although contract revenue will be included in the company's financial statements, it will not bring Enron any cash until the contract is fulfilled. The more contracts are signed, the wider the gap between book numbers and actual cash income. An important reason why Enron is unwilling to admit that it is a trading company is to boost its share price. As a trading company, it is difficult to be overrated in the stock market due to the inherent risk of unstable trading income. At its peak, Enron's market value reached 70 times or more its earnings. In order to maintain its self-proclaimed status as a "world leader", Enron's business continues to expand to include not only traditional natural gas and electricity businesses, but also wind power, hydropower, investment, timber, advertising and more. In 2000, when broadband business was at its peak, Enran invested in broadband business again. After all this trouble, Enron finally pulled out a huge hole of US$618 million on its balance sheet in October 2001. Impact of the incident In the Enron bankruptcy incident, the investors who suffered the most losses were undoubtedly those who suffered the most, especially ordinary investors who still controlled a large amount of Enron stock. According to U.S. law, after filing for bankruptcy protection, Enron's assets will have priority in paying taxes, repaying bank loans, paying employee salaries, etc. If a company that is already worthless goes through such a fuss, investors will definitely lose their money. Also affected by this incident were Enron's trading partners and large financial consortiums. According to statistics, in the Enron bankruptcy case, Duke Group lost $100 million, Milent Company lost $80 million, and Dinoki lost $75 million. Among the consortiums, J.P. Morgan and Citigroup suffered heavy losses. J.P. Morgan's unsecured loan to Enron alone amounted to $500 million, and Citigroup's losses are said to be about the same. In addition, Enron's creditors also include Deutsche Bank, Bank of China, China Merchants Bank of China, and three major Japanese banks