The Ascendant: A Thriller

by Drew Chapman

  A modern trader can make thousands of transactions, all in less time than it took a stock broker on the New York Exchange in 1929 to yell “Buy!” or “Sell!” or “I’m going down in flames!”

  And not all of the transactions on the global marketplace are visible to all onlookers. Vast swaths of the deals being done are brokered and consummated in so-called black pools, nontransparent, off-the-record negotiations and sales conducted by third parties and anonymous brokers. The market for debt—government and corporate bonds—is particularly opaque, with no governing body making sure that prices are known to all the players. It is a murky pit of “buyer beware” action, an instant economy where fortunes can be made or lost in the blink of an eye, and nobody is any the wiser. At least not right away.

  But word eventually does get out. Huge sums of money are not made or lost without some steely-eyed observers taking note, either to seethe in envy or revel in coldhearted gloating. And therein lies the other difference between today’s market and that of a century ago. Information flow can travel almost as fast as the money itself. News of a stumbling stock, a faulty product, a debt ceiling, or an impending bankruptcy flashes around the globe with lightning speed. Often rumors travel across borders faster than real data: a stock can rise or crash on the most hastily formed opinions. And those opinions are not always based on fact. And the result can be devastating.

  And that was exactly what Garrett was counting on.

  It was the rumors that started first, at 11:00 p.m., East Coast time, a day earlier. They were very real-sounding bits of information concerning the solvency of a handful of Chinese companies, all of them traded on American exchanges. They came in the form of postings on financial blogs and stock-trading bulletin boards; official-looking analyst reports from Moody’s and Standard & Poor’s were suddenly ping-ponging across the Web. But since both of those companies were closed for the night, no one was around to authenticate the reports, and plenty of investors decided to take them at face value.

  Then a trading house in lower Manhattan—and people suspected it was Jenkins & Altshuler—sold off a big chunk of Chinese holdings, and they did it in not particularly discreet blocks of selling: thirty million dollars of Star Hong Kong Holdings; twenty-five million dollars of Han Le Manufacturing; fifty million of Ace Software. People noticed. People in every corner of the globe.

  By one in the morning, the rumors were ricocheting, growing more extravagant with each retelling: the Chinese companies were actually shell accounting entities, with no factories or real product. The stories morphed: the firms had product, but they were dangerously faulty and were under investigation by the U.S. government. A new PDF appeared at 2:00 a.m., this one bearing the seal of the attorney general’s office of the Southern District of New York, verifying the rumor: those Chinese companies were indeed coming under investigation, and in fact the AG was pushing to have them delisted from the New York Stock Exchange altogether.

  The tipping point was reached at 4:30 a.m., when Alvin Montague’s Value Trade newsletter sent out a “sell all China” blast on its first Twitter feed of the morning. Value Trade had more than two million subscribers; when Alvin Montague said sell, people sold. And sell they did. They dumped Chinese equities listed on American and European exchanges.

  The problem was, Alvin Montague never tweeted any such words.

  His account had been hacked. So had the account of the AG of lower Manhattan. As had Moody’s. By whom, no one could say. And it didn’t matter: the damage had been done; the companies’ stocks started to crater. First in after-hours trading in the U.S. and Europe, then in live trading on the Asian exchanges. These rumors, along with the mounting international crisis involving an American jetliner in North Korea, and the growing speculation that the Chinese government had lost control of its country, started a run on the Shanghai Stock Exchange. By ten in the morning, Beijing time, all the on-air reporters for CNBC had gathered in their New Jersey studios to narrate the course of these extraordinary events. They jabbered and screamed about the panic—they also replayed the YouTube videos of Chinese rioters throwing rocks at policemen in a dozen different cities. It was clear to anyone watching—or trading stocks—that the great global slosh of capital had become a tidal wave, rushing away from China, and looking to land someplace else. Anywhere else.

  By the time the talking heads on CNBC paused to catch their collective breath, the value of the Shanghai Stock Exchange had dropped by seventeen percent. By noon the drop was twenty-seven percent.

  By three in the afternoon the Chinese government pulled the plug and shut the stock exchange down. But the global marketplace no longer sleeps. Or pauses. By the closing bell on Wall Street, every Chinese equity, anywhere in the world, on a multitude of exchanges, had been scorched. The trading day had been a disaster.

  And it was all built on lies.

  91

  SOUTHEAST WASHINGTON, D.C., APRIL 19, 8:02 PM

  Garrett watched the run on the Chinese markets with undisguised glee. It wasn’t that he liked to see other people suffer—although he didn’t mind that terribly—it was more that he loved the concept of global mischief, and he loved that it was his mischief. A grand hoax had been perpetrated on the Powers That Be, in all the corners of the globe, and it had all come from his twisted brain: his planning, his feints, his misdirects, lies, and forgeries. As Mitty Rodriguez said as she watched the circuit breakers kick the Shanghai exchange off-line: “Garrett Reilly is fucking legend.”

  It made his head hurt a little less, but only a little.

  He didn’t even regret that he was leaving money on the table, which normally would have chafed him to no end. He could have shorted every one of those Chinese companies that had tanked. But, he reminded himself, profiting off a stock plunge that he had created—with lies and forgery—was indisputably stock fraud, and you could go to jail for a long time for that shit. He was better than that.

  Garrett let his eyes trace over the cascade of tumbling numbers on the French CAC 40 and the German DAX, the Hang Seng in Hong Kong and the JSE in Johannesburg. Panic was in the air; panic on a global scale. Panic about Chinese companies, panic about war, and panic about China itself. Some of it was real, some imaginary; it really didn’t matter. What mattered was the confusion. The bolts from the blue. If you kept people off balance, if you kept them guessing, then they didn’t have much of a chance to strike at you. Sooner or later they would have to start circling their wagons.

  News outlets from around the globe were all in a frenzy; some still led with the plane down in North Korea, others with the Chinese riots, a few with the crash of the Golden Shield, but in the past few hours the stock sell-off had crept into most lead positions. Analysts were coming on the air to weigh in on why it had happened, and whether this was a fundamental slide for China or merely a whiff of momentary panic.

  Again, Garrett didn’t care how they spun it—the job was getting done.

  92

  NEW YORK CITY, APRIL 19, 9:12 PM

  A very Bernstein watched the sell-off in Chinese stocks with a mixture of horror and admiration: horror that the supposedly “smart” money in the markets could be so easily misled, and admiration since he knew that Garrett Reilly had planned it, and then pulled it off. Perhaps Garrett’s genius was being put to a good cause. What that cause was, Avery wasn’t exactly sure.

  But Avery knew Garrett had orchestrated it. He was like a conductor leading a symphony, moving bits of digital information here and there, melding it all into a weird, almost magical piece of music. Hacker music. That music seemed to be having a devastating effect on people and countries. But to what end?

  He replayed in his mind the conversation he’d had with Garrett over the phone two days earlier. Garrett had promised that if Avery agreed to participate, any losses at Jenkins & Altshuler would be made whole by the U.S. Treasury. That seemed a tall order, but Avery guessed that Garrett was now playing in a world that he, Avery, barely recognized. Which brought him to ano
ther thought, one that had been bouncing around in his head for the past few days now—how safe was it for Avery to be playing in that world?

  Garrett might have promised the full backing of the federal government, but could he come through on that promise? And, still more important, were there other forces out there, like that Metternich character, who might not be so happy with Garrett’s antics? If people found out that Avery had been helping Garrett, would they come down hard on him?

  It had made him paranoid. So much so that three days ago he’d had his office swept for listening devices by an electronic security company. Then he replaced all the old servers at Jenkins & Altshuler with brand-new ones—at quite a cost—and had those new servers jam-packed with security software. He changed the locks on his town house, and even toyed with the idea of getting a dog, even though Avery hated dogs.

  Okay, the dog idea was probably a bit much.

  Avery shut down his computer, turned off the office television, said good night to his secretary, Liz, and waved to a few lingering employees. It had actually turned out to be a profitable day for Jenkins & Altshuler: by selling Chinese equities early he had been ahead of the curve, and had avoided panic losses. But the Securities and Exchange Commission would come knocking after all the detritus had been sorted through, and they would want to know what he knew, and when he knew it. At that point, lawyers would be called in, and the shitstorm would commence. He hoped Garrett would be good as his word then, because it would take more than just money to keep him, and his company, in the clear.

  He rode the elevator down, and said good night to the doorman at 315 John Street, then stepped out of the front door and looked up and down the street. The sidewalks were mostly empty, and a thick darkness was settling on lower Manhattan. It was a forty-block walk back to his West Village apartment, and it used to be that Avery took the trip on foot, every morning and evening, partially to make sure he got some exercise, but also because the beauty of living in New York City was walking the streets. But since the whole business with Metternich and his trip down to D.C., walking out in the open had seemed less inspiring. In fact, it scared him. He had started taking car services, both ways, jogging from his front door to the car, and then sprinting from the car to his office lobby.

  He regretted everything about his involvement with Hans Metternich. On the same day that he’d called a security company to sweep his offices, Avery had hired a private detective to track the mysterious Metternich down. The detective had found one match—he was seventy-eight and lived outside of Munich—and nothing else. The man who had approached Avery on a lower Manhattan street corner was a ghost.

  Avery tapped his foot impatiently as he stood on the sidewalk. He’d called the car service a little late, and would probably have to wait for them to show up. The night was warm, and the streets looked less intimidating than they had for the past few days. Avery wasn’t sure why, but for a moment his paranoia subsided; whatever Garrett was doing was Garrett’s own affair. Avery was a minor player in this drama—all the juicy stuff was happening far above his pay grade.

  That thought gave him confidence. He decided to skip the car service. He called the company on his cell phone, canceled the ride, and started off west down John Street. The sun had dipped below the horizon, and Avery breathed deep of the spring air. It was good to be alive. He waited at the traffic light, then turned north and crossed the street on Broadway.

  He heard an engine being gunned, and thought for a moment that it was a cabbie racing to get a fare, but then a woman yelled behind him. Avery thought she was saying “Luka!” like in that song from the eighties, but as he turned and saw the car racing toward him down John Street he realized she had said “Look out!”

  The car was aiming for him.

  The last thought Avery had, as the front end of the Chrysler hit him, full speed, in the midsection, was that he hoped they hadn’t gotten to Garrett as well.

  He hoped Garrett would be okay.

  Then blackness overtook Avery Bernstein.

  93

  SHANGHAI, APRIL 20, 10:00 AM

  Standing in the back of the crowded train station on the outskirts of Shanghai, Celeste could tell that the engineer was having second thoughts. His name was Li Chan; he was a small, balding man with sad eyes and fidgety hands. He was a cousin of Hu Mei—she seemed to have thousands of cousins, scattered across the country—and had been, at first, eager to hand over information. But not now.

  “How do I know you are not the police?” Li Chan asked in Mandarin.

  “If I were the police, I would have had you arrested already,” Celeste said.

  Li Chan nodded. That seemed to make sense to him. Around them, travelers hurried from one train platform to another, or out the door to waiting buses that would whisk them away to the center of Shanghai. Noise was everywhere; a thousand voices, chatter, official announcements about trains leaving and arriving, the grind of engines and the metal-to-metal squeal of wheels on tracks. The two of them were standing in the back of the cavernous station, unnoticed by passengers and workers alike, two locals in the middle of an intense discussion.

  “They will kill me if they find out,” Li Chan said, rubbing his hands together. Celeste thought he looked like he was trying to start a fire with his fingers.

  “They will not find out,” Celeste countered quickly, quietly. “We are very careful.” She knew time was running out. She had been monitoring the Internet all day, stunned at first that she could access any content, uncensored, then alarmed as reports of chaos and political tension raced across news sites and blogs. Garrett was spinning his storm of chaos, but they needed Li Chan. They needed him right away.

  This was the test that Celeste had known was coming.

  “Master Li,” Celeste said, trying to get the older man to look her in the eye. “This is a moment of extreme importance. You have a part to play in history. Isn’t that important to you?”

  “What do you know of history?” Li Chan said. “You are American. Americans have no history. A hundred years. Two hundred years. Nothing.” He swung his hand out in a grand, sweeping motion. “Chinese people know history. Thousands of years. Whatever you Americans are planning, it means nothing. I am done with this. I am leaving.”

  Li Chan started away from Celeste, his fear clearly overwhelming him, but she jumped to block his path. “No, you are wrong. It means something very important. And not just to Americans. To Chinese people. Isn’t what Hu Mei is doing important? Doesn’t she understand history?”

  Celeste could hear the pitch of her own voice rising, the tension straining her vocal chords. She knew she had to calm herself.

  “You cannot force me!” Li Chan said. “I can turn you in to the police right now. You know that? You are a conspirator. An enemy of the state. They will take you to jail. Interrogate you. Beat you. Then put you against a wall and shoot you. I can go to that soldier right there and turn you in. I can!”

  Li Chan pointed to a young soldier in a green uniform rolling his own cigarette and lazily eyeing the commuters. He didn’t seem dangerous, but Celeste knew that he could summon backup in mere seconds, and then everything Li Chan had predicted they would do to her would absolutely come to pass. Because she was no longer an American student looking to research a social movement in central China. She was a member of that very movement. She was a budding revolutionary. She closed her eyes and breathed deep. If she had learned anything from watching Hu Mei in their brief time together, it was the power of humility. This was a test, and she needed to pass it.

  Celeste bowed her head, stepping out of Li Chan’s way, allowing him a free path to the soldier, who was now smoking his cigarette. “Of course,” she said. “You are right. And you must do what you must do. I was wrong to try to stop you. I have been overbearing and foolish. So American of me. Please forgive me.”

  Again she bowed, eyes directed only at the floor. Celeste could not see if the engineer was standing in front of her, or if he had stalked of
f to inform the soldier, but it did not matter to her. Humility was not something to be faked, and acceptance of one’s fate had to be real, and fully understood.

  And Celeste was glad for it. She would take what came. She took a last calming breath, then looked up. To her surprise, Li Chan was still standing there, only now he had a scrap of paper in his hand.

  “There,” Li Chan said, thrusting the paper into her fingers, “now you have it.”

  He turned and walked quickly into the crowd. Celeste watched him go, then looked at the paper: on it was written a username and a password.

  Celeste smiled, not with relief or triumph, but with fulfillment.

  94

  SOUTHEAST WASHINGTON, D.C., APRIL 19, 10:15 PM

  Garrett read the text message on his phone three times, then wrote the Pinyin—phonetic Mandarin—onto a legal pad. He turned off the cell phone and dislodged its battery. His team gathered around him.

  “Know what it means?” Lefebvre asked.