In January I wrote a column about the short that got away, Overstock.com. It's not that I didn't short the stock, I did, it was that I got short squeezed right before the stock tanked. I had shorted around $80 and it later fell to $10. In January of this year, the same stock was miraculously trading again at that same level, $80, without any meaningful increase in revenues or profits. How? It was a "hustle" of sorts.

For those of you that missed it, my column describes the various marketing gimmicks that Overstock employed to ride the cryptocurrency craze. Lo and behold, Overstock trades now down 57 percent from the time I wrote the column. If the cryptocraze had continued there's a chance the stock could have held on to its levels but as the spike came from crypto so too did the collapse. I checked Overstock immediately after watching a great documentary on a group of short sellers who were able to profit from their instincts. The documentary, "The China Hustle" tells an interesting story and is a cautionary tale for investors that shouldn't be missed.

"The China Hustle" follows several investors who realized many Chinese firms were using a backdoor to get listed on major U.S. stock exchanges. A previously listed but idle U.S. firm would be purchased by a Chinese firm through a reverse merger; the new company would take on the name of the Chinese firm and voila! The Chinese firm would be able to get listed. "Surely the New York Stock Exchange and other exchanges must have some compliance regulations," you might ask. According to the documentary these Chinese firms would hire one of the big four accounting firms (PWC, KPMG, Ernst and Young, Deloitte) to sign off on their books and submit their seal of approval. This is where things get a little tricky.

Apparently these four firms have licensed their names to accounting firms in China and collect royalties. Experts interviewed in the documentary claim that these firms that have licensed the brands, employ less than the rigorous standards used by the accounting firms whose name they carry. Management cooks the books, submits them for rubber stamp approval, and is simultaneously listed on the New York Stock Exchange (NYSE) and has been "approved" by a "big four" accounting firm claim the filmmakers.

The spark that lights the fire of the short sellers started is a report written by Muddy Waters, a "due-diligence based" equity research firm. The firm sends investigators to Chinese firms that have gone public in the United States only to realize that their reported earnings are inflated. Muddy Waters' report sends the stock into free-fall. This process is repeated with other Chinese companies, many of which decline over 90 percent in value.

What's most interesting about the documentary is not that foreign companies had questionable accounting practices; it's that this fraud was largely orchestrated by American companies. The Chinese firms declared actual values to their domestic tax authorities but with the help of U.S. law firms and brokers, masked the fraud and dumped billions of dollars of shares onto unsuspecting U.S. individual investors, pension funds, and mutual funds. Now billions of dollars have been erased from the accounts of those who were fooled into investing in these equities. In the meantime, the sell-side strategists made hundreds of millions of dollars. The army of lawyers and underwriters that made these deals possible also made a killing.

While the story itself is very interesting and definitely worth watching, it ends on a very peculiar note. After describing how many Chinese stocks are ripe with fraud, the documentary makers show several clips and sound bites involving Alibaba, the multi-billion dollar online retailer. There's even a shot of the founder Jack Ma with U.S. President Donald Trump. Is the implication that Alibaba is a fraud? That its stock price is inflated? That it should be shorted? Apparently one of the famous short sellers had shorted Alibaba but says he covered two months after the movie was released. Even if the implied allegations are true, the documentary makers seem to have used some of the very tactics they decreed in their movie. Best to take everything with a grain of salt.