Let June the 23rd go down in our history
as our independence day!
The British people have made a very
clear decision to take a different path.
No one really knows what the future is going to look like.
That's a defacement of the Union Jack!
You're not allowed to deface our flag
The shocking defeat of the Remain campaign,
"We've got our country back"
Caused the largest collapse of any major currency
in the history of the modern global financial system.
You could literally watch the pound
falling off the edge of a cliff.
The last time we saw falls of 8%,
I'm not sure we actually know.
People in the City of London were running
their own private polling to get information
about the vote while it was still happening.
It was probably one of the most lucrative nights
for the hedge fund industry that there had ever been.
My name's Gavin Finch, I'm a journalist at Bloomberg News.
I cover financial crime.
I'm Cam Simpson, I'm an investigations editor and writer.
My name is Kit Chellel,
I'm a reporter with Bloomberg,
and a writer for Businessweek.
And we're the three reporters
who broke the Brexit Big Short.
The Brexit night was a huge deal
for everyone in the country.
I watched it on television the same way most people did.
At 10pm voting stopped,
the polling stations closed.
All of the networks, all of the broadcasters
went immediately to their coverage.
In or out. It is too late to change your mind now.
So within the first minute they had a concession
from Nigel Farage who's the global face of Brexit.
This statement, as the polls close,
"It's been an extraordinary referendum campaign,"
this is Nigel Farage, "turnout looks to be
exceptionally high and looks like Remain will edge it."
I remember being shocked when I heard that just
because it was quite out of character for somebody like him
to concede before even the results had been counted.
Later that evening, Nigel Farage came
out again with a second concession speech,
and this one was a bit more specific than the first.
In this one he said that Remain had won,
and that he had heard this from some friends
in the City who run some pretty big private polling.
And that really shook me.
That was when I really realized, wait a minute.
The pollsters secretly working with hedge funds,
and Nigel had access to that information,
before any of the votes were even announced.
That was the moment when I realized
there's a lot here for us to look into.
First thing that I did was I created a very detailed
timeline of everything that happened politically,
everything that the pollsters were doing
and how the markets were reacting.
We had to try to identify the polling firms that were
involved and the hedge funds that they were working for.
So we had these two giant haystacks
that we kinda had to go searching for needles in.
We call this a mosaic investigation.
You gather all the pieces that you can
and you build a mosaic.
It's not a perfect picture, but it's a good picture
and one that you can kind of see what happened.
So we set out to interview as many
of the polling company employees,
former employees we started with
so as not to alert them to what we were doing.
And people were genuinely scared about the implications
of talking to a journalist about something like this.
We basically wanted to know who the buyers were
of these polls and who was conducting them and why.
Two polling firms that were notable in all this,
and that we highlighted in the story,
were YouGov which is one of the fastest-growing
polling companies in the world,
and a company called Survation.
Hello and welcome to Pop Idol.
In the early stages of both YouGov and Survation,
part of their market legend was built around the work
they did on U.K. talent competitions
like Pop Idol and X Factor.
They were really the first to build polling panels,
large groups of people that were available to them online
that they could tap with sort of the press of a button.
What was interesting about those polls
is it was an early indicator that you didn't need to know
the outcome of the actual competition.
You didn't need to know who won X Factor.
All you needed to know was who was gonna vote
for which candidate on which particular week in X Factor,
for you to then be able to make a market bet.
For the Brexit referendum, the senior members
of the polling industry told the press that it was not
possible to do a regular exit poll for this event.
Their normal methods, their normal data gathering
simply wouldn't work in this context.
What they didn't say was they were secretly
doing it for hedge funds at the same time,
who were trying to profit on the day
from the ultimate inside information
which was an exit poll showing how British people had voted.
Hedge funds are among the
most sophisticated players in financial markets.
What they're looking for is an edge,
some sort of insight that no one else has
that they can use to make their trading profits
and make money for their investors.
If the markets were deciding this referendum,
they would already have called it for Remain.
The pound is absolutely surging on the markets.
But the pound kept going to new highs
all throughout the evening.
If you're a hedge fund with access to information
showing you that actually, the opposite is likely to happen,
then you're in an incredibly good place
because you can play that market all the way up to the top.
Short selling is essentially a bet in a given direction.
The bet is that something will fall in value.
So the higher the pound is pushed up,
the more money you make when it
comes back down the other side.
Hedge funds and banks were willing to pay
comparatively enormous sums for the data
that polling firms were selling
because it allowed them to trade so profitably.
$100 million, $160 million,
$300 million in a single day.
When you're looking at the definition of insider trading,
insider trading is when you have access to
and trade on non-public, market-moving information.
In this country, exit polling data is
criminally defined as non-public information.
It is a crime to provide it to the public
or any section of the public before the polls are closed.
Polling companies were streaming it all day long
to their secret hedge fund clients
long before the polls were closed
so that they could trade on how people
were voting while they were still voting.
I hope and pray that my sense of this tonight is wrong.
Nigel Farage does seem to think
that the referendum is lost.
The results as they've been coming through this evening,
rather I think cast doubt, very early stage, on Mr. Farage's
rather low-key approach to what's going on.
So on the evening of the Brexit vote
after the markets had closed,
the concession speeches which Nigel gave
certainly did drive markets higher.
What we wanted to understand was
why did he concede that night?
What information did he have when he made those concessions?
What was going through his mind?
And whether he had access to some of the private polling
that we had identified that was being done by hedge funds?
So we really had to figure out a way to try
and get to the bottom of some of this
and we asked Nigel to come to lunch with us.
So we met Nigel Farge at Sweetings.
That was on Kit's suggestion
and it was a good one because it turns out that
Nigel was the third generation of his family
who had been eating at Sweetings.
It's kind of a strange venue.
It feels like stepping back into the 1950s.
We went in through the door with him.
And he immediately had a go at the
Spanish host and waiter for being Spanish.
I'd never eaten oysters before,
and Nigel Farage insisted that I try oysters.
About halfway through the meal,
our attention certainly changed to our story.
And we started asking him about his concession speeches.
If we'd just tried to call him up and ask those questions,
he would have hung up the phone.
Or if we knocked on his door, he would have shut the door.
But he felt, I think, compelled at that point
to give us full answers and we got them.
He certainly confirmed to us that in between
at least the beginning of the first concession
and the second concession, he had spoken to
Damien Lyons Lowe at Survation.
Damien Lyons Lowe is the founder and the CEO of Survation.
He built Survation's reputation in the early days
by polling in a way that drove UKIP's results higher.
That immediately brought him
to the attention of Nigel Farage
and he became Nigel Farage's pollster and UKIP's pollster,
and a very key political advisor for Nigel Farage.
Nigel knew from his favorite pollster
Leave had won before he gave at least
one of his concessions that really pushed the
market in the wrong direction that night.
So that was pretty critical for us to find out.
On the night that he gave the concession speech,
we do know there were others within UKIP and
within the Leave EU campaign who were very curious
within the Leave EU campaign who were very curious as to why he was going on air saying that Leave had lost
as to why he was going on air saying that Leave had lost
because they too had access to this private polling data
which showed that Leave had won.
The reasons he gave to us that he made those concessions
were simply that he had an attack of nerves, essentially.
When the moment came he got jittery,
and nervous, and lost faith.
He described being in a sort of black despair and a gloom
about what the outcome would be and losing hope.
What his personal dealings were
we're not sure of but we're still looking.
This whole process was us building
a very complicated jigsaw from scratch
and it perhaps wasn't right until the end
of the reporting process that we really saw
the whole picture in all its complexity.
The fallout was massive.
I mean we were really surprised that a story about
derivatives, essentially, was like
the third biggest trending thing on Twitter.
And it didn't take long for U.K. lawmakers
in both Houses of Parliament to start calling
for official inquiries into this.
It matters to different people for different reasons.
It matters if you're a trader because it matters
if someone else has an unfair advantage over you.
It matters if you care that a handful of people
can make huge sums of money by betting on political events
that shape our future and using information that would be
illegal for you or I to look at.
I think it matters if politicians are involved in this
and we should know more about it.