A Real Steel Company, $66M in Fake Orders

Derek Wachob ran a real steel company in Oklahoma. Real factories. Real customers. Real purchase orders that matched the business on paper. Federal prosecutors say he used that legitimacy to borrow and raise at least $66 million against steel purchases that never happened.

Wachob pleaded guilty to wire fraud, the U.S. Attorney's Office for the Southern District of New York said. The scheme ran from October 2022 through August 2024. He solicited money from individual investors, a bank, an investment firm, and steel distributors based on anticipated steel purchases his company would make, according to court filings cited by prosecutors.

The company itself was struggling. It carried substantial debt. Financial distress changes what management is willing to represent about future revenue, and the gap between a company's past operations and its forward-looking claims is where schemes like this live.

Business diligence tends to focus on the counterparty. An investor confirms the factory exists. A distributor checks that the company has bought steel before. An investigator verifies the CEO's corporate authority. All of that can check out. None of it proves the specific transaction being pitched is funded, contracted, or real.

That gap creates a credibility transfer problem. The company genuinely makes steel. So claims about future steel purchases look plausible by association. The existing business validates the story without validating the deal.

The questions that matter sit one layer deeper. Does the company's balance sheet support the proposed transaction? Are projected purchases being presented as existing obligations? Where does the money go after it hits the company account?

A scheme like this does not require an entirely fictional enterprise. It works better when the enterprise is real. Historical transactions establish precedent. Legitimate operations reduce skepticism toward what management says it plans to do next.

Transaction intelligence should separate established facts from forward-looking statements. Expected purchases, anticipated contracts, projected revenue, planned transactions – all of these are claims that require independent corroboration, especially when outside capital is being raised against them.

Banks lend against projected activity. Suppliers extend credit based on expected orders. Business partners make operational decisions on management representations. When those representations collapse, the damage includes direct financial losses, litigation, disrupted supply chains, reputational harm, and years of asset recovery work.

The case also shows why financial condition belongs in counterparty intelligence. A company with healthy operations and a company in distress can look identical on the factory floor. Deteriorating liquidity, rising leverage, unusual financing, delayed vendor payments, repeated capital raises, and aggressive projections all signal that the economics of the relationship have changed.

A legitimate company can make a false transaction look real. That is why diligence must verify both the counterparty and the specific promise.

Pete Weishaupt is the co-founder of Weishaupt Strategic Group, an AI-native corporate intelligence and investigation firm. He brings more than three decades of U.S. Intelligence Community experience in collection, analysis, and operations to complex private-sector matters. WSG advises executives, boards, and investors on due diligence, transaction intelligence, and risk analysis.