A Just Judge

With an initial investment of 230,000 gold coins, the total wealth had grown to 1,070,000 gold coins, accompanied by numerous long positions in paper shells. This fortune was the result of raiding over thirty Hanseatic merchants and most of the citizens of Lübeck.

Uncle Muller and the chubby Baron were in a state of numbness.

Edward smiled and said, "Now that the stock exchange is operational, we must continue with this venture. Baron, you will need to absorb all the long positions in paper shells and act as the market maker for them."

Baron, dazed, asked, "What does being a market maker mean?"

Edward casually explained, "It means providing liquidity and profiting from the spread. Uncle Muller and I will work together to establish a beer futures contract, and Uncle Muller, you'll be the market maker for paper beer."

Uncle Muller snapped out of his stupor. "I'll follow your lead. To be honest, I've never seen so much money in my life."

Edward shook his head, "What's this little amount of money? If we become the mayors of Lübeck, we'll make even more by wielding power!"

Baron's excitement grew. "Boss, you've got to bring me along to make money too! But let's settle up for this round first."

Edward nodded. "The profit is 840,000, and the 20% commission is 168,000. Just give me 168,000 gold coins. The long positions in paper shells can be given to the Baron."

Baron nodded. "Alright, I'll take on the role of the market maker, though I'm still not quite sure how it works."

Edward smiled. "Don't overthink it. It's simply about stabilizing the price, acting as the 'market maker.' I'll teach you."

...

The next day, Edward went out, accompanied by his subordinate, sitting in a luxurious carriage to negotiate the purchase of properties.

The building for their headquarters, which the landlord initially priced at 50,000 gold coins, had suddenly been raised to 60,000 gold coins. Edward then began negotiating.

After much back-and-forth for an entire morning, the price was finally settled at 55,000 gold coins. The landlord's sudden price hike left Edward feeling displeased, especially since today was supposed to be a Saturday—a day he'd hoped to relax. Instead, he spent the whole morning dealing with that old man.

In the afternoon, Edward went to purchase the building for the newspaper office. The landlord demanded 15,000 gold coins, which Edward accepted.

Thus, he spent a total of 70,000 gold coins on both properties.

Remaining balance: 181,000 - 70,000 = 111,000 gold coins.

...

Back at the headquarters, Edward enjoyed a well-deserved nap, only to be woken up by his subordinate.

"Boss, some people from the court are here. They say you've been sued and are waiting for you outside. You need to go to the court."

Edward was stunned for a moment. Who could be suing him on such a peaceful Saturday? Hadn't Muller said the court was under his control?

After getting dressed, Edward made his way downstairs and found some people in uniforms waiting in the lobby.

"I am Edward. What's going on?" he asked.

"Are you Edward? Please come with us," one of the officers responded.

Edward's mind raced. Based on his dealings with the navy and Lübeck's victory in the war, he couldn't fathom who would sue him. But then again, if it was the officials settling scores, he couldn't rule that out. After all, the navy had bought shells at a high price…

Edward followed the guards, his thoughts unsettled, until he reached the court. There, he saw Uncle Muller, the chubby Baron, the Jew Joseph, Wood, and over thirty Hanseatic merchants, along with several so-called representatives of the citizens.

At that moment, Edward relaxed. As long as it wasn't the military coming for him, everyone was equal before the law. Moreover, wasn't Muller supposed to have the court under his influence?

The judge sat at the bench and addressed Edward, "We're all here. The plaintiff, Wood, claims that the stock exchange operates as a virtual exchange. Edward, as the owner of the stock exchange, do you run a virtual exchange?"

Edward chuckled coldly. "He's just a sore loser. Your honor, I assure you, every one of our contracts is real and valid. There is absolutely no such thing as a virtual exchange here."

The judge nodded. "Please provide proof."

Edward explained, "My paper contracts are simply for convenience in trading. Each paper shell is backed by actual shells, which can be redeemed at the warehouse for real ones if desired."

The judge nodded again. "Plaintiff, why do you believe the exchange is virtual or fraudulent? Please provide evidence."

Wood shouted, "It's just too ridiculous! In the following days, large blocks of 5,000 boxes were dumped onto the market. Who has such power? Even if we, the 30-plus Hanseatic merchants, pooled our resources, we couldn't compete with such a force. Is there really someone this strong in Lübeck?"

The judge looked confused. "I don't understand what you're saying. Defendant, do you have a response?"

Edward nodded. "Your honor, all our trades are backed by contracts and stored in our archives. There's no fraudulent activity. I welcome the plaintiff and the court officials to review the transaction records."

The judge nodded again. "Let's go and take a look then."

They returned to the stock exchange, where Wood and his team examined the transaction contracts and receipts for each trade, including major counterparties such as Muller and Baron.

After thoroughly reviewing the evidence, the judge asked Wood, "Do you have anything else to say?"

Wood took a deep breath. "Your honor, my main concern is the short-selling method. According to their rules, short selling involves borrowing shells, selling them, and then repurchasing them after prices fall. But at the time, we controlled the market. All the shells were in our hands. No one lent them shells. How could they have short-sold?"

The judge seemed lost, but turned to Edward. "Do you have a response to this?"

Edward smiled. "Short-selling is a basic financial transaction. Simply put, it allows investors to profit from price declines. You can think of it as a type of betting contract. I'll explain with an example."

"Muller, as a gentleman, uses his credit to back short-selling of shell contracts. He promises to sell 5,000 boxes now and repurchase them at a future date."

"Let's examine his contract. He fulfilled his promise and indeed returned the 5,000 boxes."

"For the stock exchange, a gentleman's word is what matters. If he keeps his promise, it shows he is trustworthy. That's the essence of short-selling. No one else is involved—just the exchange and the counterparties."

The judge nodded. "I understand now. Plaintiff, do you have anything further to add?"

Wood, visibly frustrated, replied, "I have no more to say."

The judge, now thoroughly convinced, turned to Edward. "I hereby declare the defendant not guilty."