Many parents want their kids to be doctors, lawyers or sports stars, but being a tech expert can be unbelievably rewarding.

Take the case of Dr Tony Castagna, an ex-Silicon Valley techie who got involved in a local private company called Nuix. Because Castagna was smart, he saw $3,000 options package given to him to buy additional shares in the company (as part payment for his work) turn into $80 million when Nuix became a public company.

Making this story more juicy was the SMH revelation that Dr Castagna served time in jail for tax fraud. But let’s make this clear, he was acquitted of those charges.

Nuix hit the headlines last December when it floated on the stock market. Its $5.30 price shot up 50% on the first day and topped out over $11!

This made people ask: what does Nuix do? The answer was that it specialises in transforming massive amounts of messy data (from emails, social media, communications and other human-generated content) into searchable, contextualized information. It has great clients like ASIC and other regulators and big end of town clients.

Its USP is “Finding truth in a digital world” but within its business it looks like some very well qualified people missed the truth that Dr Castagna was sitting on this options goldmine when Nuix went public.

For those wondering why the company’s share price did so well and then flopped to around $3, here’s the story in a nutshell.

First, the business idea is so good it attracted big customers. Second, Macquarie Group (which is effectively Macquarie Bank) has ‘smarties’ who took a share in the company. Third, Macquarie’s magic turned the business into a real goer, so it was listed around $5.30 and shot up 50% in double quick time to peak around $11.

But then the market fell out of love with Nuix, after a disappointing first report and fell to $3.

Yesterday it spiked 11%. But how has Dr Castagna turned $3,000 into $80 million?

It looks like bad record-keeping has meant the company’s number crunchers haven’t recognised the potential value of these options. And the SMH’s investigation suggests that the existence of this options deal only was really discovered after 2011, when Macquarie bought into the company.

The good doctor has understandably cashed out and that too wouldn’t have helped the share price. But given Macquarie had Grant Thornton pour over its proposed deal to get into Nuix and these options for Dr Castagna weren’t flagged, it suggests some dodgy or incompetent records could be to blame.

Once again, it’s not the job of Castagna to report this options deal but someone in the original Nuix company could find themselves falling foul of the Corporations Act.

For shareholders, this whole story isn’t a good look for the smarties at Macquarie. When the stock was listed and its share price zoomed up to $11 plus, many market experts just shook their head and said: “That’s Macquarie for you!”

Others bought in because Macquarie retained 30% of the company. And when its share price fell to around $5 after the disappointing first report from the CEO, many bought in because Macquarie had retained this 30% share of the company.

So what does this story do to Nuix and its share price? When the story broke yesterday I thought this could be good for its share price — stock markets can be odd places — and yes, it spiked 11.46% to $3.50.

A couple of weeks ago I suggested on my Switzer Investing programme and in my newsletter the Switzer Report, that the sell off was so big, it looked overdone.

I also pointed out that the analysts surveyed by FNArena tipped the stock had over 100% upside and today it is 138.9% upside! Now this isn’t advice but simply reporting what some experts think. I will do more on Nuix in my TV programme tomorrow.

So what’s the moral of the story? Well, it’s clear that a lot of things can go wrong in the stock market and when a smart group like Macquarie can be tricked by a dodgy reporting curve ball, then it’s a huge mistake if a normal investor goes too long with a big investment in any one company.

Sure you can do it, but know the risks.