What happened

General Electric (NYSE:GE) stock is in free fall -- down 7.3% as of 10:15 a.m. EDT on a day when much of the rest of the stock market is in recovery mode after yesterday's mass sell-off.

What is making GE an outlier today? As CNBC reports, a 175-page "whistle-blower report" has just landed, alleging that General Electric stock is "a bigger fraud than Enron." Even without investors reading any further or knowing any additional details, that allegation alone was probably good for a few points' drop in GE stock.

Glowing red chart arrow trending downward.

Image source: Getty Images.

So what

And yet there are additional details -- beginning with the source: Harry Markopolos, the same man who blew the whistle on pyramid schemer Bernie Madoff more than a decade ago.

Markopolos reports that after spending "the past 7 months analyzing GE's accounting," he has come to the conclusion that there's "$38 billion" worth of fraud ongoing at GE today. What's more, it's "merely the tip of the iceberg" that "has left GE on the verge of insolvency."

Markopolos warns that GE is fudging the accounting at its oil and gas unit Baker Hughes and using accounting tricks to hide massive (and growing) losses at its long-term-care insurance unit. Worst of all, the company may be lying to insurance regulators about it, says the whistle-blower.

Now what

What will this mean to GE investors? If the allegations are correct, GE needs to add $18.5 billion to its reserves to cover long-term-care costs "immediately" and "in cash." Furthermore, the company will be required by GAAP accounting rules to take an additional $10.5 billion noncash charge to earnings "no later than 1QTR 2021."

And those are just the losses GE will need to record in two of its business units. According to S&P Global Market Intelligence, GE has a total of seven such major businesses.

Conclusion: As bad as things look for GE today, they could get a whole lot worse.