Wall Street: A place where money gets thrown around like it’s meaningless. It’s a place where fortunes are made and lost, and where daily screaming matches over the future prices of soybeans take precedence over almost everything else. Investors throw around capital, dictating tectonic shifts in the economy and policy. Yes, Wall Street is a magical place where honest men and women can go to put their money to work.
But it’s also a place that attracts those of questionable character. With so much money flying around, coupled with paltry amounts of oversight and regulation, the idea of cutting corners here and there can become wildly attractive. There have been hundreds if not thousands of Wall Street criminals over the years, their misdeeds ranging from simple insider trading to massive Ponzi schemes, perpetrated over several years. The 2008 financial crisis also saw its genesis on Wall Street, where only a handful of white-collar criminals were able to bring the entire country to its knees.
Here we take a look at 10 of the more notorious Wall Street criminals of all time. Their crimes range in magnitude and severity, and some are noteworthy simply because of who perpetrated them. Some names are well-known, others will be new to most people. But they all have one thing in common: they used the markets to game the system.
Read on to see 10 of the biggest Wall Street busts of all time.
1. Albert H. Wiggin
Albert H. Wiggin isn’t a household name, but as one of the original godfathers of fraud, he should be. Wiggin enjoyed a successful career as the head of Chase National Bank, now JP Morgan Chase. Joining the bank in 1904, he oversaw its expansion during the early 1900s, building it into one of the nation’s leading financial institutions. He oversaw mergers with seven other banks, and increased Chase’s assets from $250 million to $2.7 billion, according to the Harvard Business School.
Unfortunately, Wiggin also became the poster boy for public ire following the market crash in 1929. It was revealed that he had shorted his own company 40,000 shares, which, as Investopedia puts it, is similar to a boxer placing a bet on his opponent to win. He profited about $4 million (about $5.7 billion in today’s money) which was perfectly legal back then. In the years following, there were laws put in place to stop such behavior. In 1934 the Wiggins Act was passed, placing stiff penalties on insider trading.
2. Bernie Madoff
No name has become more synonymous with fraud and financial shenanigans than Bernie Madoff. A former stockbroker and investment advisor, Madoff pulled off the largest financial fraud in U.S. history through a Ponzi scheme that totaled roughly $65 billion. Arrested in 2008 at the age of 70, Madoff was put in handcuffs one day after he came clean to his sons about his company’s trickery. His sons then went to authorities with the information. He eventually pleaded guilty to eleven federal felony counts and was sentenced to 150 years in prison.
The Madoff trial ended in 2009, but the effects of the scandal linger to this day. The scheme hit Madoff’s family especially hard, as his son would later commit suicide. Financial victims of the Ponzi scheme include celebrities like Kevin Bacon, Steven Spielberg, and John Malkovich. Considering the enormity of the Madoff scheme, he could count himself lucky that he won’t have much time to rot in jail.
3. Bruno Iksil
In what was made famous as the ‘London Whale’ trading scandal, JPMorgan Chase incurred big losses through trades at its London location, with total losses at approximately $6.2 billion. The losses were traced back to trader Bruno Iksil, who was essentially gambling on transactions through a series of credit default swaps. This ended up backfiring and losing the company billions. Iksil’s hedging strategy to increase profits led to a cover-up and subsequent investigation by the U.S. government.
The bank eventually agreed to pay a fine of $920 million to settle charges relating to the scandal, and two of Iksil’s coworkers were hit with criminal charges. The bets Iksil and his ilk placed were in an abstract and obscure subset of the market, making them relatively undetectable. JPMorgan Chase was also forced to admit that they had broken the law by the SEC, which is unusual for a financial institution. It only goes to show that a whale is never safe from a stiff harpooning by regulatory commissions.
4. Jordan Belfort
Belfort, best known for being portrayed by Leonardo DiCaprio in The Wolf of Wall Street, is a former stockbroker who has since become an author and motivational speaker. Martin Scorsese profiled several of Belfort’s reckless exploits in his film, which included manipulating the stock market as part of a penny stock scam. Belfort founded the brokerage firm Stratton Oakmont, which went on to defraud investors through sales of stock while employing more than 1,000 people. The firm was shuttered in 1998, and Belfort was charged with money laundering and fraud.
After an FBI investigation and Belfort’s agreement to cooperate, he went to jail for almost two years. The total damage in investor losses was tallied at $200 million, $110 million of which Belfort was ordered to pay back by the courts. After being released from federal prison, Belfort authored his memoir, which was the basis for Scorsese’s movie. He also makes the rounds on the speaking circuit.
5. Allen Stanford
It’s not easy to earn a 110-year federal prison sentence, but Allen Stanford was able to pull it off. The Texas-born Stanford was, at one point, one of the richest men in America with a net worth of roughly $2.2 billion. Sadly, that wealth was accumulated by running a Ponzi scheme, much in the same vein as Bernie Madoff. Reports indicate that investors had complained about Stanford’s crimes as far back as 1997, but the SEC didn’t actually go after him until 12 years later during the financial crisis.
In 2009, he was charged with fraud by the SEC for crimes that involved around $7 billion. Prior to his arrest, he voluntarily surrendered to authorities after several raids on his offices across the country. In addition to his 110-year sentence, he was ordered to forfeit $5.9 billion as part of his civil penalty. Stanford never admitted to wrongdoing, and instead blamed his company’s misdeeds on government regulators. His earliest possible release from prison will be in the year 2105.
6. Jeff Skilling
Little more needs to be said about Jeff Skilling than that he was the CEO of Enron Corp. — but just in case the details of this particularly horrid case of corporate fraud escape you at the moment, here’s an executive summary.
Enron was a major energy company with major positions not only in the electricity and natural gas markets but also with operations in communications and even the paper and pulp businesses. At its peak, the company employed about 20,000 people and claimed revenues of over $100 billion. The company was apparently so successful that Fortune named it America’s most innovative company six years in a row, from 1996 until 2001, when the scandal broke.
“Claimed” is the operative term here when it comes to Enron’s business. In 2001, it came to light that Enron had been conducting institutional fraud. Through a series of accounting loopholes and a mind-boggling amount of complacency, corruption, and incompetence, Enron booked billions in fake revenues and hid billions more in debt over several years. The fraud that Enron committed was both institutional and complex, but it boils down to the fact that Enron claimed revenues that it had no real right to claim.
But the bigger they are, the harder they fall. Enron’s bankruptcy was the biggest in American history, and it was so catastrophic that it even put its auditor, Arthur Andersen, out of business. Skilling has been in prison since 2006 and is scheduled to be released in February 2019.
7. Ivan Boesky
Remember Gordon Gekko’s “greed is good” speech from the movie Wall Street? Here’s a taste, in case you missed it: “Greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.”
The speech and the film itself is incredible, but Oliver Stone didn’t just pull it out of thin air. Ivan Boesky was exactly the kind of white-collar criminal we presume Gekko was inspired by. The son of immigrants, Boesky utilized a mix of hard work and dubious morality to become one of the most successful money managers on Wall Street during the 1970s and 1980s. Partnering with the infamous Michael Milken aka the “Junk Bond King,” Boesky used insider information to make his millions. At one point, Boesky’s fund was managing $3 billion. With a hefty 50 percent fee, Boesky quickly became one of the richest people in America.
His fortunes changed in the late 1980s when regulators began cracking down on Wall Street — particularly those involved in the value-destroying leveraged buyout industry. As Business Insider chronicles, authorities first went for Milken. Then they came after Boesky.
Boesky (to his credit, we guess) cooperated with authorities and opened the lid on the can of worms that was Wall Street’s LBO sector at the time. Boesky helped federal investigators break up a massive insider trading ring which resulted in charges filed against 14 people at five major brokerages. In 1987, Boesky was sentenced to three years in prison but served just 22 months for good behavior.
8. Barry Minkow
Barry Minkow was a criminal from an early age, and the habit would bring him as much fame and fortune as it would grief and, ultimately, jail time. Minkow first made a name for himself in the late 1980s when he was caught operating one of the largest Ponzi schemes in history. His fraud cost investors about $100 million — not as bad as Madoff, but still big enough and, in many ways, textbook enough that it’s used as a case study.
Financial regulators caught up with Minkow in 1988. He and his staff at ZZZZ Best (seriously, that’s the name of his company. Pronounced “zee best,” he came up with the name in high school) were indicted on 54 counts ranging from racketeering to tax evasion. Minkow was sentenced to 25 years but was released early in 1995.
During his time in prison, Minkow appeared to undergo a classic though insane kind of turnaround. Born to a Jewish family, Minkow became a born-again Christian shortly before going to prison. When he emerged, he went to work as a pastor. According to U-T San Diego, Minkow then proceeded to bust other Ponzi schemes operating in the area near his church, including one that had defrauded investors out of $300 million. Minkow’s cooperation helped convince a judge to end his probation in 2002.
But Minkow hadn’t really turned himself around. In 2011, he issued a report accusing the homebuilder Lennar Corp. of fraud. It turns out, though, that Minkow had either fabricated or exaggerated most, if not all, of the claims he made. Still, his report caused shares to tumble and Minkow tried to game the market by taking a short position on the stock. That year he pleaded guilty to a count of insider trading and was sentenced to five years in prison– and in 2014, he was sentenced to five more years for fraud related to his time as a pastor.
9. Martha Stewart
By now, Martha Stewart is as famous for her insider trading scandal as for her successful commercialization of lifestyle. Stewart was always more than just the face of her brand, Martha Stewart Living Omnimedia, she was also the business mind behind it. As a successful businesswoman, Stewart owned sizable positions in fairly speculative equities, as you would expect most moguls would. One of her positions was in a biopharmaceutical company called ImClone Systems, now owned by Eli Lilly and Company.
To make a not-so-long and actually kind of boring story short and punchy: Stewart sold the nearly 4,000 shares she owned in the company after receiving an insider tip from her broker. The timing of the sale helped her avoid tens of thousands of dollars in losses, as the stock tanked the day after the trade was made. Stewart was ultimately sentenced to five months in prison.
10. Bernard Ebbers
Bloomberg’s BusinessWeek aptly captured the spirit of infamous WorldCom Chief Executive Bernard Ebbers when they called him the “telecom cowboy” in 1997. That year, Ebbers made himself famous by orchestrating the unsolicited and unprecedented $40 billion takeover of MCI, a telecommunications company now owned by Verizon.
WorldCom became famous under Ebbers’ leadership for its aggressive acquisitions campaign. WorldCom gorged on smaller telecom companies until it finally ran up against one it couldn’t absorb, Sprint, which it tried to purchase for $129 billion in 1999. Regulators shut down the deal over antitrust concerns. The following year, as the tech bubble began to collapse and much of the telecom industry went with it, WorldCom started to deflate. WorldCom itself was discovered to be artificially inflating revenues and falsely claiming normal expenses as capital expenditures, while Ebbers used company loans to protect himself from margin calls on his own leveraged equity positions. All told, WorldCom had artificially inflated assets to the tune of $11 billion.
Ebbers was convicted of fraud in 2005 and is currently serving a 25-year sentence.
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