What do you know about financial fraud?
Some of the most high-profile incidents in American culture and history are white-collar crimes, and financial scams are typically the most terrible versions of them.
There have been a lot of cases of fraud in the United States banking system, and many of the con artists that tried to defeat the system are still incarcerated in minimum security facilities. On the other hand, some people on this list are long dead, but their stories will be left in the world forever.
We wanted to discover more about the biggest cases of hoaxes in the recent history of our country, and the fraudsters that are mentioned on this list will surely be remembered for the suffering and destruction they caused in their professional life.
Besides that, they also left behind billions of dollars in lost market value and countless bankrupt investors in their wake. Here are the 5 most significant financial frauds in US history.
1. Charles Ponzi
Charles Ponzi was an Italian con artist who developed a specific kind of hoax in the 1920s called “the Ponzi scheme“. According to different sources, he offered investors a 50% profit from an arbitrage plan that involved buying United States stamps at a discount in one market and selling them at full price in another market.
He operated his fraudulent business in both the United States and Canada, but at one point, he was caught. At first, his mischievous plan seemed to work, but it didn’t produce the 50% profit that he promised his clients.
He didn’t want to give up and admit that he was wrong when he made the promise, so he covered the shortfall with money he received from new investors and paid off those who invested earlier. But when a huge number of investors asked for their money all at once, things got very complicated and went downhill.
2. Bernie Madoff
Bernie Madoff is arguably the most dishonest con artist on our list and probably one of the most popular ones in the whole world. He was an American financier who learned about the Ponzi scheme and decided to try it himself.
What’s completely unbelievable about his actions is that his scam worked for at least 17 years and managed to defraud people out of millions of dollars. Just like Charles Ponzi, he had the ability to trick thousands of investors by paying early investors with money he received from later ones.
Due to the enormous returns Madoff’s investors received on their investments, his business remained respected and prosperous until the very end. His illegal investments generated far more profits than regular investments would have and he was able to maintain the scheme and the trust of people for more than a decade.
How was Bernie Madoff caught?
Bernie told his children, Andrew and Mark, that he wanted to give his employees big bonuses before Christmas, and he confessed that his business was actually based on lies.
When the two boys heard this, they were speechless, and their father asked them to give him 24 hours to make things right before they all went to the authorities together.
However, Mark and Andrew talked to their lawyer and decided to go to the police. Their father was arrested on the second day. The whole thing happened in December 2008, while he was in his apartment in New York City.
A few days after, he and his wife, Ruth Madoff, made a suicidal pact on Christmas Eve, but their attempt didn’t succeed. The felon confessed everything in 2009.
She said that she was completely devastated when she found out what her husband had done. She couldn’t believe that Bernie, whom she knew and loved, was capable of lying to his friends for so many years.
Bernie Madoff was sentenced to 150 years in prison for the 11 federal felonies he committed, which resulted in a scam involving around $68 million. He died on April 14th, 2021, due to some health issues he had.
3. Ivan Boesky
In 1986, Ivan Boesky was the first Wall Street trader to be found guilty of insider trading. During the 1980s, when everyone had a consumerist mindset, he said that “greed is good”. This quickly turned into a quote that made him very popular among people in New York City.
By the time he was captured, Boesky had amassed a fortune of over $200 million. He knew how to make money by betting on company takeovers with inside information about the transactions.
His fraud was comparable to casino cheating, which allowed him to go unpunished for years. He served 3 years in prison, and he made a deal with the authorities and informed them of the financial crimes committed by his fellow merchants.
Financial crime is a constantly evolving field, and those who want to scheme always come up with new ideas on how to succeed in their mischievous plans. So if you ever meet an investment banker who tells you they can treble your life savings in a few years, be careful not to fall for it!
4. Enron
Enron was an American energy company that started engaging in significant trading in the energy derivatives markets. Huge trading losses were hidden by the business, which led to one of the worst accounting scandals and bankruptcy in recent U.S. history.
They had to file for bankruptcy due to inadequate bookkeeping procedures. As many experts say, a fraud issue is a big deal for a multibillion-dollar company, and the consequences are huge.
When the problem was discovered and disclosed in the media, Enron’s stock prices quickly fell, and the value of the entire firm swiftly vanished. In a really short time, 16 Enron executives were arrested and 78 billion dollars vanished from the economy overnight.
Jeff Skilling, the CEO of the company, didn’t escape either. He was caught by the authorities and received a 24-year sentence in a white-collar jail.
5. ZZZZ Best
While still in high school, Barry Minkow established the foundation of the ZZZZ Best rug cleaning company. What people didn’t know at first was that his company was actually only a cover for his illegal activities, which involved credit card fraud, money laundering, and racketeering.
When ZZZ Best was at its peak, it was worth more than $200 million. This company collapsed in 1987, and it was considered the biggest example of securities fraud on the west coast during the 1980s. Minkow and 10 of his coworkers were charged with money laundering, conspiracy, and racketeering. That’s not a good way to jumpstart your career when you’re only a teenager, if you ask us!
What happened to him afterward?
He was sentenced to jail in 1989 for 25 years, but only served 7 years and a few months. Many sources say that during the time he was in prison, his attitude completely changed. He transformed from a conceited young man – who believed that being given the opportunity to leave jail sooner if he did what was necessary – to a man who was deeply connected to God and the church.
After he was released in 1995, Minkow went to see a pastor from the Church at Rocky Peak in Chatsworth, California, and started working for him. After a while, he became the head of the church’s Bible Institute and was very happy with his new life.
He published a book, “Clean Sweep,” in the same year, which was a first-person account of the ZZZZ Best fraud. He used all the earnings from the book to compensate his victims – that’s nice.
In 1997, Minkow became the pastor of Community Bible Church in San Diego. A few months after he arrived there, a church member asked him for help: to research a money management company in Orange County.
The former felon thought that something wasn’t right and he informed federal officials. His instincts were indeed good, as they later realized the company was actually a $300 million pyramid fraud. His success led him to start the Fraud Discovery Institute (FDI), which is an investigation company.
His first victims were penny stock firms, but he quickly caught the interest of several media organizations, including CBS’s 60 Minutes, The Wall Street Journal, Bloomberg News, and Fox News. Minkow said that he discovered fraud worth $1 billion through FDI, the organization he founded in 2001.
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