Top 10 financial scams in the US history

Financial scams are one of the prime examples of white-collar crimes. US banking history is filled with high-profile white-collar crimes. Here are some of the most famous financial scams in U.S history:

1. Bernie Madoff

The best fraudster in American history, Bernie Madoff’s scam was a massive $65 billion Ponzi scheme. It is termed as the “largest-ever fraud by any individual.” Madoff, a Wall Street financier, used money from new investors to pay off old investors. For years, Madoff carried out this elaborate scam, until the 2008 recession, when his scam was unraveled. His investors pulled out approximately $12 billion. His son’s reported him to the authorities, following which he pleaded guilty to 11 federal felony counts, including securities fraud, wire fraud, mail fraud, perjury, and money laundering. Madoff passed away in 2021, before completing his 150-year jail term.

2. ZZZZ Best

In 1982, high school student Barry Minkow started a carpet cleaning company called ZZZZ Best. In 1986, the company went public, was quickly valued at $300 million. Another example of the Ponzi scheme, he nearly got away with the scam, by committing criminal activities like check kiting, theft, insurance scams. He, along with his business partner Tom Padgett created a fictitious company, Interstate Appraisal Service, to defraud banks and other lending institutions. Eventually, they planned to acquire their rival company KeyServ, which would make their company legitimate. But before closing the deal, they were exposed, thereby becoming completely bankrupt. Minkow was found guilty and was sentenced to imprisonment for 25 years.

3. Enron

Enron was formed by a  merger between Houston Natural Gas Company and Omaha-based InterNorth Incorporated, in 1985. In 1990, Enron Finance Corporation was formed with Jeffrey Skilling as the CEO. It further established Enron Online (EOL), a trading website in 1999. The company was popular and reputed and was named “America’s Most Innovative Company” by Fortune for six consecutive years between 1996 and 2001. Things went downhill when they started hiding the financial losses using the mark-to-market method. Here the current value of a security will be projected instead of its actual value. Enron became bankrupt in 2001 and executives were charged with various financial crimes. From 2004-2011, the company paid its creditors $21.7 billion. 

4. WorldCom

Yet another financial scam, WorldCom was a telecommunication company, which was very successful in the late 90s and early 2000s. WorldCom acquired many other telecom companies. At its height, the company was valued at $175 billion. Things went south when WorldCom resorted to accounting frauds, by entering its expenses as investments. Investors soon found out about the fraud, and in 2005, Bernie Ebbers, the CEO was convicted of security fraud and was sentenced to 25 years of imprisonment. 

5. Cendant

A conglomerate formed by the merger of CUC International (CUC) Hospitality Franchise Services (HFS). CUC International, which had resorted to accounting frauds even before the merger, such as overstating its profits. An internal investigation revealed the decade-long scam carried out by CUC executives. The chairman, Walter Forbes was sent to 12 years imprisonment and was asked to pay $3 billion as restitution.

6. Lehman Brothers

A well-established organization, Lehman Brothers started off as dry goods store in 1888 and ventured into various businesses like commodities trading and brokerage services. The Lehman investment bank had assets worth $600 billion. The company failed in 2008, with the collapse of the U.S housing market. Lehman’s bankruptcy is known as the “largest bankruptcy in history”.

7. Tyco International

Tyco International Scam refers to the theft by the CEO Dennis Kozlowski and CFO Mark Swartz. They soaked in more than $150 million for almost six years in the name of loans and bonuses, none of which were approved by the board of directors. After a long trial, Kozlowski and Swartz were convicted and sentenced to 25 years imprisonment. 

8. Fannie Mae

A government-sponsored mortgage company, Fannie Mae paid $400 million to U.S Securities and Exchange Commission (SEC) in 2006 for misstating financial statements for six years. A civil lawsuit was initiated by SEC wherein top executives were charged with securities fraud and for misleading investors. 

9. Ivan Boesky

He is termed as the first Wall Street trader to be convicted of insider trading. He paid nearly $300 million as a penalty and served 3 years in jail. He was banned from trading by SEC after which he became a government informant by exposing financial crimes committed by fellow traders.

10. Qwest Communication

Founded in 1996 by Philip Anschutz, this telecommunication company is known for its illegal and unethical practices like internal trading and inflated revenue projection by its top managers. Its CEO Joseph Nacchio was convicted of internal trading and was sentenced to imprisonment.