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Biggest Stock Market Scams in History

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A wicked web of deceit, with just a good measure of theft and forgery thrown in for old time’s sake! Most of the time when we read about history, the biggest this or the fastest that related to the stock exchange it’s (so we are told) so that we don’t make the same mistakes twice and then some bull gets spun about how we need to learn from our mistakes. But, if the truth comes to the truth, it’s not this that people are interested in, is it? What they want to learn is how and why and when and where the guy that got caught actually went wrong, so they don’t make the same mistakes twice!

SCAM!

SCAM!

Let’s face it, when it boils down to it, people are in the investment game not because they are interested in making loads of money and making the sale or the purchase of the decade (or not only that), but simply because they have been bitten by the money bug. The thrill of the chase and the game. The competition with someone else. It’s legalized drugs, it’s gambling, its addiction. The sweaty palms, the furrowed brow, the scanning of the papers, the elation when it works and the belief that the next one will be bigger and better.

SCAM: Free Money?

SCAM: Free Money?

Throughout history there have been guys that have been smooth-talkers. Ones that had the propensity to turn horse manure into gold. The ones that enchanted and then disenchanted us all when all was revealed about the scams they had been running. Being a swindler is as old as the hills. Cheating and defrauding people has always happened. But, if there’s one thing you have to admire in the following list, it’s the people that did it, sometimes so blatantly obviously. The ones that we should have smelt, as they were standing right under our noses. But, we were probably blinded by the money-making, and anyway, everybody loves a scammer.

They’re all around us, the card sharks in the street, the con artist on the other end of the phone. The slicker, the beguiler in that shop that sells you just what you never needed. The welcher that never pays the debt back. The clip artist that fleeces you for money and runs you dry. Damn slickers! The stock market abounds with them. It’s all about confidence on the stock market. It’s all about belief and faith. It’s the best place to deceive.

So, here they are, the ones that will go down in history as being the biggest slickers and cheats around! There are so many to choose from that these are the ones from the 1980s and the 1990s. More will follow!

1. Barry Minkow

SCAM: Barry Minkow

SCAM: Barry Minkow

A 15-year-old kid, which makes the story all the more worthy. The guy went from nothing to millionaire, with an IPO and hit the big time. Then, he ended up in prison to pay for the dastardly deed. You have to admire him though. A smooth-talking crook as good as they ever get.

He founded ZZZZ Best, a carpet-cleaning and restoration company at the age of 15, in San Fernando Valley. He had trouble making ends meet and despite his idea, he had banks closing down on him at the start because he was under age and minors can’t sign contracts or checks. He joined forces with Tom Padgett and forged documents for carpet restoration, stating that he was working on various projects to make it look like he had business. They set up a company to front the operation, Interstate Appraisal Services. The fake company gave the banks the ‘proof’ that he was raking it in and everybody believed him. Kids don’t lie, do they? The insurance company amounted to some 86% of his revenue. But, that was all fake. The carpet-cleaning company was bone fide, though. He financed his carpet-cleaning business by check-kiting schemes: he wrote checks from account X to finance account Y, and then wrote checks immediately from account Y back to account X and the money (which never existed) just got transferred from one account to another. Child’s play, wasn’t it? Now, don’t go getting any ideas, the banks will find out (one day)!

When Minkow left school, he needed investment and got it by meeting Jack Caitan, a businessman from LA that was involved in organized-crime deals.

Within four years, by 1986, Minkow had decided to go public. By some superb twist of fate, the accountant that was involved in the launch on the NASDAQ never visited the insurance restoration sites and so never discovered that they were nothing more than empty mailboxes in San Fernando Valley. Minkow owned 53% of the company that was launched in January 1986. He became a millionaire! But, the company had no money. He couldn’t pay anyone and so decided to raise $15 million through an initial public offering of the company’s stock.  He set up fake offices and buildings for the insurance side of things and the financial consultant (Mark Morze) faked thousands of documents.  At 21, he became the youngest guy in history to have an IPO!

TV ads were launched and the flash cars were bought. Ambitions and greed shot through the roof of all boundaries of reason. Within just over a year, by February 1987, the company was being traded at $18 per share. It was now worth $280 million. Based on what? Nothing! Minkow was worth an estimated $100 million. He negotiated a deal and merged with the bone fide carpet-cleaners that were used by Sear’s. That was for $25 million, with ZZZZ Best being the surviving company. Apparently, he had hoped to use the cash from the new company to finish the fake business and go legal.

The Los Angeles Times was tipped off about $72, 000 in credit-card fraud that Minkow had run up and that was just days before the signing of the merger deal. Shares plunged by 28% after that article. From then on, things just went from bad to worse. Shares tumbled to just $3.50 each by July 1988.Minkow ran off with $23 million in company funds and the company went bankrupt.

The police stepped in and found that he had been laundering money and that it was an organized crime-den. At the hearing, there were 54 counts of racketeering. Dummy companies were discovered all over the place and 90% of the company’s activities were now considered as fraudulent.

He got 25 years on March 27th 1989 and had to pay $26 million in restitution.

He was sentenced on the following counts:

  • racketeering
  • securities fraud
  • embezzlement
  • money laundering
  • mail fraud
  • tax evasion
  • bank fraud
  • credit-card fraud.

It cost the investors that were taken in by his talking to the tune of $100 million. He is considered as the largest one-man show for scams in the history of the stock-market. When he got out of prison in 1995, he had found god and seen the light. He became an Evangelic Pastor. But, he never lasted long. He was later involved in other shady deals, too, but that’s another story!

2. Michael Milken

SCAM: Mickael Milken

SCAM: Mickael Milken

Milken was known as the ‘Junk Bond King’. He worked for Drexel Burnham Lambert and he was their top man in the 1980s. At the height of his time, he was raking in $1 billion over a four-year period. That might sound like just peanuts today compared to some guys, but back then it was a record. He is still the 48thrichest person in the world, according to Forbes and has a net worth of $2 billion.

He provided the stock trader at Drexel (Ivan Boesky) with huge sums of money and they split the profits when he used insider knowledge of takeovers to hit the jackpot.

Milken was arrested and indicted in March 1989 on 98 counts of racketeering and fraud. He was accused of misconduct, insider trading, stock parking (or the concealing of the real owner of stock) and tax evasion. He had been paid $5.3 million in 1986 for his share in illegal trading profits. He pleaded guilty in April 1990 to:

By pleading guilty immediately, he avoided further investigation and the other charges were dropped. He paid $1.1 billion in lawsuits related to these actions (of which there was a fine worth $600 million). He got sentenced to ten years in prison, but served just 22 months.

He was banned for life from the securities industry. But, in February 2013, the Securities and Exchange Commission carried out an investigation to determine if he had violated this ruling, since he had allegedly provided consultancy to Guggenheim Partners regarding investment.

He turned good and bought himself a couple of years less in purgatory, though. When he got out of prison he set up institutes for medical-research into prostate cancer. He was called ‘The Man Who Changed Medicine’ by Fortune magazine and it seems like prisoners can make it good when they get out of jail. I wonder if the same goes for everyone?

3. Hiromasa Ezoe

SCAM: Hiromasa Ezoe

SCAM: Hiromasa Ezoe

Ezoe was at the bottom of the insider trading scandal with a bit of corruption thrown in for good measure at Recruit, a human-resources and classifieds company in Tokyo. As Chairman, he offered shares to politicians and senior executives in a subsidiary company called Cosmos just before it went public in 1986.

Cosmos was launched publically, the shares soared and most people ended up making a profit of 66 million Yen each. The Prime Minister of Japan at the time, Noboru Takeshita, and the Deputy Prime Minister, Yasuhiro Nakasone, were involved as well as other prominent members of the government. The government was forced to resign over the scandal.

  • There were 155 people that were indicted in the insider-dealing scheme.
  • The Nikkei fell by 40% as a result, rocked by the political scandal.

What happened to Ezoe? His trial lasted 13 years! He was given a suspended sentence after all of that! Just makes you wonder why they even bothered after all.

4. Bernard Madoff

SCAM: Bernard Madoff

SCAM: Bernard Madoff

No scammer would look himself in the face unless he pronounced the words Madoff, would he? This guy was the biggest scammer possibly of all. The dark side of Wall Street!

He started swindling people way back in 1989, if not well before that. Remember, we probably only know the half of it.  Madoff’s fraud was the largest scam ever to have taken place in the world and in history. Primarily because it lasted so long (until 2009). He cheated the world’s investors out of $65 billion. There are 9, 000 claims that have been filed against the guy!

What was he offering? Low-risk, high-yield (sounds too good to be true, doesn’t it?). It came to light as early as 1999 when the Securities and Exchange Commission was made aware of the mathematical impossibility as to the gains being made by Madoff (at least the gains that were on paper). The New York SEC ignored the complaints in 2005 and 2007. The Boston SEC did the same as early as 2000 and 2001! Were people blinded? Or were they just turning a blind eye to the scam?

False trading reports were being issued in the back office as and when Madoff ordered them for each client. Trades were backdated and manipulated, accounts were falsified. He simply deposited the client’s money into a special bank account at the Chase Manhattan Bank. He never invested it as they had believed he was going to. As clients asked for their money, he removed it from the account. Everything was going fine, at least until people started wanting their money back all at the same time. His was considered as the biggest Ponzi Scheme ever.

He accused his four largest clients in an interview from his prison cell saying that they were at fault: Norman F. Levy, Jeffry Picower, Stanley Chais and Carl Shapiro. They knew, according to Madoff exactly what he was doing and they should have stepped in before! He said that J. P. Morgan was in on it all too! They should have been alerted by the millions that were going into and out of the accounts. Better to blame someone else, isn’t it?

In June 2009, he got a ridiculous (ridiculous not because of what he did that didn’t deserve it, but because it will never be served) 150 years in prison at the age of 71 and was found guilty on 8 counts of fraud, money laundering and theft. He had been turned in by his two sons.

5. Anthony Elgindy

SCAM: Anthony Elgindy

SCAM: Anthony Elgindy

Coming after the main-man Madoff, this guy seems like he is just small-fry. He was founder of Pacific Equity.

Elgindy was providing stock advice via an internet site in the 1990s to people who were paying up to $600 a month to get his tips. Little did they know he was in actual fact working alongside the FBI agent that was investigating companies and so had inside information.

He also used blackmail to extort funds from other companies, telling them that he would reveal negative (false) elements about the companies that his clients would believe. He was charged with stock manipulation and was fined $51, 000 for revealing information about companies. However, this was overturned by the Securities and Exchange Commission that decided that it was not manipulation to reveal information that was indeed true and accurate.

However, by 2005, he had been charged again for fraud, racketeering and other crimes in relation to FBI and SEC investigations that he had revealed to the public. His trial lasted four months and he was accused of revelations concerning 32 different stocks. He ended up with nine years in prison, however. He appealed, but his sentence was upheld in 2008. His total gains came to a measly $66, 000, which if you compare it to what Madoff ended up with and how much he lost for his investors, this guy really looks like he either got used as the scapegoat or got caught with his hand in the bag at the wrong time.

Elgindy will go down in history as the short seller that people were afraid of; the guy companies didn’t want mentioning their names with adverse stuff about their companies as it would influence trades that day.

So, just a few examples of history’s swindlers. But, history is always in the making. It’s being done today! There are people that in five years from now will be arrested, the ones that created scams, who fleeced the poor gullible ones into parting with their hard-earned cash and that thought they wouldn’t get caught. The perpetrator is attractive. He draws us to him because he made us believe in some stupid scheme that we thought would never work and yet it did for a bit, and fooled us all.

So, who do you think will be added to that list of scammers and swindlers? Who’s the lying, cheating, gifted chiseler that will welch and fleece you dry today?

In the next installment, we will take a look at the stock-markets scams of the 2000s and bring us closer to the present time!

Originally posted Biggest Scams in Stock Market History

 

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Mon, 07/08/2013 - 02:10 | 3730035 bigprofitbuzz
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Wed, 07/03/2013 - 14:48 | 3719077 Goggles Pisano
Goggles Pisano's picture

100 years of the Fed.

Wed, 07/03/2013 - 13:40 | 3718755 Setarcos
Setarcos's picture

OK I nominate the Obomber as Swindler In Chief, because he fronts the entire Ponzi scheme of Financialism, presumedly run by the Rothschilds and other, more or less faceless advocates of a NWO/PNAC/AIPAC and so on.

OK I could nominate Dick Chainsaw, or Dubya for fronting the biggest scam in history, i.e. the US economy, but Obomber is now nominally in charge (and getting VERY well paid as a puppet), so I nominate him.

Wed, 07/03/2013 - 13:04 | 3718556 rosiescenario
rosiescenario's picture

Equity Funding, as I recall was bigger than several you listed....Enron was incredibly far reaching in its impact even including brown outs in California that resulted in deaths.....then there was Homestake Oil.....but at the end of the day nothin tops the combined efforts of the biggest Wall Street houses in bundling sub prime mortgages, getting that bundle labeled AAA by a conspiring rating agency, and foisting the product off on European dupes....nothing comes close and we all paid for it.

Wed, 07/03/2013 - 13:00 | 3718546 dvfco
dvfco's picture

Should have become a CPA - fucking worthless BA in Poly Sci - It took me until October of freshman year to realize political science consisted of studying the biggest scum in history. As a CPA, I coulda been one of 'em.  If I got a JD and then became a CPA, I really could have moved mountains (of cash).

Sorry - I'm muttering.

Great article.

Wed, 07/03/2013 - 13:45 | 3718787 Setarcos
Setarcos's picture

I had a similar experience.

Wed, 07/03/2013 - 11:52 | 3718168 TrustbutVerify
TrustbutVerify's picture

Interesting...No mention of ZIRP, or the debt super cycle that will end soon.  I guess there are too many faces to connect, so demonizing one person - something that feels so good - isn't so easy.  

Wed, 07/03/2013 - 11:52 | 3718160 Winston Smith 2009
Winston Smith 2009's picture

You forgot the biggest financial scam of all time:  central banking in a fractional reserve monetary system with effectively no real reserve requirement.

Wed, 07/03/2013 - 10:40 | 3717774 otto skorzeny
otto skorzeny's picture

that's weird- a lot of these shysters are jewish

Wed, 07/03/2013 - 10:56 | 3717856 oddjob
oddjob's picture

Don't be silly, its Just a coincidence.

Wed, 07/03/2013 - 11:31 | 3718046 otto skorzeny
otto skorzeny's picture

whew- thanks- sometimes I get paranoid and think that a lot of these guys in banking and Wall St and even the head(s)of the Fed Reserve are "kosher".

Wed, 07/03/2013 - 12:58 | 3718532 New American Re...
New American Revolution's picture

Not exactly "Kosher", but they are "Edomite" Jews.   They are the descendents of Esau, never having experienced bondage in either Egypt nor Persia.  They lived in Palestine when Moses lead the children of Israel to the promised land, but were living with the Philistines.  Encouraged first by the tribes of Jacob, then by Persian invasion, they moved to the southern Ukraine developing into bankers between the east and west trade routes.  Ahead of the Cossacks, they ended up in Germany, where not allowed to live in the cities, again took up the hotel business and lending on the trade routes between towns.  Taking up 'territory's", lead to one of the reasons Germany was so fracticious in the Holy Roman Empire.    They are Merovenians, whose males were exterminated by Charlemagne, but whose womenfolk married right back into the line of Christ and rule, as each prince became a king unto himself. They later supplied not only England with her royal family (which still rules today), but the Hessian mercenaries that fought on the British side during our Revolutionary war.   They are the Red Shield, often depicted over the door of their inn/banks (Rothscheild).  They found favor under Hitler, himself an Edomite, re-enforced the SS, sent agents before the war to selected universities in America to spread their seed that now dominates American foreign policy....

Shall I go on?   electanewcongress.com

Wed, 07/03/2013 - 13:11 | 3718595 dvfco
dvfco's picture

New American Revolution - Great post.  I think they founded Hilton and The Four Seasons, but it took a Mormon to start Marriott.  

I think you should go on.  I found your post very enlightening, entertaining and of high quality content.  It was well written and, I believe, will be well received by the ZH community as a whole.  I think your +/- rating will suffer as many ZH'ers prefer to give the thumbs-up to post like "Gold, Bitchezzzzzz" as they take much less time to read and no time upon which to reflect.

 

Even if electanewcongress.com is a bullshit site - I love it.  I own "stopmccarthyism.com" planning to try to unseat our local congresswoman who has done nothing.  I was planing on building it when I heard she's got lung cancer.  I think I'll save the effort.  She'll run and win again, then quit/die, then Cuomo will appoint another piece of crap.

Wed, 07/03/2013 - 10:19 | 3717696 ITrustMyGut
ITrustMyGut's picture

good fun..thanks for the post...

Wed, 07/03/2013 - 10:18 | 3717689 moneybots
moneybots's picture

"Where is Hank Paulson?"

 

A 700 billion dollar swindle of the tax payers, with an assist from ben bernanke, pulling in the slosh to crash the stock market during the TARP debate.

Wed, 07/03/2013 - 10:12 | 3717664 adr
adr's picture

Zzzz Best was used as a template for virtually every IPO from 1990 on. It is OK for very powerful people to run the exact same scam, look at Apple, but not OK for a 15 year old kid.

At least 70% of reported commerce in America is fake transfers between shadow companies, accounting fraud, etc. All to support the stock market and the wealth generating machine of selling shares of fake corporations for real cash.

Everything connected with the stock market is fraudulent. Just like every hospital bill, every investment prospectus contains fraud.

Yes it's a blanket statement, but really tell me where I am wrong.

What put people in jail on this list is now generally accepted accounting principles. Look at Enron, almost completely legal now. Let alone what the Fed has allowed.

Groupon and Facebook faked hundreds of million in revenue before their IPOs and it was still allowed to go through.

Wed, 07/03/2013 - 10:21 | 3717712 ITrustMyGut
ITrustMyGut's picture

so true.... the enitre deal is a scam

mark to model, fractionalized banking, ETF's, Corp's viewed as persons, you name it... 

Wed, 07/03/2013 - 10:10 | 3717653 RaceToTheBottom
RaceToTheBottom's picture

Where is Alan Greenspam/The Bernank?

Wed, 07/03/2013 - 09:50 | 3717561 ebworthen
ebworthen's picture

Where is Hank Paulson?

Wed, 07/03/2013 - 14:59 | 3719113 boogerbently
boogerbently's picture

Corzine?

Wed, 07/03/2013 - 14:32 | 3719008 Never One Roach
Never One Roach's picture

Mozillo?

Wed, 07/03/2013 - 09:34 | 3717460 johnQpublic
johnQpublic's picture

and yet with all the society wide surveillance going on, we cant seem to catch the scumbags like corzine in the act

Wed, 07/03/2013 - 09:54 | 3717584 astoriajoe
astoriajoe's picture

its almost like you could sue the feds as accomplices, as they had information, and remained silent on it. They would almost be partially liable for almost any crime committed if any part of the planning was done over phone or email.

Wed, 07/03/2013 - 10:04 | 3717627 johnQpublic
johnQpublic's picture

'almost like'

 

how about  a real legal opinion on this?

seems to me its hand in glove

they must know because they are spying

therefore they must be accomplisses because they are not doing anything about it, and are in fact protecting the criminals by doing nothing

like harboring a fugitive, or an accompliss after the fact who buries the already dead body

class action lawsuit everyone?

Wed, 07/03/2013 - 19:29 | 3719967 steelhead23
steelhead23's picture

In the event you are blissfully unaware, due to recent Supreme Court rulings the entire genre of "class action lawsuits" are a relic of bygone days.  You wanna sue Monsanto for poisoning your food - you're on your own buddy!

Wed, 07/03/2013 - 09:14 | 3717385 lordbyroniv
lordbyroniv's picture

CRIME PAYS !

 

He got 25 years on March 27th 1989 and had to pay $26 million in restitution.

 

When he got out of prison in 1995, he had found god and seen the light.

Wed, 07/03/2013 - 09:09 | 3717353 seataka
seataka's picture

How Wall Street Got Its Name

" The red people from Manhattan Island crossed to the mainland, where a treaty was made with the Dutch, and the place was therefore called the Pipe of Peace in their language, Hoboken. But soon after that, the Dutch governor, Kieft, sent his men out there one night and massacred the entire population. Few of them escaped, but they spread the story of what had been done, and this did much to antagonize all the remaining tribes against all the white settlers. Shortly after, Nieuw Amsterdam erected a double palisade for defense against its now enraged red neighbors, and this remained for some time the northern limit of the Dutch city. The space between the former walls is now called Wall Street, and its spirit is still that of a bulwark against the people. " Chapter 7, The Tribes and the States by W. J. Sidis 1935


Wed, 07/03/2013 - 08:40 | 3717277 foytik
foytik's picture

Swindler's list. Would make a good movie.

Wed, 07/03/2013 - 08:26 | 3717232 Rainman
Rainman's picture

Modern 21st century swindlers now have big names ending in Inc, LLP, LLC ....neither admitting or denying guilt while paying wristslap fines.

Wed, 07/03/2013 - 08:10 | 3717181 Racer
Racer's picture

"he wrote checks from account X to finance account Y, and then wrote checks immediately from account Y back to account X and the money (which never existed) just got transferred from one account to another. Child’s play, wasn’t it?"

Isn't that what the Fed and gobberminths do all the time?

Wed, 07/03/2013 - 07:42 | 3717118 eddiebe
eddiebe's picture

I nominate Jon Corzine, but only for lack of knowing even .0001% of possible scumbags running the(stock market) show.

Wed, 07/03/2013 - 14:57 | 3719107 dvfco
dvfco's picture

"Literally, the first guy I called was Jon Corzine.  Literally."

Wed, 07/03/2013 - 09:31 | 3717447 Greshams Law
Greshams Law's picture

Seconded.

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