Financial Fraud Cases: Four of History’s Most Infamous Examples

Unfortunately, history is full of examples of financial fraud cases. While financial fraud cases occur in a seemingly endless number of different ways, all cases share at least one common characteristic: The perpetrators seek personal enrichment at the direct expenses of their victims.

At Sonn Law Group, our practice is dedicated to helping investment fraud victims recover compensation for their losses. Here we detail four of the largest and most infamous financial fraud cases in recent American history.

Four Infamous Financial Fraud Cases

  1. The ZZZZ Best Pyramid Scheme


    In the early 1980s, a high school student named Barry Minkow founded a carpet cleaning and insurance restoration company called ZZZZ Best. While the carpeting cleaning side of the business was real, the insurance restoration side of the business existed only on paper.

    Nonetheless, Minkow was still able to take the company public and eventually get it listed on the NASDAQ exchange. Indeed, Minkow became the youngest person in history to lead an initial public offering (IPO), and managed to raise more than $15 million from investors.

    Getting his company listed required faking thousands of disclosure documents and financial records. It also required Minkow to create a fake office to give investigators a tour of his company. Within a year of being listed on the NASDAQ, his firm was worth in excess of $280 million and it had more than 1,000 employees. Of course, because its insurance restoration business was entirely fraudulent, the firm quickly ran into severe cash flow problems.

    To try to raise money quickly, Minkow attempted to merge within a competitor through a deal financed with junk bonds. However, allegations of the massive fraud soon went public and the deal, along with the entire scheme, came crashing down. Barry Minkow and nearly a dozen other corporate insiders were indicted on charges that included racketeering, securities fraud and embezzlement.

  2. The Enron Bankruptcy Scandal

    Famous financial fraud case Enron

    In 1999, Enron was poised to grow into one of the largest companies on the planet. Directors projected their revenue was to exceed $200 billion and their stock reach more than $90 per share. By November of 2001, the company’s stock had fallen to less than $1 per share and the company was entering the largest bankruptcy in history. What prompted such a precipitous fall?

    Extensive and complex fraud.

    As it turns out, Enron’s impressive revenue largely existed only on paper. The company used extraordinarily advanced and deceptive accounting practices that had the net effect of dramatically misrepresenting the company’s value to current and prospective investors.

    Shareholders filed a $40 billion lawsuit against the company and the SEC brought criminal charges against many of the firm’s top executives.

  3. Bernie Madoff’s Ponzi Scheme


    Over a period of several decades, financial advisor Bernard Madoff conned thousands of innocent investors out of their hard earned life savings. A representative from the Securities Investor Protection Corporation (SIPC) estimated that investors lost out on more than $18 billion in the scheme.

    Shockingly, that figure doesn’t even include an additional $40 billion in losses in the form of on-paper investor gains that turned out to be fabricated by Madoff and his co-conspirators. Madoff was able to keep the Ponzi scheme going for many years because of his ability to recruit new investors.

    However, as with all Ponzi scheme, eventually Madoff ran out of new investors’ money to transfer around and the scheme fell apart.

  4. MF Global’s Collapse

    MF Global example fraud case

    MF Global was a large derivatives and commodities fund that went bankrupt in 2011. Beyond managing customer accounts, MF Global was also making their own ‘bets’ on world markets. Many of these bets were made in relation to European sovereign debt and related markets.

    During the rocky financial times of 2011, investigators discovered that the financial brokerage firm had been unlawfully transferring money from client accounts to its own corporate accounts to hide trading losses and make the company appear to be solvent. In fact, the New York Times reported that MF Global dipped into customer accounts many different times to cover up for its own cash flow problems.

    In the end, the company paid customers $1.2 billion in restitution as well as $100 million in fines.

Were You the Victim of Financial Fraud?

We can help. At the Sonn Law Group, we handle all types of investment fraud cases. Our firm is dedicated to helping fraud victims recover every penny that they rightfully deserve. To learn more about how can help you and your family, please call our office today at 1-844-689-5754 to request your free case evaluation. Our main office is located in Miami and we protect the rights of investors nationwide as well as in Mexico and South America

Rate this post:

1 Star2 Stars3 Stars4 Stars5 Stars
1 votes, average: 5.00 out of 5