10 of the Biggest Financial Frauds of the Past 25 Years

9. Financial Advisory Consultants

Estimated losses: $800 million ($1.2 billion in 2022 dollars)

Firm owner James Paul Lewis Jr. ran a scam through his firm, drawing investments from more than 5,000 clients, and using newer deposits to create the appearance of returns for existing customers.

Lewis’ marketing materials promised investors they could earn returns of 18% to 40%, depending on which Financial Advisory Consultants fund they invested in, but he used their cash to purchase cars, jewelry and other luxury items, or to make risky bets on currency futures. Lewis pleaded guilty to charges of mail fraud and money laundering in 2005.

Firm owner James Paul Lewis Jr. (Image: Bloomberg)

8. Tyco

Estimated losses: $2 billion ($3 billion in 2022 dollars)

The scandal at this security controls system company stemmed from off-balance sheet transactions and blatant misuse of company funds by CEO Dennis Kozlowski and Chief Financial Officer Mark Swartz. The men used Tyco money to buy homes and art and to fund a lavish lifestyle, which included a $6,000 shower curtain and Kozlowski’s multimillion-dollar Italian birthday party.

In 2005, Kozlowski and Swartz were convicted of grand larceny and falsifying business records. Kozlowski spent eight years in prison and Swartz served 10 years of his sentence. In 2016, Johnson Control acquired the company.

Dennis Kozlowski, CEO (Image: Bloomberg)

7. Wirecard

Estimated losses: $4 billion ($4.6 billion in 2022 dollars)

The German fintech company crashed and declared bankruptcy in 2020 after auditors refused to sign off on its 2019 books when they found evidence of ongoing fraud and misappropriation of customer funds. Prosecutors said executives had lied in financial statements and knowingly raised billions from banks and investors to cover the company’s ongoing losses.

The company’s chief executive and largest shareholder, Markus Braun, 58, and two other executives are currently on trial in Munich on charges of fraud and market manipulation. They face up to 15 years each in prison. The company's auditor has also faced significant scrutiny as well as a class action lawsuit for allegedly missing evidence of the fraud in earlier audits.

Markus Braun, CEO (Image: Bloomberg)

6. Bre-X Minerals

Estimated losses: $3 billion ($5.5 billion in 2022 dollars)

Shares in the Canadian mining company Bre-X Minerals rose throughout the early 1990s thanks to its reports that it had found an untapped source of gold in a mine in the Bornean jungle. In 1997, another mining company acquired a stake in the business and drilling at the mine but could not find evidence of the gold apparent in the samples Bre-X Minerals had produced.

Prospector Michael de Guzman, who had initially reported the gold discovery, fell or jumped to his death from a helicopter amid the revelations. Bre-X shares plummeted, and the company filed for bankruptcy in 1997. Founder David Walsh claimed not to know about the fraud and was acquitted of insider trading charges.

(Image: Bloomberg)

5. FTX

Estimated losses: Over $7 billion

The crypto exchange run by 30-year-old Sam Bankman-Fried collapsed in November 2022 after a liquidity crunch exposed that the firm, once valued at $32 billion, had been using customer deposits to fund risky bets through a hedge fund also controlled by Bankman-Fried.

FTX is now in bankruptcy proceedings, and Bankman-Fried has been arrested in the Bahamas and faces extradition to the United States on criminal charges of conspiracy to commit wire fraud, commodities fraud, securities fraud and money laundering. He faces up to 115 years in prison. His hedge fund, Alameda Research, faces separate accusations related to potentially illegal campaign donations. The scandal has rocked the broader world of crypto investments, sparking dozens of investor lawsuits and pushing down the value of digital assets. The Senate Banking Committee held a hearing to examine the case and consider further regulations on the crypto industry.

In that hearing, John J. Ray, the CEO brought in to replace Bankman-Fried and unwind the company said it was a case of “old-fashioned embezzlement.”

“This is just taking money from your customers and using it for your own purpose,” he added. “Not sophisticated at all.”

Founder, Sam Bankman-Fried (Image: Bloomberg)

4. Waste Management

Estimated losses: $6 billion ($11 billion in 2022 dollars)

From 1992 to 1997, Waste Management executives adjusted their accounting records to fraudulently show that the company had met the targets it had shared with analysts earlier in the year. When a new CEO came on in 1998, he had the company restate earnings for the previous five years.

After the following investigation, the company, which was acquired by a larger firm that kept the name, paid a settlement of more than $17 million to the Securities and Exchange Commission on behalf of former executives. Arthur Andersen, Waste Management’s auditor, also paid a fine in connection with the scandal.

(Image: Wikimedia Commons)

3. WorldCom

Estimated losses: $11 billion ($18.2 billion in 2022 dollars)

The Mississippi-based telecommunications company grew quickly throughout the 1990s by acquiring other service providers, building infrastructure, and positioning itself to investors as ready to ride the wave of consumer internet adoption. After the dot-com crash, however, the company found itself overextended and used fraudulent accounting practices to hide its losses. An internal auditor spotted the anomalies and alerted the Securities and Exchange Commission, which launched an investigation. WorldCom’s collapse in 2002 ultimately led to the passage of Sarbanes-Oxley regulations, aimed at reducing corporate fraud and holding company executives responsible for accounting scandals. WorldCom CEO Bernard Ebbers spent 13 years in jail on fraud charges. He died in 2020 at age 78.

Bernard Ebbers, CEO (Image: Bloomberg)

2. Bernard L. Madoff Investment Securities

Estimated losses: $65 billion ($90.2 billion in 2022 dollars)

In potentially the largest Ponzi scheme in history, Bernie Madoff collected billions for his investments firm from individuals and institutions with promises that he was able to consistently deliver market-beating returns. The former Nasdaq chairman relied on his connections and reputation to brush aside questions about his investment strategy while repaying earlier investors using funds from newer depositors.

When investors increased withdrawals during the financial crisis of 2008, it became apparent that the firm did not have the funds to make them whole. In 2009, he pleaded guilty to charges of money laundering and securities fraud. He received a 150-year prison sentence and died in prison in 2021, at age 82.

Fifteen years later, prosecutors and investigators are still attempting to recover funds for Madoff’s victims. In September, the U.S. attorney’s office announced new payments of $372 million to victims. While the total $4 billion recovered so far is the largest payment of forfeited funds under the U.S. Justice Department’s Victim Compensation Fund, it’s still less than 7% of the amount lost.

Bernard Madoff (Image: Bloomberg)

1. Enron

Estimated losses: $74 billion ($124 billion in 2022 dollars)

In 2001, the energy pipeline and commodities trading company imploded in one of the most notorious corporate accounting scandals. Enron’s management, led by CEO Jeffrey Skilling, used accounting tricks such a “special-purpose vehicles” and mark-to-market accounting to hide mounting debts and losses from shareholders. Those shareholders included thousands of Enron employees whom managers had encouraged to invest their retirement funds in company stock.

Enron’s bankruptcy filing was, at the time, the largest in U.S. history. After Enron’s failure, its accounting firm, Arthur Andersen, came under so much criticism and pressure that it eventually dissolved as well. Skilling spent 14 years in prison on charges of conspiracy and securities fraud. Chairman Kenneth Lay was also convicted of securities fraud, but he died in 2006 before his sentencing.

Jeffrey Skilling, CEO (Image: Bloomberg)