Wall Street Villains

For the most part, traders respect the financial system and stay within the boundaries set by regulations in order to earn a profit. However, not every trader likes to follow the rules, especially when the rules stand in the way of making millions or billions of dollars. So, we here at FTF thought it might be interesting to compile a short list of the “Top 5 Wall Street Villains.” Here is what we came up with:

5. Charles Ponzi – creator of the now famous Ponzi scheme.

Mr. Ponzi paved the way for unscrupulous brokers to steal millions of dollars from investors, so we had to have him on the list. In the early 1920’s, Charles Ponzi convinced others to invest in him so that he could purchase international coupons and then redeem them, resulting in a neat “robbing from Peter to Pay Paul” profit of some 400%. In addition, he created the “Old Colony Foreign Exchange Company” to promote this scheme. Soon he was taking in millions from investors, but, as it was too good to be true, his scheme was discovered and he found himself nearly $7 million in debt. Remember, this is in the 1920’s, so you can only imagine what that would mean in today’s market. Mr. Ponzi created the scheme that would lead to some of the biggest Wall Street scandals in history.

4. Jerome Kerviel – While Mr. Kerviel is still in the midst of a trial, he is facing allegations of causing Societe Generale to lose approximately € 4.9 billion ($7 billion) in value.

It is ironic to think that Jerome Kerviel is accused of becoming a rogue trader, when he started in the compliance sector of Societe Generale. Mr. Kerviel is facing accusations that say he was making unauthorized trades totaling nearly €49.9 billion. He apparently was hiding fraudulent trades and losses from the bank. The sad part is, Kerviel is not believed to have made a personal profit from all of his deceitful trades, but he appears on this list because he is accused of causing Societe Generale to lose billions of dollars.

3. Nick Leeson – Caused the collapse of the UK’s oldest investment bank, Barings Bank, where he was Chief Trader.

Leeson made unauthorized trades, which at first saw a profit, but when he began losing money on his trades, he used Baring Bank’s error account to cover his loses. He then continued to make risky trades in hopes of recouping his loses, all the while using the bank’s funds to cover his tracks. When he was finally caught, it was determined that his “errors” had resulted in an accumulated loss of $1.4 billion (twice the bank’s trading capital). Baring Bank attempted a bailout but inevitably went under due to Mr. Leeson’s deceitful actions.

2. Enron – There were so many people responsible for the bankruptcy of Enron, that we couldn’t just name one.

Enron perfected the art of making a balance sheet look favorable. They kept cash-flow up while keeping liabilities off the books. Between hiding debt and reporting the value of each trade as revenue, Enron created the facade that they were worth a lot more than they actually were. Hedging risk and using derivatives in a questionable manner helped lead to Enron’s bankruptcy. And let’s not forget the audit firm they took down with them, Arthur Andersen. Arthur Andersen was accused of not auditing Enron correctly, and using reckless standards (you think?), all because of the high fees they were generating from Enron. When Arthur Andersen’s questionable tactics were realized, they were forced to break up the firm. In the end, Enron lost $74 billion of shareholder’s money over a span of 4 years. In addition, they owed creditors $67 billion and were sued by thousands of employees, paying out $85 million in compensation and $2 billion in pension loses. Needless to say many people are now in jail.

1. Bernie Madoff –are you even surprised? Mr. Madoff operated what is considered the largest Ponzi scheme in history. He pled guilty to 11 federal crimes and stole close to $65 billion from his clients. He founded the Wall Street firm, Bernard L Madoff Investment Securities LLC, which some say was never a legitimate business. Eventually greed caught up with Madoff and he began to struggle to pay clients. Finally Madoff confessed to his sons that he had nothing left and that the whole investment fund was “one big lie.” He was turned in by his sons, promptly arrested, and plead guilty to securities fraud, mail fraud, money laundering and a list of other offenses. He is now serving out his 150 year sentence in the Federal Correctional Institution Butner Medium in NC.

So there is our list – do you think anyone is missing?

About Maureen Lowe

President and Founder of Financial Technologies Forum, LLC. Editor-In-Chief of FTF News. Entrepreneur, Jersey Girl that recently returned to Jersey, Loves to Bake, Married to a Kiwi, First Time Mom
This entry was posted in Financial Crime, Fun Friday, Wall Street and tagged , , . Bookmark the permalink.

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