The Top 10 Biggest
Financial Crimes in History.

The biggest Financial Crimes in history weren't carried out at the point of a gun, but with a pen or the click of a computer key.

Some were carried out through greed; some because of the narcissistic dreams and delusions of rogue traders.

All were made possible by breaches or oversight of basic business principles of justice, fair play, good governance and competent management.

1. Bernard L. Madoff ... $65 billion.

Institution:

When: From the 1980's until Madoff's arrest in December 2008.

How: Bernard Lawrence Madoff carried out one of the biggest financial crimes in history through a Ponzi scheme which defrauded thousands of (mostly wealthy) investors.

Almost $65 billion, including all the phony "gains" along the way, was lost.

Many investors were wiped out. At least two committed suicide, including French financier Rene-Thierry Magon de la Villehuchet who lost his entire life savings and his client's money to the tune of $1.4 billion. He slashed his wrists with a box-cutter in his Manhattan office. Madoff became known as "The most hated man in New York".

Mark Madoff, the eldest son, hung himself two years after his father's arrest with a dog leash as his 2 year old son slept nearby.

Sentence: 150 years in prison.

Financial Crimes.

2. Bruno Michel Iksil... up to $9 billion.
... rogue trader.

Institution: JPMorgan Chase.

When: 2011 to 2012.

How: Iksil joined the London office of JPMorgan Chase around 2005, commuting from Paris. He was known for his aggressive trades and was nick-named "The Caveman" after a $1 billion bet (that certain companies would default) earned his employer $450 billion. After a series of disastrous Credit Default Swaps (which is estimated may total $9 billion once the complex maze of trades is untangled) he was re-nick-named "The London Whale".

Sentence: An investigation is currently being carried out by the Federal Reserve, the SEC, and the FBI (ref: Wikipedia).

Published on 14 Jul 2012 by The Young Turks.
"JPMorgan Chase said Friday that its traders may have tried to conceal the losses from a soured bet that has embarrassed the bank and cost it almost $6 billion -- far more than its CEO first suggested."... Financial Crimes.

3. "Sir" Allen Stanford ... $8 billion.

Institution: Stanford International Bank.

When: 2000 to 2008.

How: Stanford "Certificates of Deposit" promising "safe, insured returns" of up to 15 percent enticed over 21,000 investors to hand over their money, which was then spent on everything from illiquid real estate to cricket tournaments. Some of the bank's assets were manufactured through a phony $2 billion real estate deal in Antigua, which later bestowed on Stanford the title of "Sir".

Sentence: In March 2012 Stanford was found guilty on 13 of the 14 charges against him. On June 15th 2012 Stanford was sentenced to 110 years in prison for conducting one of the largest Ponzi schemes in US history.

*P.S. As of November 2011 the court appointed receiver had only recovered US$217 million, of which US$102 million had already been spent on recovery costs... not much joy for the 21,000 investors (many of whom lost their life savings).

Financial Crimes:
Financial Crimes:

4. Jerome Kerviel... Euro 4.9 billion.
...rogue trader.

Institution: French bank Societe Generale.

When: 2006 - 2008.

How: Kerviel, a junior futures trader, became a "rogue trader" and joined the financial crimes list by conducting unauthorized trades in European Stock Index Futures totalling tens of billions of dollars (more than the bank's total market capitalization).

Sentence: 5 years prison, 2 years suspended.

Financial Crimes:

5. WorldCom ... $3.8 billion.

Institution: Began as Long Distance Discount Services (LDDS) in 1983, became LDDS WorldCom in 1995, and WorldCom in 2000.

When: Main fraud from 1999-2002.

How: Bernard Ebbers became CEO of LDDS in 1985 and remained at the helm of the company to the bitter end.

The fraud involved capitalizing "line costs" on the balance sheet rather than correctly expensing them, and inflating revenues with phony accounting entries from "corporate unallocated revenue accounts".

Audits in 2003 revealed the company's total assets had been inflated by some $11 billion.

Over 20,000 layoff notices went out in 2002 which had workers clearing their desks into cardboard boxes and leaving work for the last time.

Sentence: Bernard Ebbers was sentenced to 25 years imprisonment.

Financial Crimes:

6. Yasuo Hamanaka ... $2.6 billion.
..."Mr. Copper".

Institution: Sumitomo Corporation.

When: 1996.

How: The head of Sumitomo's metal-trading division, he was nick-named "Mr. Copper" and controlled up to 5 percent of the world's copper.

Hamanaka used his position to corner and squeeze the market higher through the London Metal Exchange for nearly a decade, earning handsome profits for his company and bonuses for himself. Eventually, the copper price crashed leaving Sumitomo exposed to huge losses.

The company denied any knowledge of his dealings and labeled Hamanaka a "rogue trader" accusing him of forging a supervisor's signature.

Sentence: 8 year prison term.

7. Kweku Adoboli (UBS)... $2.3 billion.
...rogue trader.

Institution: Swiss global Investment Bank UBS.

When: 2011.

How: 31 year old Adoboli was born in Afican Ghana, lived in England from 1991, and graduated from the University of Nottingham (shades of Robin Hood...stealing from the rich?).
A director of the Global Synthetic Equities Trading team in London, Adoboli engaged in unauthorised "rogue trades" by dealing in S&P 500, DAX, and EuroStoxx index futures.

At his trial Adoboli insisted such unauthorised trades were common place at the firm, and that he got in trouble only because he lost money.

His father, a former Ghanian official at the United Nations was shocked saying "The family is heartbroken because fraud is not our way of life."

Sentence: In November 2012 Adoboli was found guilty of fraud and sentenced to seven years in prison. The judge told Adoboli he would "forever be known as the man responsible for the largest trading loss in British banking history".

*P.S. In October 2012 UBS announced it would cease a number of its risky trading businesses which would see 10,000 employees lose their jobs world-wide.

Financial Crimes:

8. Nick Leeson ... $ 1.4 billion.
...rogue trader.

Institution: Barings Bank.

When: 1995.

How: Leeson worked out of the Singapore office of Barings Bank, the oldest merchant bank in London (started in 1762). He carried out unauthorized trades in Nikkei Index Futures at first earning great profits for the bank and bonuses for himself.

The Kobe earthquake of January 17th 1995 sent markets into free-fall trapping Leeson on the wrong side of a trade. Leeson fled Singapore leaving a note saying "I'm sorry".

Barings Bank was declared insolvent 5 weeks later.

Sentence: 6 year jail sentence.

Financial Crimes:

9. Toshihide Iguchi ... $1.1 billion.

Institution: Daiwa Bank of Japan.

When: 1983-1995.

How: Iguchi started work in Daiwa's New York branch soon after graduating from a U.S. university. In 1980 he was promoted to portfolio manager and eventually rose to executive vice president. He incurred his first losses in 1983 and began their concealment, helped by two co-workers.
His fraud involved the unauthorized selling of client's securities (U.S. Treasury Bonds) to cover his losses and the falsification of Banker's Trust account statements to hide these transactions. He is believed to have forged over 30,000 trading slips and other documents.

Iguchi explained his main motive was to protect his reputation and his career. Daiwa Bank was fined $340 million and forced to close its U.S. offices in 1995.

Sentence: 4 year prison term.

10. Enron ... $1 billion.

Institution: Enron Corporation...American energy company based in Houton, Texas.

When: 1985-2001.

How: Enron was formed in 1985 by Kenneth Lay who gathered a staff of executives who engaged in exploiting accounting loopholes, shady financial reporting, special purpose entities and covering up billions in debt from failed projects and deals.

The dysfunctional company culture focused on high-volume deals and short-term earnings driven by executives chasing generous performance-based bonuses. Enron's auditor, accounting firm Arthur Andersen, was later accused of not applying proper standards in its audits with a conflict of interest due to the large consulting fees they were generating from Enron. Arthur Andersen also shredded tons of documents and deleted some 30,000 e-mails and computer files raising suggestions of a cover up.

Enron was declared bankrupt in 2001. Shareholders lost almost $11 billion when the its stock price crashed from $90 in mid-2000 to under $1 by November 2001. Up to 7,500 Enron employees in Houston lost their jobs.

Arthur Andersen (then one of the top 5 audit firms in the world) was forced to surrender its CPA licence in August 2001 and 85,000 employees subsequently lost their jobs around the world... 28,000 of those in the U.S.A.

Sentence: Kenneth Lay faced a 45 year prison term but died in July 2006 before sentencing.
Enron President Jeffrey Skilling was sentenced to 24 years in jail.

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