Some of the biggest financial scams in history have stunned the economic structures of companies and nations, rendering stupendous repercussions globally.
Financial scams have existed since time immemorial, and although they come in different fonts, they use the same tactics – manipulation and coerciveness, to rob hard-working individuals of their hard-earned money. Scammers have revolutionized how they access your funds through social media spaces or playing intricate mind games. Based on recent data, unsuspecting U.S. citizens fell prey to scammers and lost roughly $10 billion to financial scams in 2023, a 14% surge from 2022. Such figures continue to paint a striking image of the harsh realities of scammers and how they can mess up economies.
Given the many scams over the years, we took a deep dive into the annals of the internet to give you the top 10 biggest financial scams that rocked our century. Are there any lessons to be drawn by unsuspecting consumers?
Top 10 Biggest Financial Scams
The FTX Scandal
FTX shut down operations in 2022 after its CEO, Sam Bankman – Fried came under fire due to fraud allegations. Allegedly, the crypto firm collected legit client funds and accumulated them in an offshore account named Alameda Research. Such absurd financial behavior caught the eye of investors and stakeholders alike, who opted to withdraw all their digital assets, funds, and digital art and later filed a lawsuit.
FTX could not handle the mass exodus and opened a bankruptcy lawsuit. Sam was indicted in 2023 for running a Ponzi scheme aimed to swindle billions from unsuspecting clients.
Theranos
Theranos, a firm that amassed a ton of investors with the promise of a homeopathic transformation, came undone in a twisted financial scandal. Elizabeth Holmes spearheaded the organization and promised investors that Theranos could handle many tests with just a pint of blood. Such an approach poached hundreds of investors who propelled the company’s value to $10 billion. However, experts in the medical sector discovered that Theranos technology was non-existent, which led to inaccurate blood results.
As investigations continued, it emerged that the company duped victims, which led to the arrest and conviction of Elizabeth Holmes and her co-founder Balwani.
Wirecard
Wirecard, a German-based corporation and pre-eminent payment processor, clinched the spotlight in 2020 after it featured in one of the biggest financial scams globally. Wirecard made huge returns from exaggerating its earnings through fraud schemes. How did they steer these activities? By crafting fake financial records and contracts.
Guns came blazing when the Financial Times poked its nose into the implementation of the company, which led to an expose of the century on missing billions and how investors were duped into financing the company.
Wirecard had no choice but to report insolvency, provoking an outrage from its diehard clients. Numerous investigations induced the arrest of its CEO, Markus Braun, and his former executive, Jan Marsalek, a wanted fugitive in Europe.
Wells Fargo
Wells Fargo, a highly acclaimed bank in the United States, has had its share of run-ins with the law for too many times. In 2016, the bank’s executives pressured junior workers to meet their sales quotas, which prompted them to register existing customers for unauthorized accounts.
Doing this also meant signing them up for services they were clueless about and never interested in. In essence, Wells Fargo overlooked customer trust and damaged hundreds of credit scores with inflated fees. Eventually, one of the bank’s executives, Carrie Tolstedt, who headed its retail banks and small business lending sector, was arrested and pleaded guilty to obstruction.
Luckin Coffee
Luckin Coffee, a Chinese Company, was avant-garde with its investor relations and coffee house chain ideas. However, this self-preserved image collapsed in 2020 after financial experts discovered that the company used fake financial records to amplify its growth and woo investors.
Employees executed this idea by crafting dubious promotional deals and using shell corporations to purchase preposterous amounts of non-existent coffee. Finally, these schemes became known, and senior management was fired for fraudulent activities.
Volkswagen
Volkswagen, a German car manufacturer in charge of crafting some of the poshest cars of our generation, was recently involved in one of the biggest financial scams debacles whose fumes are yet to rest. In 2015, the company engaged in dubious activities with their cars involved in installing “defeat devices” to fabricate emission tests. The devices ensured that Volkswagen met the emission threshold, but upon further investigations, it became known that its car’s nitrogen oxide gas was way higher as it caused over pollution.
Later findings revealed that the scheme was centered on engine performance and violated global pollution policies. When the United States discovered this dupe, Volkswagen had to recall its batch of cars and pay approximately $30 billion in penalties to the United States.
Enron
Enron, dubbed one of the most progressive companies of the 20th century and early 21st century, dealt with various goods, including natural gas. In 1999, it launched its first-ever digital trading site, which propelled it to approximately $90 shares. In 2001, Enron engaged in fraudulent accounting tactics that allowed them to hide their losses and inflate their market cap to woo investors. This intricate web of deceit was made possible by complacent regulators and the company’s primary accounting firm.
After too many run-ins with regulators, stakeholders fled, leading to Enron’s stock price plunging. Later, the firm announced it was bankrupt, which caused investors to lose billions of dollars, yet to be settled to date.
Tyco
The Tyco financial scandal occurred due to the insatiable greed of corporate culture executives Mark Swartz and Dennis Kozlowski. Allegedly, they stole over $600 million from the company’s accounts to boost their lifestyles by authorizing illegal bonuses and exaggerating their salaries.
Their modus operandi for siphoning money from the company was easy and masqueraded as executive bonuses, benefits, and pensions. Findings from several investigations highlighted Dennis’ overspending habits on ridiculous items. Tyco lacked strict oversight and transparency regulations, which alerted the company of the two executive’s poor spending habits. Afterward, the company faced billions in losses after investors fled to greener pastures.
HealthSouth
Allegedly, a healthcare firm “HealthSouth” amplified its revenue net by a whopping $1.4 billion to align with stakeholder prospects. The company’s CEO Scrushy ordered his subordinates to create fake transactions and numbers by billions of dollars for eight years.
Junior workers strived to create fake profits that did not match the company revenue to stay on top of the market cap. HealthSouth’s dubious image came down in flames when financial experts raised a red flag that led to Scrushy’s arrest and subsequent deterioration of the company.
American Insurance Group (AIG)
American Insurance Group (AIG) allegedly committed financial fraud through a financial scheme known as default swaps. AIG was the primary insurer of the default swaps, indicating that it would pay off clients in case of losses. However, the group stepped into unchartered waters and could not account for its insurance money. Investigations shed light on AIG’s credit default swaps fraud, which negatively impacted the purchase of mortgages. Additionally, the firm’s risk management strategies were inadequate, which plummeted housing prices in the United States.
Later, financial experts discovered that the group’s CEO, Greenberg, manipulated stock prices and rigged bids. The company could not withstand its deteriorating financial status, causing the federal government to step in and fill the shoes of its predecessors.
Everything You Should Know About Financial Scams
The biggest financial scams in history occur when someone, known or unknown to you, steals your assets through criminal activity, deception, or threats. Therefore, it is crucial to stay vigilant and avoid getting into deals that promise quick returns with minimal risks. However, scams should not be confused with legit financial schemes, which also promise huge financial margins with a certain level of risk. In case you feel undecided about any financial step, it might be best to take your time and think it through.
Furthermore, financial scams thrive on false exclusivity or urgency. It might feel like you are missing out on the world, forcing you to rush to pledge an amount for better wins. Before investing in anything, take time to investigate its legitimacy. While at it, look for anything that might seem off, from customer reviews to credentials.
Finally, trust your reasoning. Walk away if a situation feels too good to be true. Also, if you must invest in something, ask for expert advice from qualified professionals. Many organizations in the U.S. offer professional financial advice, including the FTC and SEC.
Below are steps you can take to avoid falling prey to scammers:
Review Your Bank Account Regularly – Doing this ensures that you counterattack any unauthorized access or fees that seem suspicious.
Use Strong Passwords – Your accounts need passwords for better security. Therefore, ensure that they are updated often.
Double-Check Links – Nowadays, scammers have devised better ways to steal your funds, and one such method is through links that often look genuine. Ensure that you double-check any links to certify their origin.
Conclusion
These biggest financial scams highlighted above underscore how swindlers are becoming proficient at what they do. It is why the number of people falling prey to their deceit has increased over time. Even with 21st-century technological advancements, it is challenging not to fall prey to scammers. Stay vigilant when making financial decisions, and if you can, seek expert advice to put you in the right financial lane.
