So here are a couple more guys, building off my previous post, that make Sam Bankman- Fried look small time.
As a side note to that first article, I did not really think about until after, Bernie Ebbers cost me personally quite a lot of money. I was working for Sprint PCS at the time all that took place. I don't remember the exact numbers, but, Sprint stock was trading around 80 dollars when the WorldCom takeover fell though. Before it was all said and done, when I left company the stock had hit one dollar. It only recovered to around ten dollars before Sprint finalIy was taken over years later by another company. My 401k at the time, took quite the hit. I tell that story to point out, I realize the real world implications of these bad apples.
Ivan Boesky
His career on Wall Street began in 1966 as a stock analyst. In 1975, he started his own arbitrage firm, and by the 1980s, his net worth was estimated to be in the hundreds of millions. Boesky looked for companies that were takeover targets. He would then buy a stake in those companies on speculation that news of a takeover was going to be announced, then sell the shares after the announcement for a profit.
Throughout the 1980s, corporate mergers and takeovers were enormously popular. According to a 1986, article in Time Magazine, there were almost 3,000 mergers worth $130 billion in that year alone.
However, Boesky's alarming success in this strategy was not all instinct: Before the deals were announced, the prices of the stocks would rise as a result of someone acting on inside information that a takeover was going to be announced. This is a sign of illegal insider trading, and Boesky's involvement in this illegal activity was discovered in 1986 when Maxxam Group offered to purchase Pacific Lumber. Three days before the deal was announced, Boesky had purchased 10,000 shares.
As a result of these and other insider-trading activities, Boesky was charged with stock manipulation based on inside information on November 14, 1986. He agreed to pay a $100 million fine and serve time in prison. He was also banned from trading stock professionally for life. He cooperated with the SEC, taping his conversations with junk-bond firms and takeover artists. This led to both investment bank Drexel Burnham Lambert and its highest-profile executive, Michael Milken, being charged with securities fraud.
Michael Milken
In the 1980s, Milken was known as the junk bond king. A junk bond (also called a high-yield bond) is nothing more than a debt investment in a corporation that has a high probability of default, but provides a high rate of return if it does pay the money back. If you wanted to raise money through these bonds, Milken was the person to call. He used them to finance M&As as well as leveraged buyouts (LBOs) for corporate raiders. Despite their reputation, the debt securities known as "junk bonds" may actually reduce risk in your portfolio.
But what he was doing was nothing more than creating a complex pyraid scheme. When one company would default, he would then refinance some more debt. Both Milken and Drexel Burnham Lambert would continue to make their fees as a result of this behavior. The company made at least half of its profits from the work of Milken.
Later on, Milken also started purchasing stock in companies that he knew would become potential takeover targets. Boesky, when charged with insider trading in 1986, helped implicate both the firm and Milken in several insider trading scandals. This led to criminal charges against the firm and nearly a hundred charges against Milken, who pleaded guilty, was sentenced to 10 years in prison and paid $600 million in fines.
It is argued that the savings and loan crisis in the late 1980s and early 1990s occurred because so many institutions held large amounts of Milken junk bonds. After he was released from prison, Milken focused his attention on his foundation, which supports cancer research.
