17 Big Wall Street Scandals to Know About
Wall Street has seen some shocking scandals over the years. From fraud to insider trading, these events made headlines and shook the financial world. Here are 17 scandals that you need to know.
1. Black Tuesday – 1929 Stock Market Crash
Black Tuesday, the stock market crash of 1929, marked the beginning of the Great Depression. This catastrophic event resulted from speculative bubble bursting and led to a decade-long economic crisis.
2. Charles Ponzi’s Scheme – 1920
Charles Ponzi’s fraudulent investment scheme in 1920 is one of the earliest examples of a pyramid scheme. Investors were promised high returns, but Ponzi was paying earlier investors using the investments of new clients.
3. The Savings and Loan Crisis – 1980s
The Savings and Loan crisis of the 1980s was a widespread failure of savings and loan associations in the United States. Deregulation, poor lending practices, and economic downturn contributed to this massive financial disaster.
4. Junk Bond Scandal – Late 1980s
The Junk Bond scandal, primarily associated with Michael Milken, involved the illegal use of high-yield bonds for hostile takeovers and leveraged buyouts. It led to significant losses and the fall of prominent figures in the finance world.
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5. Nick Leeson and Barings Bank – 1995
Nick Leeson’s unauthorized speculative trading led to the collapse of Barings Bank in 1995. His activities resulted in losses amounting to over $1 billion, leading to the bankruptcy of the UK’s oldest investment bank.
6. Long-Term Capital Management Collapse – 1998
Long-Term Capital Management, a hedge fund, collapsed in 1998 due to high-leverage and speculative trading strategies. This led to a significant bailout organized by the Federal Reserve to prevent a wider financial crisis.
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7. Enron Scandal – 2001
The Enron scandal, one of the biggest accounting frauds in history, involved hiding debts and inflating profits. It led to the bankruptcy of Enron and the dissolution of Arthur Andersen, one of the big five accounting firms.
8. WorldCom Scandal – 2002
WorldCom’s scandal in 2002 was another major accounting fraud. The company exaggerated its assets by billions of dollars, leading to one of the largest bankruptcies in history at the time.
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9. Bernie Madoff’s Ponzi Scheme – 2008
Bernie Madoff’s Ponzi scheme, uncovered in 2008, is considered the largest in history. He defrauded investors of billions of dollars over decades, leading to significant financial losses for individuals and institutions.
10. Lehman Brothers Collapse – 2008
The collapse of Lehman Brothers in 2008 was a pivotal moment in the global financial crisis. Its bankruptcy was the largest in U.S. history and intensified the worldwide economic downturn.
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11. Subprime Mortgage Crisis – 2007-2010
The Subprime Mortgage Crisis, which peaked from 2007 to 2010, was caused by banks giving mortgages to high-risk borrowers. This led to a housing bubble burst and was a major factor in the global financial crisis.
12. LIBOR Scandal – 2012
The LIBOR scandal involved major banks manipulating the London Interbank Offered Rate, a benchmark interest rate. This unethical practice affected loans and mortgages worldwide.
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13. JPMorgan Chase “London Whale” – 2012
JPMorgan Chase’s “London Whale” incident in 2012 involved trades that resulted in over $6 billion in losses. The scandal brought to light the risky trading practices in derivatives by the bank’s traders.
14. Forex Manipulation Scandal – 2014
In 2014, several major banks were fined for manipulating the foreign exchange market. Traders were found colluding in online chat rooms to manipulate benchmark exchange rates.
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15. Wells Fargo Account Fraud Scandal – 2016
The Wells Fargo account fraud scandal involved employees creating millions of fraudulent savings and checking accounts on behalf of Wells Fargo clients without their consent, leading to a major crisis of trust in the bank.
16. 1MDB Scandal – 2015
The 1MDB scandal involved the Malaysian government’s investment fund, 1Malaysia Development Berhad. Billions of dollars were embezzled, leading to investigations in several countries and the involvement of major financial institutions.
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17. Wirecard Scandal – 2020
The Wirecard scandal, a German payment processor and financial services company, involved a missing $2 billion from its accounts. It led to the company filing for insolvency and raised questions about regulatory oversight.
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