LibGuides: Speculation & Financial Risk-Taking: Fraudulent Financial Activity

Charles "The Boston Swindler" Ponzi (1882-1949)

"...in 1920, Ponzi's sham firm in Boston collected an estimated $10 million from hopeful investors who had been drawn in by his pledge to pay a 50 percent return on the money via the selling of overseas postal reply coupons. The savvy con artist, who targeted Boston's Italian American community and other working-class folk, merely paid his first round of investors with funds deposited by newcomers." More...

SOURCE: Charles Ponzi. (2014). In Encyclopedia of World Biography (Vol. 34). Detroit: Gale.

Source:Wikipedia Commons

Gold Mining Fraud - The Bre-X Saga

"One of the worst scandals ever experienced in the securities markets occurred in 1997 when it was discovered that claims of an unprecedented gold find in Indonesia by a Canadian company known as Bre-X were fraudulent. Ore samples had been salted. The Bre-X stock had soared to $4.5 billion in value before exposure of this hoax. The company’s mining engineer mysteriously disappeared while flying in a helicopter over the site." More...

SOURCE: "4 The Market Boom." A Financial History of the United States, Jerry W. Markham, Routledge, 1st edition, 2002.

Accounting Irregularities and the Collapse of Enron Corporation

"The scandal resulted in a wave of new regulations and legislation designed to increase the accuracy of financial reporting for publicly traded companies. The most important of those measures, the Sarbanes-Oxley Act (2002), imposed harsh penalties for destroying, altering, or fabricating financial records." More...

SOURCE: Enron scandal. (2017). In Encyclopædia Britannica.

Bernie Madoff Investment Scandal (2008)

"The Madoff scandal was a fraudulent investment scheme, exposed in 2008, that was perpetrated over a number of years by Wall Street financier and former NASDAQ chairman Bernard Madoff. It was an elaborate, high-stakes Ponzi scheme in which current investors were paid returns on their investments from the funds invested by new investors rather than from actual market gains." More...

SOURCE: Ciment, J. (2013). Madoff (Bernard), scandal. In R. Chapman, & J. Ciment (Eds.), Culture wars in America: An encyclopedia of issues, viewpoints, and voices (2nd ed.). London, UK: Routledge.

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Books, E-Books and Other Resources -- Fraudulent Speculative Activity

Fraud : An American history from Barnum to Madoff [E-Book] The United States has always proved an inviting home for boosters, sharp dealers, and outright swindlers. Worship of entrepreneurial freedom has complicated the task of distinguishing aggressive salesmanship from unacceptable deceit, especially on the frontiers of innovation. At the same time, competitive pressures have often nudged respectable firms to embrace deception. As a result, fraud has been a key feature of American business since its beginnings. In this sweeping narrative, Edward Balleisen traces the history of fraud in America—and the evolving efforts to combat it—from the age of P. T. Barnum through the eras of Charles Ponzi and Bernie Madoff. Starting with an early nineteenth-century American legal world of "buyer beware," this unprecedented account describes the slow, piecemeal construction of modern regulatory institutions to protect consumers and investors, from the Gilded Age through the New Deal and the Great Society. It concludes with the more recent era of deregulation, which has brought with it a spate of costly frauds, including the savings and loan crisis, corporate accounting scandals, and the recent mortgage-marketing debacle. By tracing how Americans have struggled to foster a vibrant economy without enabling a corrosive level of fraud, this book reminds us that American capitalism rests on an uneasy foundation of social trust.
Publication Date: 2017
Ponzi's Scheme : The true story of a financial legend You’ve heard of the scheme. Now comes the man behind it. In Mitchell Zuckoff's exhilarating book, the first nonfiction account of Charles Ponzi, we meet the charismatic rogue who launched the most famous and extraordinary scam in the annals of American finance. It was a time when anything seemed possible–instant wealth, glittering fame, fabulous luxury–and for a run of magical weeks in the spring and summer of 1920, Charles Ponzi made it all come true. Promising to double investors’ money in three months, the dapper, charming Ponzi raised the “rob Peter to pay Paul” scam to an art form and raked in millions at his office in downtown Boston. Ponzi’s Scheme is the amazing true story of the irresistible scoundrel who launched the most successful scheme of financial alchemy in modern history–and uttered the first roar of the Roaring Twenties. Ponzi may have been a charlatan, but he was also a wonderfully likable man. His intentions were noble, his manners impeccable, his sales pitch enchanting. Born to a genteel Italian family, he immigrated to the United States with big dreams but no money. Only after he became hopelessly enamored of a stenographer named Rose Gnecco and persuaded her to marry him did Ponzi light on the means to make his dreams come true. His true motive was not greed but love. With rich narrative skill, Mitchell Zuckoff conjures up the feverish atmosphere of Boston during the weeks when Ponzi’s bubble grew bigger and bigger. At the peak of his success, Ponzi was taking in more than $2 million a week. And then his house of cards came crashing down–thanks in large part to the relentless investigative reporting of Richard Grozier’s Boston Post. In Zuckoff's hands, Ponzi is no mere swindler; instead he is appealing and magnetic, a colorful and poignant figure, someone who struggled his whole life to attain great wealth and who sincerely believed–to the very end–that he could have made good on his investment promises if only he’d had enough time.Ponziis a classic American tale of immigrant life and the dream of success, and the unexpectedly moving story of a man who–for a fleeting, illusory moment–attained it all.
Call Number: UofL Main Collection HV 6692 P66 Z83 2005
Publication Date: 2005
Business Scandals, Corruption, and Reform [E-Book] Written by an expert on financial analysis and capitalism, this book describes the widespread corruption and specific scandals that have occurred throughout history when ethically-challenged innovators and greedy scoundrels are unable to resist the dark side of corruption.
Publication Date: 2013
Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay Classic swindles, wild schemes, and incredible scams on a grand scale: this 19th century landmark study of crowd psychology and mass mania provides an entertaining account of human folly through the ages. It happens in every period and every nation, from the Tulipomania that practically consumed the Dutch imagination in the 17th century to the Mississippi Scheme that swept France in 1720 and the South Sea Bubble that ruined thousands in England during the same decade. There's also a look at fads and delusions that sprung from beliefs and causes that still have supporters today: the prophecies of Nostradamus, the coming of comets and Judgment Day, the Rosicrucians, and astrology. Some of the people and movements surveyed here remain highly controversial, from the Crusades to sorcery and witchcraft. Compelling and thought-provoking.
Call Number: UofL Main Collection HM 283 M33 2002
Publication Date: 1989
Pump and Dump: the rancid rules of the new economy In Pump and Dump: The Rancid Rules of the New Economy, Robert H. Tillman and Michael L. Indergaard argue that these scandals are symptoms of a corporate governance problem that began in the 1990s as New Economy pundits claimed that advances in technology and forms of business organization were changing the rules. A decade later, it looked more like a case of no rules. Endless revelations of fraud in the wake of corporate bankruptcies left ordinary investors bewildered and employees out of work with little or nothing. Tillman and Indergaard observe that victims were taken in by organized behavior that calls to mind "pump and dump" schemes where shadowy swindlers push penny stocks. Yet, in the 1990s it was high-profile firms and high-status accomplices (financial analysts, bankers, and accountants) who used powerful institutional levers to pump the value of stock--duping investors while insiders sold their holdings for fantastic profits before the crash. The authors explain how it was that so much of corporate America came to resemble a two-bit securities scam by focusing on the rules that mattered in three critical industries--energy trading, telecommunications, and dot-coms. Free-market hype and policies at the national level set the tone. While Wall Street wrapped itself in star-spangled packaging and celebrated its purported "democratization," in the real halls of democracy congressional allies of business gutted protections for ordinary investors. In the regulatory vacuum that resulted, business professionals who were supposed to watch corporations instead promoted New Economy doctrines and worked with executives to tout their firms as New Economy contenders. Ringleaders in the inner circles that committed fraud made their own rules, which they enforced through a mix of bribery and bullying.   At a time when there is growing debate about proposals to privatize programs like Social Security and to promote an "ownership society," Pump and Dump offers a path-breaking analysis of America's most urgent economic problem: a system that relies on self-regulation and the rancid politics that continue to support the short-term interests of financial elites over the long-term interests of most Americans.
Call Number: UofL Main Collection HV 6769 T54 2005
Publication Date: 2008
The Ponzi Scheme Puzzle In a Ponzi scheme, new investments are used to pay existing investors, to cover the cost of salespersons, and to finance the Ponzi schemer's satisfying lifestyle. Although Charles Ponzi recruited investors in Boston in 1919 and died in 1949, his design and mode of operation are alive and welltoday. Indeed, losses from Ponzi schemes in the United States are equal to losses from shoplifting. Ponzi schemes catch in their net highly sophisticated individuals and institutions as well as low-income and middle-income investors, and these schemes have attracted investors all over the world, inRussia, England, India, Albania, Romania, Portugal, Costa Rica, and elsewhere.Looking into the innumerable cases of Ponzi schemes throughout the years, Tamar Frankel observes that even though patterns began to emerge in the stories of con artists and their victims' behavior, the main puzzles still remain: How do con artists dazzle and lure wealthy and educated individuals andrepresentatives of large institutions to hand over huge sums of money? How do con artists divert investors' attention from the soft spots of their stories? And while there are so many books and articles about Ponzi schemes, their warnings and constant advice on how to detect and avoid con artists gounheeded. In The Ponzi Scheme Puzzle, Frankel explores con artists' fascinating power of persuasion and deception, and analyzes their subtle signals that mimic truth and honesty. She identifies the reasons for the local and global success and longevity of such schemes and seeks to understand the nature ofthe con artists and their victims. She combines the many stories of Ponzi schemes, derived mostly from court cases and newspaper articles, to show the patterns of such frauds, the nature of the con artists, and character of their victims. These patterns tell us much about human nature, about oursociety, and about ourselves. The book first analyzes the design and pattern of the con artists' attractive offers and how they hide deceptions, then deals with the ways in which schemes are advertised and sold. Next, it focuses on the core of con artists' success, then discusses the characters ofcon artists and their victims. Finally, Frankel offers a number of observations on the lessons we can learn from these stories and analyses. She concludes that our attitude to con artists is ambivalent and uncertain perhaps because their behavior is so close to the behavior of honest people; orperhaps because they act like the social leaders with whom they are likely to mingle, or perhaps their actions are necessary to shake up a complacent society. Therefore, she writes, self-protection from charming, dangerous con artists must involve self-examination: once we recognize our owntendencies we can better protect ourselves from their toxic attraction.
Call Number: UofL Main Collection HV 6691 F73 2012
Publication Date: 2012
Understanding Ponzi Schemes: can better financial regulation prevent investors for being defrauded? [E-Book] A Ponzi scheme is one of the simplest, albeit effective, financial frauds to engineer, and new schemes keep coming forward. Despite this, however, people continue to invest in them. How are we to account for the seemingly never-ending lure of such schemes? In providing answers to this central question, this concise and well-researched book examines how Ponzi schemes operate, and how they differ from pyramid schemes, Ponzi finance and other financial arrangements.
Publication Date: 2015
Memoirs of Extraordinary Popular Delusions and the Madness of Crowds [Free E-Resource] by Charles Mackay
Publication Date: 1852

Related Subject Headings

Revisiting Bre-X Scandal

Bre-X: The real story and scandal that inspired the movie Gold
Calgary Herald news article (2017)

Bre-X : gold today, gone tomorrow ; anatomy of the Busang swindle
Call Number: UofL Main Collection HD 9536 I54 B73 1997
Publication Date: 1997
Bre-X : The inside story by Diane Francis For 2 years, BRE-X was the darling of the world's stock markets. Millionaires were created over night; until the scam was uncovered.
Call Number: UofL Main Collection HD 9536 I54 B74 1997
Publication Date: 1998

Speculation & Financial Risk-Taking

Charles "The Boston Swindler" Ponzi (1882-1949)

Gold Mining Fraud - The Bre-X Saga

Accounting Irregularities and the Collapse of Enron Corporation

Bernie Madoff Investment Scandal (2008)

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Books, E-Books and Other Resources -- Fraudulent Speculative Activity

Related Subject Headings

Revisiting Bre-X Scandal

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