Less than three years after its inception, the FTX cryptocurrency scam turned out to be one of the largest corporate frauds of all time.
A cryptocurrency exchange company worth $32 billion filed for bankruptcy on November 11, 2022, leaving nearly one million customers without access to funds.
“Exchanges are already regulated. What is missing is regulation of real cryptocurrencies,” said Daniele Servadei, co-founder and CEO of e-commerce platform Sellix. . “FTX’s downfall will accelerate crypto regulation, even if it shouldn’t. In my humble opinion, these regulations are based on something that shouldn’t happen and are too strict.” Or maybe even unnecessary. Let’s see how things go.”
Following the FTX scandal, Safe Betting Sites, a popular UK-based website that helps people find the most highly regulated betting sites, lists the top 10 largest corporate frauds in history by amount embezzled and researched the location of the crypto exchange FTX. Bankruptcy is included in the list.
Enron – $74 billion
From 1996 to 2001, Enron was named America’s Most Innovative Company for five consecutive years. At one point, it was her seventh largest company in the United States (on paper).
However, the company used a mark-to-market accounting scheme to make it appear more profitable than it actually was. In addition, Enron hid all its losses in a shell company. As a result, the company fell from $90 to 65 cents a share in just four months when news of the fake account broke.
The collapse of the Enron fraud cost $74 billion in funding and also dragged out audit firm Arthur Andersen.
FTX – $32 billion
FTX had its own token, FTT, which acted like a customer loyalty program. This token was used as collateral to make a loan to Alameda Research, another company of Sam Bankman-Fried.
In November, CoinDesk reported that nearly 40% of Alameda’s $14.6 billion balance sheet is held in FTX’s own cryptocurrency, FTT. Subsequently, Changpeng Zhao, the chief executive of competing crypto exchange platform Binance, conducted corporate due diligence on FTX’s finances, prompting him to dump 23 million of his FTT coins and reduce its price to plummeted. The value of his FTT, which once traded at $80, plummeted to $1.30 after the crash.
FTX was forced to file for bankruptcy, and its collapse subsequently shook consumer confidence in the cryptocurrency market.
Parmalat – $20 billion
Parmalat CEO Kalisto Tanj inflates earnings through fake transactions, uses receivables from fake transactions to create collateral, borrows more from banks, and inflates fake assets I tried to cover up the loss. By 1990, Parmalat was losing $300 million a year and hiding the losses in a Caribbean shell company.
Shares fell about 40% over the next five months following an article published about the company by Merrill Lynch analysts Joanna Soeed and Nic Sochovsky.
The scandal broke out a year later in December 2003, when Parmalat publicly announced that it was $3.95 billion short of cash, bringing its overpriced stock to zero. The total amount of fraud resulted in an estimated $20 billion worth.
Volkswagen – $25 billion
The Volkswagen ‘Dieselgate’ scandal is one of the most audacious corporate frauds of all time. To become the world’s number one automaker, Volkswagen tried to circumvent US regulatory emissions regulations by using software to control its exhaust system.
For almost a decade, Volkswagen has entrenched a clean diesel campaign of performance cars with good fuel economy and clean emissions. Following strict U.S. protocol, VW used software to turn off the emissions control system as soon as the car left the regulator’s test bed. The car then exhales illegal levels of two types of nitrogen oxides.
The scam cost Volkswagen $25 billion in fines, penalties, civil damages and restitution for all 580,000 contaminated diesel vehicles sold in the United States. .
WorldCom – $11 billion
Worldcom, one of the largest telecommunications companies in the United States, went bankrupt in 2002 after a massive accounting fraud.
When the tech boom turned into a recession, many companies slashed their communications services and equipment. WorldCom then resorted to accounting tricks to maintain its ever-growing appearance.
To hide its liabilities, the telecommunications company inflated net income and cash flow by reporting expenses as investments. It turned out to be overrated.
Theranos – $10 billion
Theranos Inc. claimed to have invented an automated device that could devise blood tests requiring only small amounts of blood that could be used to diagnose disease quickly and accurately. The claims were later proven false and the company quickly dissolved in 2018 following multiple lawsuits.
Valued at $10 billion in 2013 and 2014, Theranos has become one of the biggest corporate scams in recent history. The company was able to raise over $700 million from venture capitalists and private investors, but it quickly turned from a hype-filled company to a major disappointment.
By 2015, medical research professor John Ioannidis questioned the effectiveness of Theranos’ technology, leading to its demise. Recently, its CEO and founder, Elizabeth Holmes, was sentenced to 11 years in prison after being found guilty of four counts of wire fraud and conspiracy.
Wirecard – $4 billion
An audit conducted by EY denied approval of Wirecard’s 2019 accounts, ultimately forcing CEO Markus Braun to admit that the company’s $2.1 billion in cash doesn’t exist.
In mid-2020, Philippine authorities investigated local businesses believed to be associated with Wirecard. The German payments firm initially claimed the lost money was held in escrow accounts at his two major banks in the Philippines, but the banks denied that.
Braun was eventually arrested and the company soon declared bankruptcy because Wirecard had falsified financial information to its shareholders. But Chief Operating Officer Jean Marsalek, who was thought to be hiding in the Philippines but denied by the country’s immigration authorities, has gone missing and is still missing.
All in all, the Wirecard demise led to a $4 billion fraud scandal.
Wells Fargo – $3 billion
American banks were fined $3 billion after a fake account scandal uncovered in late 2016.
Since 2016, Wells Fargo has faced millions of lawsuits. The plan lasted more than ten years of his life and was carried out by thousands of Wells Fargo employees.
The scandal forced the bank to pay the US Securities and Exchange Commission $3 billion. However, none of the settlement money was used to compensate the customer. Instead, banks have made another effort to compensate victims.
Quest Communications – $3 billion
Qwest Communications has been found to have falsified financial documents. To increase revenue, Qwest Telecommunications exchanges pieces of equipment with other providers and records the transaction as revenue. While inflating its share price, the company has also been guilty of insider trading.
CEO Joseph Nacho falsely informed Wall Street that aggressive earnings targets would be met, even though he knew the stock had no value. In the process, Naccio made more than his $50 million in the process of selling his shares while conducting insider trading.
All in all, telecommunications companies masterminded a financial fraud scheme worth an estimated $3 billion.
Olympus – $1.5 billion
Olympus was able to hide its losses for 20 years by paying high fees to its advisors. As a result of the scandal, the company’s stock lost his 70% of its value from 2006 to 2008.
A corporate corruption scandal resulted in $1.5 billion in investment losses and various fees and other payments dating back to the 1980s.