Financial scandal, it would appear, is taking off. In the last month alone, we have seen a $600m crypto heist, the discovery of a $4.2bn money laundering network by HSBC, and a Vatican cardinal accused of syphoning off $412m from the church.
The scale of the crisis is unprecedented. Indeed, a landmark report this year from United Nations High Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI) found that global money laundering currently drains $1.6 trillion annually from world resources, with the heaviest effects felt by the world’s poorest.
The swelling size of the financial sector, the growing complexity of the structures of global businesses, and an increasing number of professional enablers (tax advisers, wealth managers, lawyers, accountants, company formation agents, and trust companies) have laid fertile ground for money laundering, fraud, and corruption.
In order to move forward, we need to learn lessons from past crises and not simply cast them into the annals of history as one-off occurrences. Here we highlight some of the biggest financial fraudsters in recent history, and cast a brief glance over the ways unscrupulous individuals have robbed innocent investors and ruined economies:
Isabel dos Santos - $5bn
Isabel dos Santos, the daughter of Angola’s former strongman ruler, claimed that she made her multi- billion-dollar fortune through business acumen, determination, and entrepreneurial spirit. But the 2020 Luanda Leaks documents offered a dramatically different story.
The exposé detailed two decades of inside deals and government giveaways, aided by Western lawyers and accountants, which allowed dos Santos to become Africa’s richest woman through embezzlement and money laundering, exploiting her country at the expense of ordinary Angolans.
Angolan prosecutors accuse dos Santos of causing more than $5 billion of losses to the southwest African nation’s economy, and since 2019 her assets have been frozen. Now from self-imposed exile in Dubai, Dos Santos, who denies all wrongdoing, watches her fortune and empire crumble.
Bernie Madoff - $20bn
Influenced by the strategies of Charles Ponzi, one of the world’s most well-known con-artists, Bernard Madoff made history as he executed one of the largest financial crimes in history in 2008.
Undetected for decades, the well-respected financier, who once chaired the Nasdaq, was able to convince thousands of investors to hand over their savings, falsely promising consistent profits in return.
Supposedly he was investing in blue-chip shares and then engaging in portfolio hedging by buying options on the S&P 500. In fact, Madoff did not execute a single trade for his advisory clients for years. He simply deposited investors’ funds in a single bank account, paying off new customers with funds from earlier customers and providing his clients with falsified account statements. At one point, those statements totalled over $65 billion.
Things fell apart in 2008 when a large number of investors wanted to cash out, to the tune of around $7 billion, and Madoff didn’t have anywhere near enough money to cover the requested withdrawals.
He was arrested in 2011 and sentenced to 150 years behind bars. Madoff died in prison on April 14, 2021, at the age of 82.
Dmitry and Alexei Ananyev - $6bn
These Russian brothers made their fortunes in tech, mining, and later banking, accumulating at their peak a shared net worth of nearly $3bn. But in recent years, they have fallen into hot water after being accused of concocting the biggest financial scandal most of the world has still not heard about.
In late 2016, the Ananyev brothers’ business empire was facing serious financial difficulty. Needing to raise funds, the brothers allegedly devised a plan to sell $240m of guaranteed loan notes through their personal bank Promsvyazbank (PSB) to unsuspecting, ordinary Russian savers. Presented to trusting customers as safe, these were in fact the first step in a scam that allowed the bank’s owners to milk PSB as much as possible before it went under.
A few months later the Russian central bank put PSB into administration, taking over what they discovered was an empty shell, devoid of financial reserves. In order to address a capital shortfall of around $4bn, PSB had to be bailed out twice.
In the days following, the brothers fled Russia, and soon after, Russian authorities placed a warrant for their arrest, charging them with money laundering and embezzlement to the tune of around $2 billion, which was aided allegedly by their ability to move money through U.S. bank accounts.
A lawyer for Alexei said the charges and warrant for his arrest were ‘absolutely groundless’, while Dmitri denies all wrongdoing.
The Ananyev brothers still face criminal charges if they return home. Elsewhere their reported victims continue to file legal complaints against them in jurisdictions linked to their complex web of offshore entities.
Thanks to their Cypriot passports, they are able to continue to operate without repercussion in Austria, the UK and other parts of Europe. But you can’t help feeling they won’t be enjoying that luxury for long.
Katzutsugi Nami $1.4bn - $2.1 bn
The biggest investment scam in Japanese history saw Japanese businessman Katzutsugi Nami, the chairman of Tokyo based L&G Bedding company, defraud 50,000 investors between 126 and 226 billion yen ($1.4bn - $2.1 bn) over the 2001 to 2009 period.
In a scheme that would sound more familiar in today’s digital currency focused financial pages, the fraudster promised investors in the struggling L&G riches via a virtual currency called Enten, guaranteeing annual returns of 36%. In February 2007, when L&G dividends were distributed in Enten, rather than in cash, the business was hit with a number of lawsuits and cancellations of accounts.
Suspecting that the company had violated investment laws, police raided L&Gs headquarters and Nami’s home in Tokyo in September 2007. Shortly after in November, the company declared bankruptcy.
Nami was arrested in Tokyo in February 2009 on suspicion of large-scale investor fraud along with twenty-one of his associates and sentenced to 18 years in prison. Nami denies all charges.
1MDB – $4.5bn
1Malaysia Development Berhad (1MDB) was a Malaysian state investment fund that was originally set up to improve the living standards of ordinary Malaysians through financing infrastructure and other economy-linked deals in the Southeast Asian country.
However, according to US and Malaysian prosecutors, the billions of dollars raised for public development projects ended up in the pockets of private individuals, including former prime minister Najib Razak and financial fugitive Jho Low, and was used to fund their lavish lifestyles of super yachts, million-dollar parties in St Tropez, and luxury properties, as well as political campaigns and Hollywood movies.
An estimated $4.5 billion was allegedly misappropriated from 1MDB by high-level officials and their associates between 2009 and 2014. The scandal also showed the degree to which Western institutions and companies — from Goldman Sachs to Big Four auditors and prestigious international law firms — will turn a blind eye to suspected corruption in the pursuit of profit.
Earlier this year, as part of their years-long efforts to recover the stolen funds, Malaysia announced 22 civil suits against entities and individuals accused of being involved with the massive scandal, including units of Deutsche Bank and JPMorgan.
Former prime minister Najib Razak has been charged with corruption, whilst Jho Low remains the world’s highest profile financial fugitive, believed to be in China. Both Razak and Low deny all wrongdoing.
R Allen Standford - $8 Billion
Stanford was a prominent financier and professional sports sponsor who found himself in a bind when in 2009, the SEC and FBI agents raided the Houston headquarters of his financial services business, Stanford Financial Group. In a civil complaint, the SEC accused Stanford and his associates of running a “massive, ongoing fraud” based on the sale of nearly $8bn in certificates of deposit (CDs), issued by Stanford International Bank in Antigua, to investors by Stanford’s U.S.-based brokerage arm.
While Stanford claimed the CDs were backed by solid assets and posted returns that consistently beat the market, the SEC alleged the entire operation was a fraud that financed Stanford’s lavish lifestyle.
In 2012, he was found guilty of 13 felony counts and is currently serving a 110 year sentence at a high security prison in Florida.
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