Well-known scamming companies include WorldCom, Stratton Oakmont, Financial Advisory Consultants and Bre-X Minerals. Investors are advised to do due diligence before making any financial commitment to a company.
WorldCom was the brainchild of CEO Bernard Ebbers, making most of its money from acquiring smaller telecommunications companies. The CEO largely exaggerated the company’s assets, despite WorldCom being in debt. Ebbers was convicted in 2005 for false accounting practices and fraud and sentenced to 25 years in prison.
Stratton Oakmont was famous in the 1990s, and the scam was a pump-and-dump, a method of market manipulation that involves inflating the price of stocks and cashing out, causing the stock to lose value. Jordan Belfort, the man behind Stratton Oakmont, was indicted for money laundering and securities fraud in 1998 and sentenced to 22 months in prison.
Financial Advisory Consultants cheated investors for over 20 years using a pyramid scheme. The firm’s clients referred new investors under the promise of high returns in exchange for their referrals. The firm’s CEO James Paul Lewis JR. was convicted of mail fraud and money laundering in 2006 and sentenced to 30 years in prison.
Lastly, an employee of mining company Bre-X Minerals named Michael De Guzman falsified sample findings claiming to find gold in the jungles of Borneo, Indonesia. The company’s stocks plunged to zero when no gold was discovered after intensive drilling.