Update (March, 9, 2018): Martin Shkreli sentenced to seven years in prison for securities fraud. (AP)
Ahead of Martin Shkreli's sentencing tomorrow, we thought you might want to know about famous punishments for financial crime. “White collar” criminals have routinely found ways to make money off of unsuspecting victims through ponzi schemes, insider trading, or manipulating the stock market—apparently, that’s so genteel that such financial criminals are distinguished from more “blue collar” crimes. In the United States, businesses lose $50 billion annually to embezzlement and theft, but more often than not, financial criminals get away with it.
You don’t have to be rich to be conned. Multi-level marketing, and other crimes, use manipulation to get people involved. Pyramid Scheme Alert’s Robert FitzPatrick, said that MLM recruiters convince people that a “poverty mentality” is the root of their struggle, and that MLM will “transform their lives.” You’ve probably seen your friends’ Facebook posts about their press-on nails, or been invited to a bag party or two: MLM is everywhere.
Here are some of the most famous financial criminals—do you know them all?
1. Martin Shkreli
“Pharma Bro” Martin Shkreli made headlines when his pharmaceutical company Turing Pharmaceuticals AG bumping up the price of potentially life-saving drugs by 5000 percent; however, that wasn’t the reason he was arrested on August 4, 2017. He was charged for running a ponzi-esque scheme and lying to investors at his hedge funds MSMB Capital and MSMB Healthcare, as well as improperly repaying investors with Retrophin Inc assets. He was convicted of two counts of securities fraud and one count of conspiracy to commit securities fraud. He was acquitted of the charges related to Retrophin. Shkreli is facing up to 20 years in prison at his sentencing on Friday, March 9.
2. Bernie Madoff
“It’s a human tragedy that is almost unimaginable,” said Brad Friedman, whose firm represents over 100 investors involved in the largest Ponzi scheme of all time. “It is the kind of thing we haven’t seen since 1929.” Bernie Madoff conned investors out of $65 billion, devastating the Jewish community. His victims included director Steven Spielberg and numerous Jewish philanthropic organizations. The scheme was discovered when clients pulling out of the company requested their returns totaling $7 billion—money that Madoff didn’t have. Madoff’s sons turned in their father in 2008, and on March 12, 2009, Madoff plead guilty to 11 federal counts of fraud, money laundering, perjury, and theft. He was sentenced to 150 years in prison.
Nearly a decade later, more than half of Madoff’s victims have recovered their losses. But the fallout from his scheme hurt medical research, especially bone marrow, indirect investors aren’t eligible for any payoff, and the psychological stress is unquantifiable—and perhaps unparalleled. Madoff’s crimes drove some of his victims to the edge—at least four people connected to Madoff killed themselves.
3. Allen Stanford
After Madoff, Allen Stanford ran the second largest Ponzi scheme in history—but Stanford maintains his innocence, saying that unlike Madoff, he “is not a thief.” Jamie Escalona, who could not pay for his grandson’s autism treatments because of Stanford’s scheme, called him a “dirty, rotten scoundrel” at the trial, an insult that didn’t appear to faze Stanford. For two decades, Stanford peddled fraudulent certificate of deposits through Stanford Financial Group into his bank in Antigua. Stanford made out with $7 billion when the company collapsed in 2009. It took three years to bring him to trial, but in March 2012 he was convicted of 13 counts of conspiracy, wire and mail fraud, obstruction, and money laundering. He was sentenced to serve 110 years in prison.
4. Jordan Belfort
Known as the “Wolf of Wall Street,” Jordan Belfort was ordered to pay victims $110 million in restitution, after manipulating stock of at least 34 companies through his trading company Stratton Oakmont. In 1999, Belfort and his partner, Danny Porush, plead guilty to 10 counts of securities fraud and money laundering. In 2003, Belfort was sentenced to four years in prison, along with the $110 million fine; however, he only served 22 months in jail. Belfort says he’s a changed man, focusing now on motivational speaking and sales training. “Fraud is not something you want to be good at,” he told the AP.
5. Charles Ponzi
Is Italian Charles Ponzi the most famous of all financial criminals? He was the first major one, at least. The Ponzi scheme involved buying international reply coupons in one country, and redeeming them for more expensive stamps in another country with stronger currency. In 1920, Ponzi made an estimated $15 million in eight months by promising investors fabulous returns. The investors were paid using money from other investors—“robbing Peter to pay Paul.” Ponzi was arrested on August 12, 1920 after The Boston Post began investigating him. He was charged with 86 counts of mail fraud and served 14 years in prison. Ponzi died in Rio De Janeiro, Brazil, utterly destitute, on January 18, 1949.
6. Martha Stewart
Business woman and celebrity Martha Stewart added criminal charges to her repertoire in 2004, after being charged with securities fraud, lying to investigators, and obstructing justice. Stewart lied to investigators about the circumstances of the sale of 4,000 share of ImClone Systems after learning illicitly from her broker that the company’s founder was selling his stock. Stewart defended her actions as “entirely lawful,” but she was still convicted. Even though she could have faced up to five years in prison, Stewart only received five months, which she served in full. In March 2005, she was released and is still working her brand to this day.
(Header: Boston Library/Wikicommons)