There were worst time when the biggest stock market scams happened. Understanding how disasters in the past have happened to investors can enable current investors to prevent them in the future. Here are some of the most significant all-time cases of firms betraying their investors.
Here are 4 biggest stock scams of recent time.
1. Centennial Technologies (1996)
In December 1996, Centennial Technologies CEO Emanuel Pinez and his management announced that PC memory cards earned the company $2 million in revenues. The company was actually delivering baskets of fruit to customers though.
The employees then produced fake documents to show they registered sales. Centennial’s stock on the New York Stock Exchange (NYSE) increased 451 per cent to $55.50 per share.
According to the Securities and Exchange Commission (SEC), Centennial overstated its earnings by about $40 million between April 1994 and December 1996.
Ironically, the company announced $12 million in income when it had lost nearly $28 million. More than 20,000 investors have lost almost all of their money in a company once considered a Wall Street darling.
2. Bre-X Minerals (1997)
The stock price for Bre-X skyrocketed to $280 (split-adjusted) high, rendering millionaires overnight out of the ordinary. Bre-X had a $4.4 billion market capitalization at its peak.
The party ended on March 19, 1997, when the gold mine proved fraudulent, and shortly afterwards the stock crumbled to pennies. The major losers were the Quebec public-sector pension system, which lost $70 million, the Ontario Teachers’ Pension Program, which lost $100 million, and the Ontario Municipal Employee’s Retirement Board, which lost $45 million.
3. Enron (2001)
The vast web of deception finally unraveled, and the share price plummeted from over $90 to under 70 cents.
As Enron dropped, Arthur Andersen, at the time the world’s fifth largest accounting company, took it down with him
. Andersen, Enron’s auditor, ultimately imploded after Enron ‘s chief auditor, David Duncan, ordered thousands of documents to be destroyed. The Enron scandal made a household name, once again, for the word “cook the books.”
4. WorldCom (2002)
Not long after Enron’s downfall, another billion-dollar accounting scandal shook the equities industry. WorldCom, a giant in telecommunications, came under extreme scrutiny after yet another instance of serious “book cooking.”
WorldCom reported operating costs as investments. The company clearly believed that office pens, pencils, and paper were an investment in the company’s future and so invested (or capitalized) the costs of such products for a number of years.