Wall Street Fraud

Some of the largest, most notorious, and most intriguing fraud cases perpetrated on Wall Street throughout its history

Over 1.8 million professionals use CFI to learn accounting, financial analysis, modeling and more. Start with a free account to explore 20+ always-free courses and hundreds of finance templates and cheat sheets.

What is Wall Street Fraud?

Wall Street fraud has been around just about as long as Wall Street itself. Investing centers – such as Wall Street – draw in large sums of money, and where there are large sums of money, there are usually at least a few people scheming to get their hands on some of it illegally. Therefore, the history of the financial world is inextricably intertwined with the history of financial frauds.

Wall Street Fraud

When Wall Street was largely unregulated, up through the early part of the 20th century, many activities occurred regularly that were legal then but that would later be outlawed as fraud schemes. For example, the “pump and dump” strategy – buying a stock at a low price, broadly promoting it, and then selling out after a quick rise – was a perfectly legal trading tactic, as was insider trading.

It was only after the stock market crash of 1929 and the subsequent Great Depression that Wall Street began to be significantly regulated in terms of what was and was not considered legal and legitimate practice.

Among recent major Wall Street fraud cases, accounting fraud has been one of the most recurring violations, often committed by large corporations.


  • Wall Street frauds have been around as long as Wall Street has been a financial hub – wherever piles of money are gathered, unscrupulous individuals scheme to get their hands on some of it through any means possible, legal or otherwise.
  • Many of the activities that are commonly considered fraud on Wall Street now – such as insider trading – were once perfectly legal.
  • A lot of the biggest Wall Street frauds in recent years have involved major accounting scandals, where companies conspired to report inflated earnings or hide losses.

Wall Street Fraud Cases Throughout History

The following are some of the largest, most notorious, and the most intriguing cases of fraud perpetrated on Wall Street throughout its history:

Albert Wiggin

You may never have heard of Albert Wiggin, but he became a big enough Wall Street fraudster to have an anti-fraud law partially named after him.

Wiggin was a major mover in the early 20th century in the growth of what is now JP Morgan Chase Bank. He helped guide the bank through several mergers and acquisitions that increased the bank’s assets from a bit over $200 million to nearly $3 billion, making it one of the biggest banks in the world.

Unfortunately for Albert, that’s not what he’s famous for. Instead, he’s known for being the impetus for a specific section – known as the Wiggin section – of the Securities and Exchange Act of 1934. The Wiggin section – Section 16 – dealt with insider trading.

Wiggins had made several million dollars by shorting the bank’s stock in September 1929, just before the great crash in October. It made no difference that, following the crash, Wiggins organized an effort – unfortunately, a failed one – by major investors to try to prop up the stock market. Wiggins was destined to forever after be marked as a Wall Street villain.

Bre-X Minerals

Canadian mining company Bre-X Minerals is just one of many Wall Street frauds related to gold mining stocks. Just like people rushed to California in 1849 in the belief that they could strike a fortune in gold, throughout Wall Street’s history, investors have rushed to invest in fledgling gold mining stocks rumored to have hit “a big strike.” The investors had been hopeful of turning a penny stock investment into millions.

Bre-X Minerals had allegedly stumbled upon the biggest gold mine in history, in Indonesia, in 1997. The stock shot up to nearly $300 a share, and many of the investors who sold near the top did make a fortune off the stock.

Unfortunately for the rest of the investors in Bre-X, the big gold strike proved to be nothing but a total hoax. The stock fell back to being a penny stock almost overnight when the fraud was discovered. Some of the biggest losers were several pension funds that had invested tens of millions of dollars each in the stock.


Among the largest and most infamous Wall Street fraud is the story of Enron, a major energy services company. Before the fraud debacle that wiped Enron off the financial map, it was estimated to be one of the ten largest companies in the United States.

Enron’s fraud was one of the biggest accounting frauds in Wall Street history. In an effort to lure and maintain investors, the company’s executives conspired to inflate its earnings and hide much of its debt. When the fraud was uncovered in 2001, Enron stock plummeted from around $90 a share to less than $1 a share.

Enron folded, and also took with it its accounting firm, Arthur Anderson, which was found guilty of conspiring with the company to maintain the accounting scam.


Another major accounting scandal on Wall Street unfolded courtesy of Richard Scrushy, the chief executive officer and founder of HealthSouth, a healthcare services provider. During the 1990s, HealthSouth expanded rapidly, acquiring other healthcare businesses and eventually ranking among the biggest healthcare companies in the United States. Needless to say, the company’s stock also shot steadily higher during that time.

Unfortunately, Scrushy was behind a massive overstatement of the company’s earnings during the period from 1996 through 2002. How big an overstatement? HealthSouth reported net earnings of $1.3 billion, while it was actually suffering losses that totaled nearly $2 billion.

When the Securities and Exchange Commission (SEC) uncovered the fraud in early 2003, HealthSouth stock dropped from nearly $100 a share to less than 15 cents a share in a single trading day. It was subsequently delisted from the New York Stock Exchange (NYSE).

There are two interesting facts about the aftermath of the HealthSouth fraud. First, Scrushy was never convicted of any of the dozens of fraud charges leveled against him. What tripped him up instead and led to a conviction was his bribery scheme to get himself a seat on the hospital regulatory board.

Secondly, after paying hundreds of millions in fines, HealthSouth managed to recover and once again become a listed stock on the NYSE, and in 2015, the company, once again profitable, began paying dividends to shareholders. Of course, none of that helped the previous shareholders, some of whom had lost small fortunes they’d invested in the company.

Additional Resources

CFI is the official provider of the global Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional resources below will be useful:

0 search results for ‘