It has been said that there is an interesting overlap between CEOs and psychopaths in traits and characteristics. Some experts estimate that about 4 to 12 percent of CEOs exhibit psychopathic symptoms and traits. At the same time, obscenely wealthy and successful people have a four-times-higher-rate of psychopathy compared to CEOs.
No matter the reason, it seems that people who have less propensity for conscience and empathy are much more likely and able to manipulate, deceive, and control others on their way to the top. It’s no surprise that the financial world attracts these ruthless entrepreneurial types, which have led to some of the biggest financial scams of the past two decades. Here are some of the most scandalous financial scams of the 21st century.
2008 Global Financial Crisis
While not driven by one specific fraudster and generally considered a financial tragedy (and it was), the global financial crisis of 2008 was also a financial scam of sorts because it involved a host of unethical behaviors, corporate fraud, and conflicts of interest from people in power. For one, issuers paid rating agencies a lot of money to provide investment-grade credit ratings to risky securities—giving rating agencies financial incentives to overlook financial risks. For another, home buyers were encouraged by home mortgage originators to exaggerate their income and assets to ensure that their mortgage applications were approved. Aggressive sales tactics were also enforced to sell mortgages. In the name of money, these unethical actions resulted in a recession and a major crash in the stock market.
Since then, new realms of legislation have been introduced to help protect hard-working people from institutions that want to take advantage of them.
Billy McFarland of Fyre Festival infamy had been lying his way into the pockets of affluent millennials before he even conned them into flying to the Bahamas for what everyone thought was a grand concert and vacation experience. He founded a company named Magnises, which marketed itself as a luxury credit card and membership club for millennials in New York who wanted to live large in the city. Members would have their debit and credit cards copied over to the Magnesis black card, with the promise that members can have access to exclusive restaurants and clubs and VIP concert tickets.
The company eventually crashed and burned. The members got antsy trying to collect the perks they were promised but never got, even after paying hundreds of thousands of dollars to become members. McFarland got away with so many of his scams by inflating his companies’ income and value, tricking investors into giving him money. All in all, it was said that he defrauded investors of approximately $27.4 million selling and marketing the tickets to the Fyre Festival. He is currently serving a six-year prison sentence.
Elizabeth Holmes was 19 when she came up with the idea of creating a machine that could do comprehensive physical examinations with just a few drops of blood. She promised that the machine she was building was going to democratize health care and allow ordinary people to test themselves for cancer, diabetes, and other illnesses from the comforts of their homes.
She built a company named Theranos, which in 2014 was projected to value at $9 billion. She made rounds in the press and was touted by multiple publications as the next Steve Jobs. She adopted his signature black turtleneck and evoked a deep baritone (which was eventually proven to be fake). Everything came crashing down when the inaccuracies and shortcomings of Theranos’ machine and technology were exposed, and how Holmes abused her team into helping her cover all of it up. She was also reportedly a toxic boss, as she ended up firing many of her staff members who expressed concern over the machines not working. The staff members were wise enough to hire employment lawyers who helped them blow the whistle on the operation.
Holmes was eventually forced to step down as CEO and was charged with massive fraud, and Theranos was forced to close up shop. She is currently awaiting trial, and if charged, she faces up to 20 years in federal prison, but experts say it’s unlikely she will see a day in jail due to her privilege and connections.
The worst financial scams take advantage of every day, salt of the earth, and ordinary people who are only doing their best. It’s bad enough when the system works only for the privileged few. Still, it’s cruel when powerful institutions go after people who don’t always have the cushion to protect themselves from financial blowback. This is why knowing our legal recourse is still essential, especially when those at the top have mistreated us.