Crime doesn’t pay, the saying goes, at least it doesn’t if you get caught. The sentencing of Sam Bankman-Fried at the end of March to 25 years n prison for his role in the collapse of FTX, a cryptocurrency exchange, made me curious as to what other big white collar crimes and criminals there have been in the past and what has happened to them.
In the US the approximately $10 billion lost by SBF as the founder of FTX is also known seems paltry in comparison with the $65 billion in Bernie Madoff ‘s Ponzi scheme or the $74 billion squandered by Kenneth Lay, Jeffrey Skilling and Andrew Fastow in the Enron accounting fraud. And let’s not forget Allen Stanford whose Stanford Financial Group Ponzi scheme lost investors some $7 billion.
But also in Asia and Europe notable white-collar criminals have been involved in large-scale financial fraud: Yasuo Hamanaka, known as “Mr. Copper,” was a trader at Sumitomo Corporation who incurred losses of around $2.6 billion through unauthorized trading in copper futures in the 1990s. Or take Jérôme Kerviel who was a trader at French bank Société Générale where he caused losses of €4.9 billion through unauthorized trading in 2008. and then. There was Nick Leeson, a derivatives trader who caused the collapse of Barings Bank in 1995, resulting in losses of approximately £827 million (I was working with an investment management firm in London at the time and the collapse of Barings meant that I had to cut short a holiday abroad and return to the United Kingdom on a few hours notice).
Countries in Europe, particularly those with significant financial centers like the United Kingdom, Switzerland, and Luxembourg, have also experienced white-collar crime, often involving financial institutions, money laundering, and tax evasion: Marc Rich was a commodities trader who was indicted in the United States in 1983 on charges of tax evasion, racketeering, and trading with Iran during the hostage crisis. Rich fled to Switzerland, where he remained a fugitive until he was controversially pardoned by President Bill Clinton in 2001 (Marc Rich Holding eventually grew into the modern day commodity behemoth Glencore). And UBS as well as Credit Suisse among other Swiss banks have been accused of and settled with the US authorities allegations of encouraging tax evasion by American citizens.
The sentences white collar criminals received were often related to the losses incurred as a result of their fraudulent activities. In many cases, the severity of the sentence was influenced by the magnitude of the financial harm caused: Bernard Madoff was sentenced to 150 years in prison in 2009 but died having served only a fraction of that in 2021. Nick Leeson was sentenced to six and a half years in prison in Singapore for his role in the collapse of Barings Bank, while Jérôme Kerviel was initially sentenced to three years in prison in France, later increased to five years on appeal, and ordered to pay restitution for the losses incurred by Société Générale. Yasuo Hamanaka was sentenced to eight years in prison in Japan for his role in the copper trading scandal. Still, in comparison with Madoff and SBF perpetrators such as Leeson and Kerviel got away relatively lightly, quite possibly because the financial harm they inflicted was limited to a small number of or even a single corporate entity, rather than scores of individuals who lost their savings. And the sentence also ended their lucrative careers in financial markets.
Then there is those whose schemes got uncovered but remain fugitives from justice: Jho Low, a key figure in the 1MDB scandal in Malaysia, is considered a fugitive and faces charges in multiple countries, including Malaysia and the United States. Or Rakesh Saxena, a financier involved in the collapse of the Bangkok Bank of Commerce, fled Thailand in 1996 and managed to avoid extradition from Canada until 2009 (in 2012 he was jailed for 10 years by Bangkok South Criminal Court, and ordered to pay US$41 million in fines and compensation).
White collar crime occurs not only in the developed world and leading financial markets, but also in emerging markets such as the Middle East, where particularly countries with oil-rich economies, have seen cases of corruption, financial fraud, and embezzlement, often involving government officials or business leaders. And in Africa corruption is widespread in many countries, leading to white-collar crimes such as bribery, embezzlement, and fraudulent business practices.
And it’s not only individuals which commit crimes, institutions are at it too (although it could be argued that the ultimate decision to do wrong is taken by people either alone or collectively). Take for example the Enron executives mentioned above: The whole executive leadership team engaged in accounting fraud to hide the company’s financial losses and inflate its stock price. The scandal led to Enron’s bankruptcy and massive financial losses for investors. Then there are antitrust violations where large corporations sometimes collude with competitors to fix prices, divide markets, or rig bids. These actions harm consumers by reducing competition and leading to higher prices. For example, in 2012, several major banks were fined for manipulating the London Interbank Offered Rate (LIBOR), which is used as a benchmark for interest rates globally.
The global annual cost of white collar crime is difficult to estimate, but the FBI calculates that it costs the United States more than $300 billion annually (this figure includes corruption), whereas Europol thinks that in the EU it could be as high as €990 billion. Huge amounts, you will no doubt agree. Now just imagine for a second by how much these amounts could alleviate poverty or mitigate climate change.
What is often forgotten is that white collar crime not only means financial losses, but also erosion of trust in organisations and the wider financial system, which in turn may lead to market instability and greater regulatory oversight. While increased regulation is not necessarily a bad thing, often it will burden businesses with compliance costs and operational restrictions, which again lead to a loss of competitiveness.
Notwithstanding those who got caught and served their punishment, and those who got caught but so far avoided capture how many felons are still out there we don’t even know about, squandering our hard earned savings through ill will or sheer gross incompetence? I can‘t imagine that there will ever come a time where there won‘t be crooked individuals tempted by making a quick buck by any means. And could many of us be tempted if the opportunity arose? The saying „Opportunity makes thieves” is attributed to Francis Bacon, and Oscar Wilde’s quote completes it quite fittingly: „I can resist anything except temptation.“
The grumpy older man 