History of Greed: Financial Fraud from Tulip Mania to Bernie Madoff

Overview

The "greater fool" theory of economics states that it's possibleto make money by buying paper (securities), whether overvalued ornot, and later, selling it at a profit because there will always bean even greater fool willing to pay the higher price. Manydescribed in this book profited by peddling such worthless junk tofoolish investors. But for some people—Bernie Madoff, NormanHsu, Sholam Weiss, and "Crazie Eddie" Antar, aka the "Darth Vaderof Capitalism"—overvalued securities were not enough. Outrightfraud was ...

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Overview

The "greater fool" theory of economics states that it's possibleto make money by buying paper (securities), whether overvalued ornot, and later, selling it at a profit because there will always bean even greater fool willing to pay the higher price. Manydescribed in this book profited by peddling such worthless junk tofoolish investors. But for some people—Bernie Madoff, NormanHsu, Sholam Weiss, and "Crazie Eddie" Antar, aka the "Darth Vaderof Capitalism"—overvalued securities were not enough. Outrightfraud was their way of life. History of Greed is the compellinginside story of the names you know—Charles Ponzi, BaronRothschild, Lou Pearlman—and the names you don't—Isaac LeMaire, the world's first "naked" short-seller. It's also ourstory—why we ignore the lessons of the past and fall prey,most every time, to the promise of easy money.

For thousands of years, alchemists unsuccessfully tried to turnworthless base metals into gold. Where science failed at turningnothing into something, business succeeded. Sometimes we praise thecreators of derivatives, collateral debt obligations, subprimemortgages, credit default swaps, or auction rate securities as WallStreet's new financial wizards, the creators of "magic paper."Other times, we vilify and prosecute them as scam artists.Sometimes, it's hard to tell who is who. History of Greed revealsthe inside secrets of how the markets really work, and how scamartists abuse them to gain an unfair edge or to outright steal. Itdescribes how luftgescheft ("air business"), wizardry, dishonesty,and fraud are used to swindle people. Along with a comprehensivebibliography, History of Greed also details:

  • 400 years of financial fraud—from everyday fraud to the oddand unusual
  • Accounting fraud (phantom sales), stock option fraud(backdating), auction rate securities, hedge fund fraud, Ponzischemes, promotion fraud (pump-and-dump scams), and moneylaundering
  • How to detect fraudulent schemes
  • How government regulation only fixes yesterday's problems

If it's too good to be true, it probably is. If they say youcan't lose, you probably will. History of Greed shows that therereally is no such thing as a free lunch, while also detailing hownot to become the "greater fool."

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Product Details

  • ISBN-13: 9780470601808
  • Publisher: Wiley
  • Publication date: 9/7/2010
  • Edition number: 1
  • Pages: 398
  • Sales rank: 1,049,063
  • Product dimensions: 6.30 (w) x 9.00 (h) x 1.40 (d)

Meet the Author

David E. Y. Sarna is a serial entrepreneur who founded three companies, sold one, and successfully took two public. He is also a technologist and a writer. Mr. Sarna is also the creator of several popular blogs, including GreedWatcher.comSM, GoogleGazer.comSM, and EyeOnTheCloud.comSM. He has authored four books, written over 120 articles, was a founding regional director of the Microsoft Developers Network, and is a popular and award-winning speaker with multiple national television appearances on Fox, CNN, and MSNBC.

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Table of Contents

Foreword

Acknowledgments

Introduction

Chapter 1 Selling Air 1

Why Now?

Chapter 2 Crash Postmortem 7

How Greed, Hubris, and Lack of Supervision Did Investors In

Chapter 3 Why We Do It 14

Bubbles and Fraud

Chapter 4 Securities Fraud 20

Its Long and Storied Past

Chapter 5 The Perils of Greed 31

It's All for the Easy Money

Chapter 6 The Elements of Financial Fraud 36

A Case Study with "Crazy Eddie" Antar

Chapter 7 "Other People's Money" 43

The O.P.M. Leasing Fraud

Chapter 8 Smaller-Company Fraud 48

The "ISC" Story

Chapter 9 Selling Long and Short 58

But Mostly Short

Chapter 10 Market Manipulation 63

Improper Short Selling and Other Abuses

Chapter 11 PIPEs 73

Investing Unfairly

Chapter 12 Promotion Fraud 91

Pump and Dump

Chapter 13 Leaks, Front-Running, and Insider Trading 100

Test Yourself

Chapter 14 Fictitious Volume 108

A Pump-and-Dump Scam with Intrigue

Chapter 15 Parachute into Prison 116

U.S. v. Schrenker

Chapter 16 Affinity Group Fraud 121

Scamming Your Own Community

Chapter 17 Twentieth-Century Ponzi Schemes 127

Larger and Longer-Lasting Scams

Chapter 18 Hit Charade 132

Lou Pearlman

Chapter 19 Hedge Fund Ponzi Fraud 137

Hedge Funds Are for Big Boys

Chapter 20 Madoff and the World's Largest Ponzi Scheme 146

The Mother of All Ponzi Schemes

Chapter 21 How Madoff Got Away with It 161

Who Helped Plot in the Mother of All Ponzi Schemes; Who Can Be Made to Pay?

Chapter 22 Madoff Plea and Its Aftermath 186

Governments Go after Merkin, Kohn, and Maybe Others in the Mother of All Ponzi Schemes

Chapter 23 Mopping up after Madoff 204

Lawyers Feast on Madoff Feeders in the Mother of All Ponzi Schemes

Chapter 24 Other Recent Ponzi Schemes 225

Madoff was a Crook but He Had No Monopoly on Recent Ponzi Schemes

Chapter 25 Stanford Group 244

Massive $7 Billion, Multinational Fraud Comes to Light

Chapter 26 Ultimate Chutzpah 259

The Strange Tale of Marc Dreier, Esq.

Chapter 27 Detecting Fraudulent Financial Schemes 266

How Much to Regulate? How Much to Verify?

Chapter 28 Fraudulent Offerings 285

A Short Look

Chapter 29 Auction-Rate Securities 287

A $330 Billion Fraud?

Chapter 30 $132 Million Tax-Free Exchange Fraud 301

Section 1031

Chapter 31 Not Smart 306

The Smart Online Trading Scam

Chapter 32 Boiler Rooms 314

Where the Heat Rises

Chapter 33 Accounting Frauds 319

With Examples

Chapter 34 Stock Option Frauds 325

Alchemy That Benefits Insiders

Chapter 35 Odd and Unusual Financial Frauds 329

Not Your Everyday Fraud

Afterword What Does the Future Hold? 333

Notes 338

About the Author 382

Further Reading 384

Index 387

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Sort by: Showing 1 Customer Reviews
  • Posted September 15, 2010

    Investment lessons.

    In an age of financial hardship and scandal, "History of Greed: Financial Fraud from Tulip Mania to Bernie Madoff" by David Sarna is a book that exposes the truth. He takes a look at financial fraud from past centuries and how it affects families and cultures. The book is well written and easy to read by the financial savvy as well as those not as savvy. He does a great job of stressing financial responsibility and skepticism for the investments that seem too good to be true.

    After reading this book, I have learned that just because someone has a degree in financial management and investment banking does not mean they are going to look out for your best interest. For every honest investment specialist there is another who will take your money and run. I highly recommend this book for everyone looking to invest.

    1 out of 1 people found this review helpful.

    Was this review helpful? Yes  No   Report this review
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