A financial scandal can rock the markets and damage investor confidence, sometimes triggering economic crises. When these incidents occur, governments and regulatory bodies scramble to enact reforms in order to prevent similar events from occurring in the future. These reforms can include stricter accounting standards and increased oversight of corporations.
However, such measures are not foolproof. Greed and corruption are still present, and even regulated markets can fall victim to their allure. Financial scandals are a reminder of the need for transparency and accountability in our markets, as well as whistleblower protections to encourage employees to speak up when they see wrongdoing.
In 2020, German payments company Wirecard was a rising star in the fintech industry, but a fraud scandal forced it to collapse into bankruptcy. The company had inflated its revenues and profits, resulting in billions of dollars of losses.
Throughout the 1990s, Bernard Madoff ran a Ponzi scheme that defrauded investors of nearly $65 billion. His case is considered one of the largest in history.
The collapse of investment bank Lehman Brothers in 2008 is widely regarded as the catalyst for the global financial crisis. The US government bails out the companies Fannie Mae and Freddie Mac and nationalises UK bank Northern Rock.
A civil engineering and construction firm, Granite Construction, fell into a massive accounting scandal in 2022 after senior executive Dale Swanberg manipulated project costs to increase profit margins. The company filed for Chapter 11 bankruptcy a month later.
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