At 18, Barry Minkow was the youngest CEO to ever take a company public. At 20, he was the youngest CEO to be indicted for securities fraud.
Barry Minkow ran a carpet cleaning company, became the youngest person to take a company public, and very nearly merged it into the largest carpet cleaning company in the country. Although this sounds like a page out of the American dream, it unraveled to become another scandal in a decade that saw Ivan Boesky, Michael Milken, and Charles Keating go down.

Minkow started his carpet cleaning business, ZZZZ Best, at the age of 16 and was in debt troubles from the beginning. In order to meet payroll and equipment needs, Minkow used check kiting and resorted to private loans that were rumored to be connected to the mafia. Facing mounting problems, Minkow began fudging invoices for insurance restoration services for which ZZZZ Best was neither licensed or contracted. Parlaying this paper cashflow into more debt, ZZZZ Best was able to expand even while it was financially unstable. In hopes of finding a way out of debt, Minkow decided to take ZZZZ Best public.

Through various methods of deceit, including fake books, false offices, and claiming the work of other companies as his own, Minkow passed the independent audits and became the youngest person to undertake an IPO in 1986. The IPO made Minkow a paper millionaire but did little to solve the fraud the company was built on. Minkow tried to break into legitimacy by merging with a larger carpet cleaner, but the high profile of Minkow and the deal proved his undoing. Ties to the mafia, allegations of money laundering, reams of paper fraud, and years of operation without an actual profit brought ZZZZ Best crashing down.

Minkow went from owning $100 million of a $300 million company to facing jail time as the result of concurrent SEC and FBI investigations. Minkow served time in prison and is still paying reparations to the investors who lost over $100 million as a result of his fraud. In an ironic twist, Minkow has went on to work for the Fraud Discovery Institute to catch people running schemes similar to his own. (Read about other fraudsters in our article The Pioneers Of Financial Fraud)

This question was answered by Andrew Beattie.

  1. What are some high-profile examples of wash trading schemes?

    In 2012, the Royal Bank of Canada (RBC) was accused of a complex wash trading scheme to profit from a Canadian tax provision, ... Read Full Answer >>
  2. What are examples of inherent risk?

    Inherent risk is the risk imposed by complex transactions that require significant estimation in assessing the impact on ... Read Full Answer >>
  3. What is the difference between wash trading and insider trading?

    Wash trading is an illegal trading activity that artificially pumps up trading volume in a stock without the stock ever changing ... Read Full Answer >>
  4. What impact did the Sarbanes-Oxley Act have on corporate governance in the United ...

    After a prolonged period of corporate scandals involving large public companies from 2000 to 2002, the Sarbanes-Oxley Act ... Read Full Answer >>
  5. Who are the most famous people convicted of insider trading?

    In finance, insider trading refers to the buying and selling of security by a person who has access to material non-public ... Read Full Answer >>
  6. What's the difference between insider trading and insider information?

    Insider information is the knowledge of nonpublic material about a publicly traded company that may affect the stock's price. ... Read Full Answer >>
Related Articles
  1. Professionals

    4 Must Watch Films and Documentaries for Accountants

    Learn how these must-watch movies for accountants teach about the importance of ethics in a world driven by greed and financial power.
  2. Investing Basics

    4 Iconic Financial Companies That No Longer Exist

    Learn how poor management, frauds, scandals or mergers wiped out some of the most recognizable brands in the finance industry in the United States.
  3. Active Trading

    What Is A Pyramid Scheme?

    The FTC announced it had opened an official investigation of Herbalife, which has been accused of running a pyramid scheme. But what exactly does that mean?
  4. Investing Basics

    How Financial Statements Are Manipulated

    Financial statement manipulation is an ongoing problem, and investors who buy stocks or bonds should be aware of its signs and implications.
  5. Economics

    3 Notorious American White Collar Criminals

    Learn about the crimes and punishments of some of the most infamous convicted white-collar crooks.
  6. Savings

    Is It Safe to Send Money Through Gmail?

    Learn why Google's safeguards minimize the risks of sending money via Gmail, but also realize how hackers' sophistication always renders the Internet less than 100% safe.
  7. Investing Basics

    Top 3 Most Scandalous Insider Trading Debacles

    While insider trading is often difficult to spot, there have been plenty of egregious examples in history that were fairly simple to detect.
  8. Economics

    Detecting Financial Statement Fraud

    Fraudulent financial statements account for about 10% of the white-collar crime incidents reported each year.
  9. Professionals

    10 Must Watch Documentaries For Finance Professionals

    Find out about some of the best documentaries that finance professionals can watch to gain a better understanding of their industry.
  10. Savings

    Is It Safe to Send Money Through Facebook?

    Learn how Facebook employs strong measures to keep your information safe when sending money, but understand the rare threats that still exist.
  1. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise ...
  2. Money Laundering

    Money laundering is the process of creating the appearance that ...
  3. Black Money

    Money earned through any illegal activity controlled by country ...
  4. Financial Action Task Force (FATF)

    An intergovernmental organization that designs and promotes policies ...
  5. Banker Trojan

    A malicious computer program designed to gain access to confidential ...
  6. Black Market

    Economic activity that takes place outside government-sanctioned ...

You May Also Like

Hot Definitions
  1. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  4. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  5. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  6. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
Trading Center