Who Is Ivan Boesky?
Ivan Boesky is a renowned American arbitrageur who came to epitomize the mantra "greed is good" during the financial excess of the 1980s. A major player in the hostile takeover and junk bond craze, his words partly inspired the fictional character Gordon Gekko in Oliver Stone's movie, Wall Street.
In 1987, Boesky was sentenced to three years in prison for his role in an insider trading scandal. A year earlier, Boesky had cut a deal with investigators, agreeing to turn government witness and pay a $100 million penalty to the Securities and Exchange Commission (SEC).
- Ivan Boesky is a former investment banker who was convicted of insider trading in 1987 and sentenced to three years in prison.
- As part of a deal with investigators, Boesky informed on a number of his associates and agreed to pay a $100 million fine to the SEC.
- Boesky made his money by investing in the stocks of companies that were primed for takeover.
- He embodied the 1980s junk bond boom, in which leveraged buyouts of companies were financed by junk debt, and a life of excess and greed were the norm.
Understanding Ivan Boesky
Ivan Boesky, the son of a Russian immigrant father and restaurant owner, rose to power and fame as the world's leading takeover arbitrageur and made a fortune investing in stocks of companies that were takeover targets. He was unapologetic about the pursuit of money. In 1986, in a commencement speech at the business school at the University of California Berkeley, Boesky said: "Greed is all right, by the way. I want you to know that. I think greed is healthy. You can be greedy and still feel good about yourself." It was a line that would be immortalized by Gordon Gekko.
It was message that chimed with the neoliberal economic policies of Ronald Reagan and Margaret Thatcher. Corporate takeovers and downsizing were just the tickets for restructuring ossifying and highly unionized old industries. Boesky was, for a time, feted by the financial media, and his gospel of greed was much in demand on the speaking circuit. However, Boesky was considered nouveau riche, known for conspicuous consumption but not necessarily good taste.
In 1986, Boesky suffered a spectacular fall from grace when he was implicated in fraud and insider trading by Dennis Levine, who was cooperating with SEC investigators and U.S. Attorney Rudolph Giuliani. Boesky was accused of using insider information to time trades and manipulate the market. He cut a deal with investigators, agreeing to gather evidence against his associate, junk bond king Michael Milken, and pay a $100 million fine.
Drexel had fueled the leveraged buyout boom through junk bonds and was famous for its predators' ball, an investment gala for corporate raiders, and financiers.
Bringing Down the Curtain on the 1980s Junk Bond Boom
It was the end of an era of roaring corporate takeover activity and leveraged buyouts funded by junk debt. If all the raiders and junk bond traders were engaged in illegal activity, who would buy all these companies at their inflated prices?
In 1987, Boesky was given a relatively light sentence of three years in prison, with the judge citing his cooperation with authorities. Milken was originally sentenced to 10 years in prison (later amended to to less than two years) and fined $200 million. In 2020, President Donald Trump granted Milken a full and unconditional pardon.
Following the insider trading scandal, Congress increased the penalties for securities violations when it passed the Insider Trading Act of 1988. Boesky never recovered his reputation and was permanently barred from working in the securities industry.