PROJECT

PRESENTATION The Great Wall Street Rip-off

(SEMINAR IN FINANCE)
GROUP MEMBERS
Sohaib Azeem 191610042
Ayesha Butt 191610045
WHAT IS WALL STREET
FRAUD?
Wall Street frauds have been around as long as Wall Street has been a financial hub –
wherever piles of money are gathered, unscrupulous individuals scheme to get their
hands on some of it through any means possible, legal or otherwise.
Many of the activities that are commonly considered fraud on Wall Street now –
such as insider trading – were once perfectly legal.
A lot of the biggest Wall Street frauds in recent years have involved major
accounting scandals, where companies conspired to report inflated earnings or hide
losses.
 ALBERT WIGGIN
Albert H. Wiggin became chairman of Chase Bank in 1917.
Engaged in M&A activities over the next 15 years
Through 6 of his own corporations, including three in Canada
to avoid reporting taxes on capital gains, Wiggin regularly
traded Chase stock.
During the Fall of 1929, he began short selling shares of
stock of Chase.
The short selling of shares of his employer's stock broke no
laws at the time, but the public certainly reacted badly.
His insider trading served as a rationale for the ban on insider
trading provision of the Securities and Exchange Act of 1934.
 ENRON
During 2001, after series of revelations involving irregular accounting
procedures bordering on fraud perpetrated throughout the 1990s
involving Enron and its accounting company Arthur Andersen, Enron
suffered the largest bankruptcy in history
Some highlights of the scandal are:
 $30 Million of self dealings by the Chief Financial Officer
 $700 Million of Net earnings disappeared
 $1.2 Million of Equity Shareholders disappeared
 Over $4 Billion hidden liabilities
Many of Enron’s recorded assets and profits were inflated or
totally fraudulent and non-existent. Debts and losses were put into
entities formed offshore that not included in the company’s
financial statements
 BRE-X MINERALS
David Walsh founded Bre-X Minerals Ltd. in 1989 as a subsidiary of Bresea Resources
Ltd. The company did not make a significant profit before 1993. Walsh bought a property
in the middle of a jungle near the Busang River, Indonesia. The first estimate of the site
by its project manager (Filipino geologist Michael de Guzman) was approximately 2
million Troy ounces.
The Indonesian government of President Suharto got involved. The Indonesians
suggested that Bre-X share the site with the large Canadian mining firm Barrick Gold, in
association with Suharto's daughter. Bre-X hired Suharto's son to handle their side of the
affair. Bob Hasan, another Suharto acquaintance, negotiated a deal whereby Bre-X would
have a 45% share, Suharto 40% and McMoRan with 15% .
The fraud began to unravel rapidly on March 19, 1997, when Filipino Bre-X geologist
Michael de Guzman reportedly committed suicide by jumping from a helicopter in
Busang, Indonesia. His wife was receiving monetary payments from somebody long after
his supposed death. A week later, on March 26, 1997, the American firm Freeport-
McMoRan, announced that its own due-diligence core samples, showed "insignificant
amounts of gold”.
 ADDITIONAL RESOURCES
Corporate Fraud
 Corporate fraud consists of illegal or unethical and deceptive actions committed either by a company or
an individual acting in their capacity as an employee of the company. Corporate fraud schemes are often
extremely complicated and, therefore, difficult to identify.
 The victims of corporate fraud are consumers or clients, creditors, investors, other businesses, and
eventually, the company that is the source of the fraud and its employees. (Enron)

Market Manipulation
 Market manipulation refers to artificial inflation or deflation of the price of a security. Also known as
price manipulation or stock manipulation, it involves the literal manipulation of a financial market for
personal gain. It means influencing the behavior of the securities with the intent to do so.
 Market manipulation can be difficult for authorities and market regulators to detect, given that multiple
variables affect the price movement of a security.