This week we will be talking about the biggest financial crimes of all times. This crime was conducted on the wall street by an investment banker who started trading of penny stocks when he initially founded the company, but eventually got into ponzi advertisement of his investment strategies.

Bernie Madoff started his investment business in the year 1960s that dealt primarily with buying and selling of penny stocks and their subsequent endorsement to their customers. His initial investment into the business was merely US $5,000 which later went to become billions of dollars. This billion-dollar company was started by a single man, however, by the time the fraud was busted, it had become a family run business in which the father – Bernie Madoff, his son and his brothers were involved.

All this being said… Let’s come to the main question – How was this crime done? And, what was the crime?

This crime was done as a culmination of a series of well-organized events that had an objective to obtain maximum possible profit from possible legitimate and illegitimate sources. Madoff investment corporation was involved in daily trade for many clients. Their investments formed the basis for their commissions and hence, they were motivated to invest their clients’ money in the best possible manner. However, in the greed to earn more profits, Madoff Investments used special software’s that introduced stock results from a previous data that had values that were marginally lesser than the actual market rates.

In the entire process, consumers did have a hint of a suspicion on his activity, however, they were not very concerned on contesting the investment firm because they did not lose a lot of money through data misrepresentation. As a result, they were able to take out a large portion of people’s incomes from their stock earnings through illegitimate means.

The problem rose when the overdid it with a big-shot customer. The transactions lost for the said customer were valued around 120 thousand US dollars. And thus, he decided to fight the company. On inspection, the SEC found that the fraud was worth US $64.6 billion. Madoff, because the fraud had been conducted over a course of 40 years, has been put on life arrest for a total time period of 150 years.

Data breaches can be pricy. When breaches occur, they expose data of millions of users while highlighting the flaws that exist in a data system thereby, causing industries to transform their entire data management system. And this transformation typically costs thousands of dollars in data encryption and protection. In 2018, IBM presented a report that an average data breach costs around US $3.86 million (after studying ancillary costs of losing customers and overhauling of the system)

A complicated factor that is involved in data breaches is that it is unlike any theft. The problem is that data breaches are not realized until two or three months after data breeches have been conducted and the news is exposed to the public. This delay is also the major reason why the magnitudes of data breaches are massive.

The purpose that revolves around data breaches is to gather as much personal information possible so that data mining companies are able collect and sell data of individuals to companies like but not limited to advertising companies and campaign management associations. These marketing associations then process the data and categorize people into different pre-set categories, that their customers use to sell a said propaganda and/or a product.

In 2016, Yahoo reported that a data breech that occurred between 2013-14, data of over 3 billion users was mined by ‘a state-sponsored entity’. The data breeched mainly involved names, email IDs and date of birth of Yahoo’s users. Though the culprits were never really found out, the impact of this data breech was immense. Yahoo was put out-of-business for almost 2 weeks, until the investigations were deemed over. In fact, when the leaks were declared to the media, Yahoo was discussing the sale of its majority shares with Verizon. The leaks, resulted in a $350 million kickback to the deal, causing shares to be sold at US $4.48 Billion.

The funny thing about Data breeches is that they cannot be predicted and worked for, with respect to its intensity, in advance. Companies like Yahoo, Facebook and Google invest millions of dollars in erecting a data protection network, and still encounter faults in them on a regular basis. This makes us question, how safe is our data with those companies that are new-born internet-based blog sites and start-ups? How safe is our data with places where we, on a daily basis, voice out our views and opinions?

Just like the previous blog, this week we will be talking about another criminal that impacted the dynamics of the way in which American businessmen interacted with businessmen from other countries. In this blog, I will be discussing Victor Lustig’s scam and how he laid out his plan for selling the Eiffel Tower.

Victor Lustig was born on 4^th January 1890 in the Austria-Hungarian town of Hostinné. He led his life, just like Charles Ponzi, full of crime and criminal opportunities. However, Lustig was forced to perform criminal activities for a living and thus, he was often involved in petty crimes like but not limited to shop lifting and pick pocketing. As time passed by, the seriousness of his criminal activities grew to an extent that he became a full time criminal and subsequently, performed bigtime crimes.

Before his main act of fraudulently selling the Eiffel tower, one of the most known crime of his involves the sale of a machine that could print currency notes using radium, which was, however, nothing but a hoax. In spite this, he sold over 200 machines that could, as he said, print currency notes. Lustig, later, also involved himself with other hoax-based crimes like organizing fake horse race schemes and bogus real estate investments that involved people contributing money to an investment pool built by him. The said plans combined, made him a public enemy and an understated millionaire.

The main game

In the summer of 1925, Lustig went to France to try out a new crime venture in the city of Paris. Lustig commissioned two French government officials and prepared ‘hoax’ property papers of the Eiffel tower. Lustig then began targeting people who would come from the US on expensive cruises and would admire the Eiffel tower during their city tours.

But, how could someone convince a stranger to buy something as significant as the Eiffel tower?

Lustig was smart. While documenting property papers for the Eiffel tower, he made the French officials underline a clause which stated that the Eiffel tower was on sale because the French government needed money to recover from the war and thus, the monument had become too expensive to maintain. The said reason also made sense as the French government did introduce the idea of decommissioning the maintenance of the Eiffel tower after the war. Though never passed, there were newspaper articles having normative statements that indicated the potential sale of the tower.

Using the aforementioned newspaper articles, Lustig developed his case. He invited several Americans to place a bid on his offering. After 3 sessions of continuous bidding, the Eiffel tower was finally sold to a businessman named Thomas Kearns. In order to appreciate Lustig’s cooperation Kearns offered Lustig a trip to his home – the place where the Lustig scam was finally busted.

At Massachusetts, after having a dinner with Kearn, Lustig went up to Kearn’s room where Kearn was supposed to give him cash for the said transaction. However, with the greedy nature that Lustig had, he tried to flee with all the money that Kearn had in his closet. Sadly, Kearn showed up and he was caught red handed by him, and later the police.

Could the crime had been prevented if it was done today? Absolutely, yes.

Would it have been possible to prevent this fraudulent transaction to take place in 1925? Maybe.

As far as I can estimate, it would have been very difficult to avoid such a fraudulent transaction to take place as the governments in 1925 were not as transparent as they are today, and hence, validating the deal would have been next to impossible.