(This article was updated on Nov. 20, 2025, with a refreshed introduction, a revised list and a table with more examples of fraudulent companies.)
In the world of finance, few events shatter investor confidence quite like a stock collapse triggered by accounting fraud.
Over 2010 to 2025, a parade of corporate titans has crumbled under the weight of fabricated numbers, hidden debts, and deliberate deceptions. These aren't isolated mishaps; they're symptoms of a systemic vulnerability that has cost investors dearly.
Aggregating both equity and debt losses using data from Bloomberg and other financial analyses, we estimate that these fraud-fueled collapses have inflicted average annual damages exceeding US$1 trillion.
This staggering figure encompasses not just direct write-downs and bankruptcies but the ripple effects - evaporated market capitalization, frozen credit lines, and eroded trust that amplifies losses across interconnected economies.
The Transparently.ai blog has chronicled some of these debacles, shining a light on the mechanics of deceit, the human frailties that enable it and how executives game the system.
This particular article is a distillation of all our insights: a somewhat detailed snapshot of the worst instances of accounting malfeasance in the history of corporate reporting. Before we get to our rogue’s gallery, let us first set the scene with some foundational definitions and an explanation of how we derived the loss amounts involved in each fraud case.
Types of accounting scandals
Accounting scandals come in four main guises: misstatement of earnings, misstatement of solvency, fraud schemes; and embezzlement.
- Misstatement of earnings occurs when a company manipulates its revenue and/or expenses to make profits appear better than they really are. With enough determination any company can transform its income statement to give the appearance of booming growth and exceptional profitability. The main goal usually being to boost the share price, enriching the controlling owners or senior management.
- Solvency misstatement occurs when a company manipulates its assets and/or debts to give the impression of a healthy balance sheet. This type of accounting fraud is popular with companies that are insolvent, or nearly so, and prefer to hide this inconvenient truth. It is prevalent among companies with large balance sheets in relation to earnings, such as financial corporations and natural resource companies. It is prevalent among companies with large balance sheets in relation to earnings, especially in fields such as technology, pharmaceuticals, biotechnology, media, gaming and natural resources.
- Fraud schemes involve attempts to receive illegal payments through false representation, failing to disclose information or abuse of position. For the most part, these schemes parlay into stock manipulation, money laundering and bribery. Stock manipulation normally coincides with misstatement of earnings and/or solvency. Stock manipulation is commonly associated with maturing options and insider trading.
- Embezzlement is any theft that occurs when a company’s assets are unlawfully transferred. A Ponzi scheme is simply a specific type of embezzlement.
Misstatement of earnings and solvency are the most common types of accounting scandal involving large-scale losses, followed by embezzlement. This is not to say that fraud schemes are less common, simply to say that they typically entail smaller losses. That said, bribery scandals tend to dissuade a lot of potential customers.
The key to all types of accounting fraud is that either a company’s financial statements are either wilfully misstated or there is a deliberate failure to disclose information. The intent, in either case, is to defraud or illicitly obtain money or advantages.
If criminal charges are laid, the prosecution must prove intent. If not, accounting scandals will be dismissed in most jurisdictions. Some scandals do not lead to a formal judgment of guilt by a court, especially of a company avoids bankruptcy, because prosecution is complex.
But even if criminal action is avoided, scandals cause significant economic and social losses. In a recent example, it remains to be seen whether any of the arrests among former employees of Evergrande will be charged with accounting fraud.
How we calculated losses from each scandal
All of the fraud examples that follow involved losses of billions US dollars. In many cases, the company engaged in several kinds of accounting fraud. Both Enron and WorldCom, for example, misstated earnings, hid debt and engaged in fraud schemes.
For each example, we calculate the total direct losses to creditors and equity holders just prior to the revelation of the scandal. Creditors in this case include all liabilities. These numbers, calculated in nominal USD billions, are taken from financial market sources such as Bloomberg, financial statements prior to bankruptcy, bankruptcy filings and academic studies of the company in question. All figures are cross-checked against additional sources, where possible.
Currency conversion is performed as per the loss calculation date. The inflation adjustment uses the US BLS CPI to convert to 2025 dollars.
Since scandals sometimes break over a number of years, the timing of equity valuation is unavoidably subjective. Wirecard is a good example of a slow-breaking scandal. In such cases, we assume that the breaking scandal begins to impact equity valuations as soon as the first impactful evidence is announced.
Where possible, we adjust the debt losses using creditor recovery data. Recovery rates typically come from bankruptcy trustee reports. For example, Enron creditors recovered ~20–53% depending on the debt class. Lehman creditors eventually recovered ~100% for some senior classes but only after massive government intervention, so the direct loss is adjusted downward. In reality, tax payers bear the cost in the event of a bail-out so this figure should properly be reported in the losses.
However, in jurisdictions such as China the lack of transparency makes this impossible. As such, consistency requires that we ignore the cost of bail-outs.
Moreover, the estimated losses do not consider second-round effects, which are profound. The failure of any major company typically leads to multiple follow-on bankruptcies which crash through economies like a tidal wave. Parmalat, number 10 on our list, is a good example.
When Parmalat entered extraordinary administration in December 2003, payments to farmers stopped immediately. In Italy alone, this involved around 135,000 dairy farms. These farms were unpaid for up to 8 months of deliveries. Many failed and the ripple effect in local communities was devastating. Unfortunately, we do not have the capacity to estimate second-round effects.
The upper-bound proxy when recovery data is missing is given by the pre-scandal market cap plus the total debt and reported liabilities. This overstates slightly but is consistent and allows for the fact that the liabilities of deeply fraudulent companies are typically misstated, especially with regard to pensions and hidden debt. The bottom line is that the direct cost to debt and equity stakeholders is typically just a portion of the total attributable losses.
Without further ado, here are the biggest cases of accounting fraud in corporate history.
10 worst accounting scandals
10. Parmalat ~ US$22.5 billion
Parmalat was an Italian dairy and food multinational. The company used off-balance-sheet entities in the early 2000s to conceal its true financial position and subsequently collapsed causing one of Europe's largest financial scandals.
Parmalat created a complex web of shell companies and subsidiaries, many of which were located in offshore tax havens. These entities were used to hide billions of euros in debt and losses from investors and regulators. The company engaged in complex financial transactions between these entities, often involving derivatives and other financial instruments to further obscure its true financial position.
Parmalat failed to adequately disclose the nature and extent of its off-balance-sheet activities. The lack of transparency made it difficult for investors and analysts to understand the company's true financial health. In one glaring example of fraud, the company forged a Bank of America letter claiming it held €3.95 billion in cash.
These fraudulent accounting practices eventually unraveled, leading to the company's collapse in 2003. It remains one of the largest corporate bankruptcies in European history. Several Parmalat executives, including the founder, were convicted of financial fraud and other crimes. The scandal shook investor confidence in Italian corporate governance and led to increased regulatory scrutiny of accounting practices, particularly related to off-balance-sheet transactions in Europe.
9. FTX ~ $32 billion
The crypto winter of 2022-2023 brought FTX's massive billion unraveling, covered in our roundup of 2023 scandals.
Founder Sam Bankman-Fried siphoned customer funds to sister hedge fund Alameda Research, commingling assets for risky bets and political donations. The exchange's balance sheet masked $8 billion in shortfalls via FTT token hype.
The total direct losses are estimated at $32 billion, dominated by equity destruction. Debt-like obligations to lenders added $10 billion to the initial fallout, culminating in Bankman-Fried's 25-year sentence and an $11 billion restitution order. Customer/creditor losses were eventually zero in nominal terms thanks to crypto's post-2022 bull run boosting asset values. The scandal’s indirect impact caused an initial crypto market wipeout in excess of $260 billion.
In its complaint against FTX, the SEC claimed that Bankman-Fried had orchestrated a years-long fraud to conceal from FTX’s investors via:
- The undisclosed diversion of FTX customers’ funds to Alameda;
- The undisclosed special treatment afforded to Alameda on the FTX platform, including providing Alameda with a virtually unlimited “line of credit”, funded by the platform’s customers and exempting Alameda from certain key FTX risk mitigation measures; and
- Undisclosed risk stemming from FTX’s exposure to Alameda’s significant holdings of overvalued, illiquid assets such as FTX-affiliated tokens.
The complaint further alleged that Bankman-Fried used commingled FTX customers’ funds at Alameda to make undisclosed venture investments, fund lavish real estate purchases, and undertake large political donations.
8. Wirecard ~ $55 billion
Wirecard’s dubious beginning in a Munich suburb involved a struggling payments processor merging with an Austrian businessman's internet porn wire transfer business, all following an "accidental" systems failure and a convenient burglary that bankrupted the original Wirecard. The new management team was led by CEO Markus Braun, who modeled himself on Steve Jobs, and COO Jan Marsalek, a former hacker, mystery man, and alleged Russian spy.
Wirecard's global expansion into online gambling, a fertile ground for money laundering, was financed by a suspicious 2005 back-door listing. The 2006 acquisition of a German bank, XCOM, was a deliberate move that successfully "muddied the numbers," forcing investors to rely on the company's "adjusted version" of its accounts. Wirecard’s profits increasingly flowed through a maze of obscure, outsourced payments firms in Asia and the Middle-East, often located in incongruous places like empty rice sheds, making its business virtually impossible to observe or verify.
Despite the brazen nature of the operation, Wirecard was cheered as a national champion in Germany. For years, German regulators (BaFin) staunchly defended the company against a relentless, evidence-backed campaign by short-sellers and the Financial Times (FT), which began in 2015. BaFin even investigated the journalists and investors who raised the alarm, while Wirecard deployed private detectives for sustained hacking and intimidation.
The battle finally concluded on June 18, 2020, when Wirecard announced that €1.9 billion was "missing." The company filed for insolvency one week later. The former CEO, Markus Braun, is currently on trial in Munich, while Jan Marsalek escaped and remains a fugitive, believed to be in Russia. The scandal served as a potent lesson in the enduring gullibility of homo sapiens in the face of financial spectacle.
7. Bernard L.Madoff Investment Securities - $65 billion
Bernard Lawrence "Bernie" Madoff was an American financier who served as the Chairman of Nasdaq in the early 1990s. He was as ‘establishment’ as establishment gets. He was universally respected and trusted by investors, regulators and government. He abused this trust to execute the largest Ponzi scheme in history, defrauding thousands of investors out of US$64.8 bn over the course of at least 17 years, possibly longer.
Madoff built his reputation as a pioneer of electronic trading. The trading platforms he developed with his brother attracted massive order flow by the late 1980s. He and four other Wall Street firms processed about half of the New York Stock Exchange's order flow. At that time, he was making about US$100 million a year and many believed that his market-making business gave him unique insights into market activity.
In the early 1990s, or possibly much earlier, Madoff began to exploit this perception of trading insight and began to switch from market making to taking money from investors.
His scheme was remarkably simple. Guided by his pedigree and claims of high returns, investors gave Madoff funds to invest in his trading strategies whereupon he deposited their funds in an account at the Chase Manhattan Bank. He made no attempt to trade and merely let the cash sit.
When clients wished to redeem their investments, Madoff funded the payouts with capital attracted from new clients. Clients came easily due to reputation and Madoff’s image of exclusivity. He often initially turned clients away. Roughly half of Madoff's investors cashed out at a profit. When the scheme was exposed, these investors were required to pay into a victims' fund to compensate defrauded investors who lost money.
Some suspected foul play. The SEC investigated Madoff and his securities firm on and off from 1992 onwards. Moreover, there were sporadic claims that his returns were not attainable from the options trading methods he claimed to be using.
In 2005, shortly after Madoff nearly went under due to redemptions, the SEC asked Madoff for documentation on his trading accounts. He invented a six-page list but there was no follow up and no attempt to confirm with his counter-parties.
Madoff was less fortunate during the global financial crisis of 2008. In November 2008, Bernard L. Madoff Investment Securities reported year-to-date returns of 5.6% while the S&P 500 had fallen 39%. Notwithstanding this excellent performance, many clients were forced sellers and Madoff was unable to meet redemptions. Bernie Madoff was arrested on December 11, 2008. He was sentenced to 150 years in prison, where he died on April 14, 2021.
Thousands of investors lost money, many lost their life savings, and some committed suicide from the seventh-worst accounting scandal of all time.
6. Daewoo Group ~ $90 billion
In 1998, Korea’s Daewoo Group was a lonely beacon of hope amid the carnage of the withering Asian financial crisis.
Daewoo appeared not only to have survived the crisis but to have thrived. The company ranked 18th on Fortune magazine’s Global 500 List of the world’s largest corporations, equivalent to today’s Microsoft ranking, and was Korea’s largest chaebol -- a vast conglomerate with 320,000 employees, $44 billion in assets and interests stretching across the globe from shipbuilding to textiles in more than a hundred subsidiary companies.
As the 1997 crisis hit, Daewoo’s Chairman, Woo Choong Kim, pursued a strategy of aggressive growth, particularly in the auto industry. Kim saw the crisis as a chance for Daewoo to cooperate with the government, borrow to acquire failed companies, and drive expansion.
In January 1998, the nadir of the crisis, Daewoo Motor acquired Ssangyong Motor, assuming $2.43 billion additional debt. In 1998 alone, the group spent $7.14 billion on sales promotions.
A strategy of growth amid crisis had always underpinned Daewoo’s success and in 1998 the strategy appeared to be working again. Sales of Daewoo Group increased by 25% while sales at Daewoo Corp. rose an incredible 54%. This, while Korea was digesting an IMF bail-out and sales at most Korean firms were declining.
All of this growth, however, was either fabricated or funded by debt. The company raised a staggering $20.6 billion of additional debt via commercial paper bond issuance in 1998 to fund growth and cover its maturing debt.
Eventually, the collapsing yen and rise in Korean interest rates upended the balancing act. Daewoo declared bankruptcy on 1 November 1999 with debts estimated at between $50 and $75 billion. We say estimated because it remains unclear exactly how much of Daewoo’s debt was hidden.
Until the downfall of Enron in 2001, it was the world’s biggest bankruptcy and certainly surpassed Enron if we exclude equity losses.
The true extent of accounting fraud at Daewoo will never be known. Most of the manipulation occurred in the company’s offshore operations, subsidiaries and investments. As is usual, most of the evidence was shredded. Korean prosecutors claimed that Daewoo’s companies inflated assets by $19.1 billion, which would make it the largest manipulation by a non-financial corporation.
Daewoo Corp., Daewoo Motor and Daewoo Electronics accounted for about 90% of the conglomerate’s impaired capital. Much of the fraud occurred at Daewoo Corp, which used its London operations to fabricate $12.2 billion in fraudulent assets.
Most of the accounting fraud in Daewoo’s domestic operations involved hiding debt, fabricating export receipts and utilizing affiliates to hide losses and debts. Prosecutors claimed roughly US$12.5 billion in debt was hidden in off-balance sheet schemes. Related-party transactions were also used for asset swaps among Daewoo subsidiaries at exaggerated values. Stronger affiliates would prop up weaker companies by purchasing assets well above market prices.
Chairman Kim was eventually charged with masterminding accounting fraud of US$43.4 billion, illegally borrowing US$10.3 billion, smuggling US$3.2 billion out of the country and roughly US$1 billion of bribery and corruption. Kim was sentenced to 10 years in prison but was granted amnesty by President Roh Moo-hyun in 2007.
5. China Hustle (Reverse Merger Frauds) ~ $100 billion
The “China Hustle” refers to a protracted and highly organized scam that has plagued hundreds of US-listed Chinese companies and caused significant problems for US regulators. The mechanics of the fraud, documented in the 2017 film The China Hustle, involve criminals secretly gaining control of low-priced stocks, artificially inflating their value to attract investment, and then executing a dump by selling off their shares for massive profit.
This scheme has resulted in investor losses running into the billions of dollars, with hundreds of millions lost in recent scams like the one involving Ostin Technology Group (OST). Adding a layer of exploitation, scammers have been known to impersonate SEC officials following a stock collapse, targeting victims with sham recovery services. In early July, the FBI reported a 300% surge in "ramp-and-dump" stock fraud complaints compared to the previous year. Edwin Dorsey’s "Problems in Chinatown" investigative series in The Bear Cave offers an excellent, in-depth analysis of the issue.
The core of the Hustle involves 200–300 small Chinese firms using reverse takeovers to list on the NYSE and NASDAQ, systematically inflating their revenues by 5–100 times compared to their Chinese filings. This led to a massive market-cap evaporation well in excess of $100 billion, yet has resulted in almost zero prosecutions.
The Bear Cave Newsletter estimates that these organized pump-and-dump scams involving Nasdaq-listed Chinese stocks cost retail investors approximately $10 billion annually, coordinating the fraud through WhatsApp chats to drain billions from unsuspecting investors. This is widely considered organized crime, operating with brazen impunity in the public financial sphere.
4. Enron ~ $190 billion
Enron Corp. was a Texas energy-trading firm that grew to dominate the US electricity industry, eventually building power stations and electricity grids, providing broadband, and trading in many commodities besides energy. Investors applauded the company’s innovation, especially with respect to risk management.
Enron stock peaked on 23 August, 2000, giving what was essentially a glorified utility an earnings multiple of over 70x, a market cap of about US$70 billion and making it the seventh-largest publicly traded company in the US.
Thereafter, the wheels began to totter. Investors began to scrutinize Enron’s use of ‘mark-to-market’ accounting to inflate earnings by revaluing investments, even if the investments were loss-making or redundant and should have been written down.
In the summer of 2001, Enron Vice President Sherron Watkins wrote a letter to Chairman Kenneth Lay, advising of the problem and warning that the company was using special-purpose entities to hide bad debt from the balance sheet.
An SEC investigation followed and Enron’s share price collapsed. In recognition of her whistleblowing, Watkins and two colleagues were named Time Persons of the Year in 2002.
The scandal led to the bankruptcy of Enron, the dissolution of Arthur Andersen, and the Sarbanes-Oxley Act (2002), which imposed harsh penalties for destroying, altering, or fabricating financial records. Investors and creditors lost more than US$150 billion.
The company’s CEO Jeff Skillings was sentenced to 24 years in prison. Prosecutor Andrew Weissman indicted not just individuals, but the entire accounting firm of Arthur Andersen, effectively putting the company out of business.
3. Worldcom ~ $200 billion
WorldCom was an American telecommunications company. At its peak, it was the country's second-largest long-distance provider.
Like all telcos, Worldcom became embroiled in the hype of the dot.com boom, which pressured management to deliver strong earnings growth, mostly via debt-funded acquisitions and creative accounting, to sustain unrealistic valuations.
When the dot.com bubble burst, spending on telecom services fell and WorldCom resorted to increasingly aggressive accounting to maintain the appearance of growth and profitability. The main device was the capitalization of expenses whereby the cost of leasing other companies’ phone lines – primarily for last-mile access to homes and businesses – was not expensed but reported as additions to property, plant and equipment.
Those assets, overstated by US$11 billion by the time WorldCom filed for Chapter 11, were then depreciated. In the short term, this device raised earnings, margins and growth. In the longer term, mounting depreciation costs depressed earnings. Meanwhile, the company used false entries to fake revenue, used overstated business combination reserves to boost income in 2001, and revalued acquisitions at overstated prices to bolster earnings.
The scandal came to light in June 2002 when WorldCom's internal audit department discovered the misstatement. WorldCom quickly collapsed, costing over 30,000 people their jobs, and debt and equity investors more than $300 billion. Guilty of fraud, conspiracy and filing false documents, WorldCom's CEO Bernie Ebbers was sentenced to 25 years in prison.
2. Lehman Brothers ~ $225 billion
Enron might be the best-known accounting scandal of all time, but the collapse of Lehman Brothers dwarfs the losses at Enron. It remains the largest bankruptcy in US history, an unmitigated disaster.
Among the creative accounting devices Lehman used to hot up its accounts was an artifice known as Repo 105. Under Repo 105, Lehman classified short-term loans as permanent sales and used the cash from these fake sales to reduce its liabilities for year- and quarter-end financial reporting.
After the reporting, Lehman unwound the transactions. Repo 105 allowed Lehman to artificially reduce its liabilities by US$50 billion and shrank its leverage ratio from 13.9 to 12.1.
Losses can be hidden, but only for so long. On 7 June 2008, Lehman announced a second-quarter loss of US$2.8 billion. The loss widened to US$3.9 billion in the 10 September announcement. Less than a week later, Lehman filed for bankruptcy as the fat lady was belting out the chorus. The world is still dealing with the consequences of the Lehman collapse. It was, without question, the most consequential accounting scandal of all time. In the absence of massive government and central bank intervention, the losses would have run to trillions.
The Great Recession fuelled by the collapse of Lehman cost tens of millions of jobs globally. No criminal charges were laid. The New York Attorney General sued Ernst & Young LLP, the company’s external accounting firm, for enabling Lehman Brothers to deceive investors. Ernst & Young paid a $10 million settlement.
1. China Evergrande Group ~ $300 billion
In our estimation, the worst scandal of all time in terms of direct debt and equity losses was China Evergrande Group, which we nominated as the biggest accounting scandal of 2024. Direct losses from the real estate company’s collapse are estimated to exceed $300 billion, making it the largest non-bank corporate bankruptcy in history. It wiped out offshore bondholders and millions of homebuyers.
Evergrande had been in its death rolls since it first defaulted in 2021, but the accounting scandal only really broke in March 2024 when the China Securities Regulatory Commission (CSRC) accused the property developer of artificially inflating its sales by approximately $79 billion over a two-year period leading up to its collapse.
Findings that PwC’s internal control measures were inadequate during their audits of Evergrande strengthened this accusation. An anonymous letter released in April 2024 highlighted these deficiencies, suggesting that PwC’s auditing practices may have contributed to the crisis at Evergrande.
On April 19, 2024, the Accounting and Financial Reporting Council (AFRC) announced an investigation into PwC’s role in auditing Evergrande resulting in a six-month business suspension and fines totaling over 441 million yuan ($62 million).
This investigation aimed to uphold public confidence in the integrity of the accounting profession and ensure accountability for any failures that may have occurred during the auditing process.
Dishonourable mentions
These cases represent just the tip of the iceberg. There are hundreds more like them. An estimated 40% of US companies manipulate their accounts every year, according to one notable study, with auditors detecting fraud just 0.3% of the time.
Here is a table of 15 companies that deserve mention in our rogue’s gallery. Together, these scandals destroyed roughly $180–220 billion in investor & creditor wealth (in 2025 dollar terms).
Top 15 Honorable Mentions – Corporate Accounting Frauds
The true cost of accounting fraud
Aggregating Bloomberg-sourced data on vaporized equity (market cap drops) and debt impairment (write-downs, defaults) yields a harrowing total: over $15 trillion in cumulative losses from 2010 to 2025. That's $1 trillion per year on average.
It’s enough to fund global R&D for a decade. How many life-saving remedies, how many life improving innovations, how many rewarding jobs could have been created in the absence of this theft. The opportunity cost is profound. Just a fraction of this annual butchers bill would be sufficient to bail out entire economies. Evergrande's debt tsunami exceeds the Greek debt crisis.
Yet the true cost transcends balance sheets and lost opportunities: jobs vanish and public trust in institutions evaporates. The societal impacts harm millions.
As we reflect on this grim ledger, the pattern is clear: fraud doesn't just destroy companies; it undermines the foundational promise of transparent markets. This article revisits a handful of the collapses, tracing a trail of destruction that underscores why vigilance - perhaps powered by AI-driven detection - is no longer optional.
