A Successful Arbitrageur Pleads Guilty To Insider Trading Charges - 11/14/1986

US History |

On this day in 1986, one of Wall Street's most successful arbitrageur by the name of Ivan Boesky agrees to pay a fine of $100 million and cooperate with the SEC (Securities and Exchange Commissions) investigations after he pleaded guilty to insider trading charges. The name Boesky was later rumored to have inspired the character Gordon Gekko in the movie "Wall Street (1987)."

Ivan Boesky was born in Detroit, Michigan in 1937, to a Jewish immigrant. He studied law before he moved into securities analysis and later forming his own company in 1975. With an amassed wealth of $200 million, which he later testified he made through illegal inside information about future mergers to trade stock in the companies involved. Boesky revelations helped in summoning one of the world's most famous traders, Michael Milken and Drexel Burnham Lambert, an investment banking company to justice for their involvement in the insider-trading scandal.

Michael Milken agreed to pay over a billion dollars in fines and was sentenced to 10 years in prison although the sentence was later reduced to time served after he had spent 2 years in prison. Boesky on the other hand because of a plea bargain, was sentenced to 3 years in prison, permanently barred from working in securities, in addition to his own financial penalty. 

He served his jail time at the Lompoc Federal Prison in California, and moved far away from the public eye. Insider trading of this kind was illegal, though there were laws prohibiting such illegal acts but was hardly applied until Ivan Boesky was prosecuted. In addition, the insider-trading scandal made Congress impose strict rules and penalties for securities violations.

After Boesky left prison in 1991, he moved to La Jolla, California where he divorced his wife with whom they had four children. His wife agreed to pay him a sum of $23 million and $180,000 per annum for the rest of his life. Of all those involved in the scandal, Boesky was the only one who could not recover, representing a national symbol of greed in the eye of the masses. 

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