A Dead Billionaire Defaults
Gary Winnick, the late founder of a failed telecom startup, sacks his lender from beyond the grave
This Week In Blunders – Oct. 26-Nov. 1
“If you owe the bank $100 million, that’s the bank’s problem.” — J. Paul Getty.
A storied Los Angeles mansion is up for auction after its late billionaire owner fell behind on paying his $150 million loan, The Wall Street Journal reported this week.
The Journal calls the 40,000-square-foot Bel-Aire estate “one of the most important private homes in the country.” Built in the 1930s, it was once home to hotelier Conrad Hilton and Dole Food’s David Murdock. But today it’s a monument to one of the world’s most successful deadbeats.
There is a class of financiers who start companies, rack up obscene amounts of debt, and leave their investors and lenders in the fog of bankruptcy. In the meantime, they walk away with millions.
Gary Winnick, who died in 2023 at age 76, was perhaps the best at this hustle.
In the 1980s, Winnick sold junk bonds with the now-pardoned junk bond king Michael Milken. In 1997, he founded a fiber-optic cable company called Global Crossing. And in 2002, Global Crossing filed what was then one of the largest bankruptcies in U.S. history.
Investors watched $50 billion simply vaporize. Lenders were stuck wih more than $12 billion in debt. But Winnick cashed out $754 million in stock before the whole thing blew.
More than 10,000 people – many of whom worked for decades at companies that Global Crossing had acquired – lost their jobs. Thousands also lost their life savings and pensions.
Investigators circled the wreckage for signs of frauds on par with Enron, Worldcom and Qwest, but no charges were ever filed.
Winnick was a low-key operator with plenty of connections and political influence. And, as it turned out, he had positioned himself as the non-executive chairman of the company and hired CEOs to sign off on all of its dubious dealings.
In just a few short years, Winnick had hired and fired five chief executive officers. All of them left the company with multimillion-dollar compensation packages for a few months worth of work.
This folly was made possible by a mad scramble to build the infrastructure for the Internet. Today, we see the same mania with untold billions pouring into artificial intelligence.
When the AI bubble finally blows, we’ll see who succeeds, who fails and who owes what. For now, Winnick’s legacy shows that the smartest money makes the fastest exit.
Today, Global Crossing is barely a footnote against the backdrop of so many bigger debacles. It made only one passing paragraph the Journal’s story about Winnick’s mansion facing foreclosure.
In 2000, Winnick paid $94 million for the 8.5 acre estate. In 2020, a Winnick entity borrowed against it through the real-estate investment firm CIM Group. The unpaid debt has since ballooned into a $150 million liability, the Journal reports.
In 2023, the property was listed for sale at $250 million, but there were no takers at that lofty price. So it will be auctioned Dec. 16 to an outside buyer or CIM could take the title since it holds the debt.
And a billionaire deadbeat has once again made his well-timed exit.
Pardoned crypto tycoon goes on the offense
Changpeng Zhao, the billionaire founder of Binance, the world’s biggest crypto exchange, is threatening to sue Sen. Elizabeth Warren for libel, The New York Post reported on Tuesday.
In an official press release, the Massachusetts Democrat said that Zhao had pleaded guilty to “a criminal money laundering charge.” She also said as much in a social media post.
I’ve saved a screenshot of the release, which has since disappeared:
Warren and her Democratic colleagues were rightfully outraged when Trump pardoned Zhao, last week.
It’s legalized corruption in plain sight.
The Wall Street Journal ran this headline on Wednesday: “How a Billionaire Felon Boosted Trump’s Crypto Company en Route to a Pardon. The subhead added: “Binance facilitated $2 billion purchase of World Liberty’s stablecoin and built its technology; clemency for Changpeng Zhao surprised some in administration.”
Technically, however, Zhao, 47, did not plead guilty to a money laundering charge. But he was sentenced in May to four months in prison for violating U.S. anti-money-laundering requirements.
That could mean bad record keeping. Not money laundering in and of itself. Still, prosecutors considered it a serious crime because crypto is the preferred currency of criminals, terrorists, child sex traffickers and despots.
Zhao, who goes by “CZ” received a much lighter sentence than prosecutors had sought. But in addition to the prison sentence, Binance was ordered to pay $4.3 billion in fines and forfeitures, and Zhao has agreed to pay a $150 million civil fine to the Commodity Futures Trading Commission.
“I’m sorry,” Zhao told the judge before being sentenced in April, according to a report by Reuters. “Here I failed to implement an adequate anti-money laundering program ... I realize now the seriousness of that mistake.”
CZ’s legal threat makes for a juicy headline, but a lawsuit against Warren is unlikely to go anywhere if it is even filed.
Warren appears to be technically inaccurate, but CZ’s crypto empire and his high-profile prosecution makes him a public figure with a high bar to clear in any libel claim.
In the end, it’s just another petty distraction in our Golden Age of Grift.
Jeffrey Epstein must have been a great customer
JPMorgan Chase suspected Jeffrey Epstein was up to no good, but it continued to do business with him anyway.
The nation’s largest bank had been flagging Epstein’s suspicious transactions for years on end, yet it continued to profit from his dodgy enterprises. Newly unsealed documents this week revealed that JPMorgan Chase flagged more than 4,700 of the sex offender’s transactions worth over $1 billion that might have been linked to human trafficking and financial misconduct.
Read More: Too Big To Jail (Business Blunders)
JPMorgan Chase released the report upon a judge’s order. It included some high-profile names: Leon Black, co-founder of private equity firm Apollo Global Management; billionaire hedge fund manager Glenn Dubin; celebrity attorney Alan Dershowitz; and trusts belonging to retail mogul Leslie Wexner. It’s not clear what those particular transactions involved.
Clearly, the bank had a compliance department that was doing its job. But when the government failed to take action against Epstein, other departments were quick to collect fees on Epstein’s massive accounts and make valuable connections through Epstein’s impressive list of wealthy and powerful contacts.
Read More: Near Intelligence On Epstein Island (Business Blunders)
In 2023, JPMorgan agreed to pay $290 million to victims. “Any association with him was a mistake and we regret it,” the bank said at the time. “We would never have continued to do business with him if we believed he was using our bank in any way to help commit heinous crimes.”
And In Other Epstein News This Week: Andrew should answer Epstein questions in US, Democrats say (BBC)
Don’t Miss These Blunders
Dr. Lie Erik Lie, a finance professor at the University of Iowa, catches cheats. His numbers don’t lie.
Hi-Yo Silver, Away NBA Commissioner Adam Silver placed a big bet on legalized sports gambling. He didn’t anticipate the alleged corruption that came with it.
There’s No Such Thing As A Green Bank Or A Fair Game Banking is corrupt. Basketball is corrupt. This week’s news blows it all out in the open.
Too Big To Jail Jeffrey Epstein couldn’t have done it without America’s biggest banks, a new lawsuit alleges. Watch them settle quietly and move on.
Parts Is Parts A secretive billionaire just exited from one of the biggest corporate scandals in years. It began with auto parts.
Go Suck A Lemon Lululemon has a message for its loudmouth founder, and it’s not namaste
Ain’t No Billionaire’s Son David Bren, the disowned son of the nation’s richest real estate mogul, sold his investors the ‘ultimate man cave.’ Then he caved.
Power Outage Illinois’ longest-serving House Speaker will start serving prison time for his ComEd bribery scheme
Wickedness On Wall Street Renowned financier Howard Rubin and his assistant were arrested for alleged sex-trafficking in a sex dungeon
Bible Lessons From A Billionaire Silicon Valley investor Peter Thiel says we should worry about the Antichrist. He would know.
Get That Mouse Out Of The House Disney will pay a price for suspending Jimmy Kimmel, but how much?
Lap Dance Dollars Executives from world’s largest publicly traded strip club company allegedly bribed a public auditor to dodge $8 million in sales taxes
From Baby Shower To Prison Shower Ian Gregory Bell celebrated with 75 guests. Six days later, he got three years.
If You Build It, Chumps Will Come A father-and-son team fleeced municipal bond investors out of more than $280 million with an Arizona sports-park nightmare
Reefer Madness The CEO behind Jim Beam and Maker’s Mark resigns over CBD use
Buffett’s Big Blunder At least the world’s most-admired investor can admit he was horribly wrong about Kraft Heinz
The Chocolate Lover Nestlé CEO Laurent Freixe just joined a litany of top executives who’ve lost their jobs to love
The Apprentice Movie producer behind Trump biopic faces 300 years in prison for alleged scams of his own
The Biggest Business Blunders Of All Time And the costly lessons they left behind.
Timeshare Prison This week In Blunders – Aug. 17-23
Instant Ponzi – Just Add Water This Week In Blunders – Aug. 10-16
Doing That Shuffle A former JPMorgan Chase and Goldman Sachs executive raised $4.3 million to start a blockchain gambling app. Then he allegedly blew his seed money in another online casino.
Kwon Don’t Terraform Labs founder Do Kwon never planned on failure. Now he’s headed to prison after pleading guilty to a $40 billion crypto fraud.
Sub Moron This Week In Blunders – Aug. 3-9
Wouldn't it be just as, if not more beneficial to society, if you would investigate companies that are committing fraud before the shtf. There are some short sellers out there who are expert at reading the footnotes in the 10Q's. "Just sayin'."
Thank you for shining a light on these criminals and scammers. People need to know what they are.