Wall Street’s 10 Most Notorious Stock Traders


No one likes recessions, but no one dislikes them more than the crooks who are an inevitable part of any financial market.

As the economy goes south, companies seeking to cut costs scrutinize their books more carefully and bring embezzlements to light. Investors take money out of higher-earning (and therefore inherently more risky) funds and put them into safer ones, and Ponzi schemes collapse as a result. Credit becomes tighter, and loan requests are more carefully investigated, so businesses with cooked books find their insolvency revealed.

The current recession brought to light one of the longest-running and biggest frauds in the history of Wall Street: Bernard Madoff’s fantastic $50 billion Ponzi scheme, which apparently ran for more than 20 years. Madoff’s fraud may be unmatched in scale and scope, but it’s just the latest of a long string of felonious schemes to hit Wall Street over the more than two centuries of its existence.

The stock market we call Wall Street can trace its beginnings to 1792 and the “Buttonwood Agreement” made among brokers who wanted to give preference to each other in trading securities. From those modest beginnings, Wall Street has become a magnet for people hoping to make their fortunes. The overwhelming majority have been honest, but large amounts of money always attract large numbers of crooks. After all, that’s why people rob banks.

But not all the famous rogues of Wall Street broke the law. Often they exploited weaknesses in the law or the rules of the exchange. Once exposed, their shenanigans brought these weaknesses to light and spurred remedies, making the market work better in the long run. Paradoxically then, the crooks have helped make Wall Street an ever safer place in which to invest money.

So here is a rogue’s gallery of the top 10 Wall Street crooks and double-dealers. (Many other noteworthy rogues didn’t make the cut. As they say in the military, it’s a target-rich environment.)

William Duer

In 1790 only two private banks operated in the United States. But the establishment of the Constitution and the regularization of federal finances helped increase that number to 29 by 1800. Speculation in bank stocks, and in the rights to buy stock in new banks, began to increase. William Duer was among the most active speculators.

Born in England in 1747, Duer had managed his father’s estates in the West Indies before coming to the mainland colonies. He sided with the new United States during the Revolution and was elected to the Continental Congress. Under the Articles of Confederation he served as secretary to the Treasury Board, a position that provided him with much inside information. Duer later served for a short time as an assistant secretary under Treasury Secretary Alexander Hamilton. Federal law forbade Treasury officials from speculating in federal securities, so Duer resigned, preferring speculation to public service. At the end of 1791 he formed a partnership with the wealthy Alexander

Macomb to speculate in stocks. Macomb provided the money, Duer made the investment decisions, and they split the profits. (This is not unlike how a modern hedge fund works, only with many investors instead of one.)

Duer’s favorite means of speculation was the Bank of New York, the state’s sole bank at the time. Rumors abounded that the Bank of the United States, which Hamilton intended to be the nation’s central bank, would take it over, a move that would cause the stock to rise. Duer used Macomb’s money to buy Bank of New York stock and let that fact be known publicly. Unbeknownst to Macomb, Duer was also shorting the stock on his own account. If the merger failed, Macomb would lose money and Duer his share of the nonexistent profits. But Duer would make money on his own account. In other words, he was hedging at his partner’s expense.

The rise in new bank charters created a bubble in bank stocks. When the newly created Tammany Bank announced that it was issuing 4,000 shares, it received subscriptions for 21,740. Duer was at the center of this frenzy. He saw to it that his trades quickly became public knowledge. When other speculators duplicated them, it looked as though he could do no wrong.

Duer apparently began to believe as much himself and started to use leverage to increase his profits. He borrowed from banks and individuals, including $203,000 (a huge sum at the time) from Walter Livingston, of one of New York’s most powerful families. He also began to buy stock for future delivery, hoping that rising prices would allow him to pay for it when the time came.

Other members of the Livingston family had shorted Bank of New York stock and thus had an interest in seeing the price fall. To help it along, they began withdrawing specie (gold and silver) from their bank deposits. This contracted the local money supply, forcing the banks to call in loans and causing a credit squeeze. This proved ruinous for the speculators, especially Duer, as interest rates soared to as much as 1 percent a day. By March 1792 he was desperate. On March 22 he wrote to Walter Livingston that “I am now secure from my enemies, and feeling the purity of my heart I defy the world.”

He was, of course, no more secure than his heart was pure. Just one day later, in fact, he was in debtors’ prison, from which he never emerged alive. Duer’s fall precipitated a panic. Bank stocks that had been flying high now fell to earth. The day after Duer’s incarceration, 25 brokers announced their insolvency. Walter Livingston, one of New York’s richest men, was broke. Alexander Macomb also went to debtors’ prison, unable to pay his obligations.

William Duer


Robert Schuyler