What's up guys and welcome back to wall street millennial on this channel, we covered many financial frauds from german payments company wirecard to chinese coffee chain. Looking coffee over the years frauds like these, have scammed tens of billions of dollars out of individual investors and institutional investors alike in this video we're covering one of the most shocking stock market frauds in american history, which was worth 300 million at the peak. While this isn't the biggest fraud we've ever looked at, it is definitely one of the most shocking, especially because the mastermind behind it was a 21 year old kid we're talking about barry minkow in his fraudulent carpet cleaning business. The best before we get into the video we'd like to thank our channel members, members get to vote on our video topics and also get access to our backlog of videos before they release to the public.

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Thank you. Barry minkow was born in 1966 in inglewood, california, when he was just nine years old. His mother got him a part-time job as a telemarketer at a carpet. Cleaning company that she worked at minkow was incredibly good at talking to customers, even at such a young age.

He was able to close deals for people wanting to get their carpets cleaned at the age of just 16, barry hired a few friends to start his own carpet cleaning company in his parents garage. They would call up people in the local neighborhood to find jobs. Doing professional carpet cleanings in their homes for the first few years, the business wasn't doing too well, he had no expertise in carpet. Cleaning and many of the jobs were done poorly.

They got poor reviews and customers would often complain about poor service with poor customer reception. Barry was not able to find enough jobs to cover the pay for the friends he hired into the company to meet payroll barry would use a method called check kiting. He would write a check that he knew would bounce but write. Another check from a different bank account to the original account.

This would hold off the bouncing by an extra few days. He would also overcharge his customers when they paid by credit card soon, after barry expanded zbets into an insurance restoration business. If an insurance company, insures a property and that property's carpet is damaged, the insurance company would pay the best to restore the carpet, barry forged documents showing that he was involved in several large restoration projects that didn't exist. He also created fake auditing companies called interstate appraisal services to verify these transactions.

Armed with the fake audit report, barry was able to secure loans from banks to expand his business when he graduated high school in 1985. He dedicated himself full time to the business and expanded throughout southern california. In 1986, when barry minkow was just 21 years old. He took his company public on the nasdaq stock exchange where the company raised 15 million dollars.

This made him the youngest person to lead an ipo in american history, the accountant auditing z best for the ipo relied on financial documents that the company supplied him. He did not physically go in to visit their supposed insurance restoration sites. If he had, he would have found out that the sites didn't exist and were just post office boxes scattered throughout san fernando valley. As part of the due diligence process, investors wanted to take a tour of the interstate appraisal, services building, which was the fake auditing company that barry created to verify his fraudulent financials barry rented out some office space for a few days, while the accountants visited to prove The company was real; they also used an incomplete building to show one of their fake insurance restoration jobs.

They also forced thousands of financial documents to show strong revenue, growth and profitability for the restoration business, which was non-existent. Barry ran a highly sophisticated operation to make the fake revenue look real. He would route funds through numerous different bank accounts and take advantage of checking delays this artificially inflated the amount of cash supposedly on the company's balance sheet, while the insurance restoration business, which supposedly made up 86 of the company's revenue, was fake, the carpet cleaning business was Real he hired roughly 1 000 employees at the peak and expanded to arizona and nevada. After the ipo they reported strong financial results almost completely driven by the fake restoration business.

The stock price peaked at 18 dollars per share in 1987, giving the company a 280 million dollar valuation barry's stake in the company was worth 100 million dollars. He used his new found wealth to purchase a ferrari in bmw. He also bought a luxurious mansion in the wealthy woodland hills neighborhood near la. However, he knew the fraud couldn't last forever.

Z best was burning cash and he had to continually raise more money from investors. They would eventually find out that the business was fake and the house of cards would come crashing down. He never intended on running the fraud forever. He thought if he just committed a little bit of fraud at the beginning.

He could raise enough money to invest in legitimate operations. Eventually, the legitimate businesses would make enough money that he could stop faking the financial statements. To this end, he tried to acquire keyserv the authorized carpet cleaner for sears. At the time, sears was a behemoth, home improvement chain and, being their authorized carpet.

Cleaner would be huge. The merger would make z best the largest independent carpet cleaning company in the u.s. He also announced plans to raise 700 to 800 million dollars in outside capital to acquire service master in a hostile takeover. He even tried to diversify out of carpet cleaning and started preliminary talks about the seattle mariners.

Baseball team barry figured that if he could successfully raise enough money and complete these acquisitions, they would bring in enough revenue and profits that he could stop committing fraud and turn zbest into a legitimate operation. But just as the deal with keyserv was about to close, a few of the company's victims from the early days came forward to expose them. The la times got in contact with zbest's former customers, who allege that they had run up a total of 72 000 of fraudulent credit card transactions as they overcharged their customers for jobs. This report was published just days before the merger was closed and it caused the best stock to decline.

28 percent the investment bank facilitating the merger was drexel berman, lambert in light of the allegations they called off the merger until they could investigate further. A few days later, a reporter found that zbest lacked the necessary permits to do large-scale carpet projects in the state of california. This was very strange because large-scale carpet projects supposedly made up the entirety of their insurance restoration business. A few days later, the best auditor ernest and winnie, which is now part of ernst young, found more evidence of fraud.

Some of the checks that were supposedly written by z, best customers were actually written by barry, minkow and forced to look like outside customers. Barry had no way of explaining these fraudulent checks. The fraud had finally collapsed under its own weight. He resigned as ceo and admitted to one of the board members that the insurance restoration business was a sham from the beginning.

In 1988, mean cow along with 10, other zbest executives were indicted by a los angeles, grand jury on 54 counts of racketeering, securities fraud, money laundering, embezzlement, mail fraud, tax evasion and bank fraud, in addition to reporting fake financials, mikao, also expropriated, tens of millions of dollars From the company's accounts to fund his lavish lifestyle at the trial, he claimed that he was forced to run the fraud by an organized crime syndicate who secretly ran the company. He later admitted that his story was false in a desperate attempt to avoid jail time. He was convicted to all charges and sentenced to 25 years in prison. The judge described mikao as a man without a conscience when mikhail asked for a lighter sentence, the judge dismissed this request as a joke, while in prison barry claimed to have become a born-again christian.

He showed remorse for his crimes and was released early in 1995 for good behavior. After his release, he became a pastor at a church in california, where he also served as the director of the bible institute. It appeared as if the convicted fraudster was finally turning around his life. He also started a business called the fraud discovery institute.

He claimed to use his experience as a former fraudster to uncover frauds and protect investors. He targeted penny stocks that he thought were fraudulent and published reports to expose them by putting his unique expertise to use for good. He was slowly rebuilding his reputation. He scored a glowing feature on 60 minutes and even the judge who originally sentenced him said that he was a changed man and released him from probation.

Unfortunately, barry was not a changed man. Ironically, his fraud discovery institute was itself a scam. It was later uncovered that he would short the penny stocks before he released reports calling them frauds. He did not disclose that he was taking positions in the stocks until after he was exposed by media outlets.

He published a report claiming multi-level marketing. Company herbalife was a fraud, however, after herbalife paid him three hundred thousand dollars, he issued a press release withdrawing all of his allegations against the company, but perhaps his most egregious case of market manipulation was with the real estate company lennar in 2009. Minkow issued a report saying the company was running a massive ponzi scheme calling the company a financial crime in progress. He published a report despite the fact that his own private investigators could not substantiate the allegations.

The day he published a report. Linarestock declined from 11.57 cents to 6.55 cents or almost 50 percent. He bought 20 000 worth of put options on lennar before the report was published. To make matters even worse, he bought shares of the company after his report was released.

This indicates that he knew his allegations were false and the stock would eventually recover. He initially denied trading in lennar's stock, but finally had to admit to it. When his trading records were exposed, he eventually admitted to forging documents that alleged misconduct on the part of lennar. He also lied about having to go to the emergency room in an attempt to avoid testifying in court.

In 2011, he was sentenced to five years in prison for his market manipulation in order to pay 584 million dollars in damages to lennar at the sentence. The judge said: minkow had no moral compass, perhaps his most disgraceful crime yet happened in his church. While he was a pastor, he defrauded his congregation out of more than three million dollars. He opened unauthorized bank accounts, purportedly on the church's behalf.

Forged signatures on church checks. Diverted money from legitimate church accounts for his personal use and charge unauthorized personal expenses on the church, credit cards. He swindled one elderly churchgoer out of 300 000 supposedly to help finance a movie about his redemption. This money actually went to funding his luxurious lifestyle in 2014.

He was sentenced to five years for his church scam, which was the maximum sentence allowed under his plea deal. This sentence was to be added on top of his time that he was already serving for market manipulation. Mikao's lawyers asked for a lighter sentence. However.

The judge said that only the maximum sentence of five years was appropriate, given the despicable and inexcusable nature of his crimes. He was released from prison in 2019 and is currently working on a docu-series about his life of crime. Barry mikao will go down in history as one of the most cold-blooded con men in history. He was given a chance at redemption, but just went on to commit even more shocking crimes.

Instead, this story just goes to show that some people have no moral compass. Alright guys that wraps it up for this video, what do you think about barry minkow? Let us know in the comments section below if you enjoy this content, don't forget to like subscribe and share. As always. Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.