Ivan Boesky Research Paper

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Ivan Boesky, who was born in Detroit in 1937, studied law before becoming an up-and-coming investor and collecting fortune worth over $250 million dollars. His link in the 1986 insider trading scandal, however, ruined his name and landed him with a $110 million dollar fine and a prison sentence. The character Gordon Gecko in the movie Wall Street (1987) is believed to be partially based on Boesky. For the first 30 years of his life, Ivan Boesky wasn't sure what career he wanted to do. He was the son of a Ukrainian immigrant who had now become a Detroit restaurant owner, Ivan graduated from the Michigan State college of Law and went from one job to another until landing on Wall Street in 1966 as a stock analyst. His wife whose name was Seema…show more content…
Over 3,000 mergers and buyouts worth more than $120 billion occurred in 1987 alone. Time and again the share price of stock in companies targeted for leverage buyout, or hostile buyout would rise before the deals were revealed, showing that insider trading was happening. Using an arbitrage fund of capital provided by limited partners, Boesky would pay more than the current trading price for a company's shares with the hope of selling them at a higher price when the acquisition was declared. For example, Boesky and others bought a large block of shares in Gulf Western before rumors of a takeover bid drove up the price of that stock. Three days before Maxim Group presented an $850 million offer for Pacific Lumber Company., Boesky bought 11,000 shares of Pacific Lumber stock. When acquisition expert named Dennis Levine, managing editor of Drexel Burnham Lambert, was accused with illegal trading in May 1985, the SEC learned that Boesky had made a deal with Levine which he was paid for inside information. In return for kindness, Boesky allowed the SEC to secretly tape his conversations with junk bond dealers and takeover artists. The SEC allowed the arbitrageur to reduce his partnership charges by selling stocks and securities before his crimes were made public. Outraged members of Congress and the business community complained about this arrangement that Boesky received. Some experts expected that the widening…show more content…
In 1989 junk bonds remained strong; high-yield bond funds realized 60 percent gains over three years. But without Milken, potential borrowers and investors lost confidence in Drexel. In 1989, when Congress forced S&L thrifts to liquidate their high-yield bond holdings, and big bond issuers like Integrated Resources, South mark and Lomas Financial defaulted, the junk bond market went into a nose-dive. Drexel reported losses of $45 million for the year and carried $1 billion in unsold high-yield bonds. Economist Daniel Fischel guessed that the temporary decline of the junk bond market led to a credit crunch that added to the 1990
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