Ivan Frederick Boesky

Ivan Frederick Boesky was a U.S. investment banker whose manipulation of the securities market through insider trading led to a criminal conviction and imprisonment in the 1980s. Boesky, who had promoted speculation in stocks through the use of arbitrage, cooperated with federal prosecutors and provided the names of others involved in insider trading, including Michael Milken, another famous securities dealer.

Boesky was born on March 6, 1937, in Detroit, Michigan, the child of Russian immigrants. After graduating from the Detroit College of Law in 1964 and then clerking for a federal district court judge, Boesky joined a prominent national accounting firm in 1965. The following year he left Detroit for New York City, where he became a security analyst. By the early 1970s he had become a general partner of a securities firm yet he wanted to start his own firm. This happened in 1975 when he formed Ivan Boesky and Company.

Boesky was one of the most successful "arbitrageurs," a new type of speculator who bought stock in companies that appeared to be likely takeover targets of other corporations. Typically the stock of a company that is taken over rises substantially, generating a windfall for an arbitrageur who bought the company's stock when it was at a much lower price. Boesky profited enormously from the many corporate takeovers that occurred in the mid-1980s. By 1985 he had become famous in financial circles and had published a book,Merger Mania-Arbitrage: Wall Street's Best Kept Money-Making Secret, that extolled the opportunities in risk arbitrage and the benefits the practice gave to the market.

What the public did not know was that Boesky's fabled skills in picking the right corporate stocks were supplemented by insider information. Since the 1930s, the U.S. government has sought to prevent insider trading, where an insider of a corporation buys or sells stock while in possession of non-public information. Insider trading, if successful, allows a person to reap a large profit or avoid a steep loss, depending on the type of information. The federal Securities and Exchange Commission (SEC) issued rules that prohibit insider trading and made it a criminal offense.

In 1986 Boesky admitted to the SEC that he had illegally traded on information obtained from an employee at the securities firm of Drexel Burnham Lambert, which arranged the financing of many takeovers. He paid the SEC $100 million, half as a fine for insider trading and the rest in illicit profit repayments. Boesky also agreed to provide federal regulators and prosecutors with information about others involved in the scheme. He named Drexel employee Michael Milken as a member of an insider-trading network that had earned hundreds of millions of dollars during the 1980s. This information eventually led to Milken's conviction on insider trading charges.

Boesky did not escape with just the large fine. The SEC barred him for life from the American securities business. In addition, he was convicted of securities fraud and sentenced in 1987 to three years in prison. Boesky served two years in prison and was released in 1990.


Symbol. Ivan Boesky became one of the most famous, and notorious, deal makers of the 1980s. By the middle of the decade Boesky was one of the leading figures on Wall Street and a leading symbol of the prosperity and the corruption of the decade. Boesky was a restless, driven man who found success on Wall Street.

Restless. Ivan's father, William, an immigrant from Russia who owned a chain of bars that featured topless dancing and strippers, became a source of embarrassment for his son as Boesky matured. Boesky never seemed to be accepted by the right crowd. During his teen years Boesky briefly attended the exclusive Cranbrook preparatory school where he had an average academic record, eventually transferring to the public Mumford High School. Boesky attended a variety of colleges and universities before going to Iran with a high-school friend. Boesky's years in Iran are a mystery, but upon returning to the United States he attended law school. Boesky spent five years getting his law degree because he dropped out twice. Upon graduation he went to work in his father's business. Boesky's success came when he moved to New York and entered into the arbitrage business. In 1975, backed by his wife's money, Boesky founded the Ivan F. Boesky Company. Boesky's new business was speculating on corporate takeovers, a fortunate decision that placed him well for the frenzy of mergers and acquisitions that was about to consume Wall Street.

Boesky Day. On 14 November 1986 government investigators announced that Boesky had pleaded guilty to insider trading and had agreed to pay a $100 million fine, the largest fine ever levied for the offense. Even as Boesky was becoming one of the most successful deal makers on Wall Street it was a poorly kept secret that he participated in insider trading. Boesky would use illegally obtained confidential information to gain unfair advantage in stock trading. Still, the news of Boesky's deal with governmental officials shocked Wall Street insiders and the day became known as "Boesky Day." It was even more unsettling to learn that Boesky had agreed to cooperate with further investigations of insider trading. With the news of Boesky's plea bargain the Securities and Exchange Commission, the federal agency that regulates stock trading, issued subpoenas seeking information about the business transactions of Michael Milken, Carl Icahn, Victor Posner, and Boyd Jefferies--all prominent figures on Wall Street during the 1980s. Boesky's business dealings with Milken dated back to mid 1983, and since then Boesky had relied heavily on Milken's firm, Drexel Burnham Lambert, for funds. The government investigators and prosecutors focused on a $5.3 million payment made by Boesky during March 1986. The payment had long seemed suspicious and was even questioned by Boesky's own auditors. Boesky eventually produced a letter from Milken's firm, signed by top executives, supporting his story that the money was for consulting. In reality, Boesky was parking his assets with Drexel, thereby hiding his real worth. Boesky eventually testified against Michael Milken and Drexel.

The Root of All Evil. Boesky went to prison in 1988, and before entering he separated from Seema Boesky, his wife of more than thirty years. In 1991 she formally filed for divorce, and Ivan Boesky sued his wife for $1 million a year in temporary alimony. Although Seema's money had financed much of Ivan's early business ventures, she claimed she did not know of her husband's illegal dealings. Eventually Ivan Boesky received $180,000 a year in alimony. As of 1993 the Boeskys were arguing over how to divide Seema's estimated wealth of $100 million. Boesky's rise and fall demonstrated the potential and the dangers of unregulated capitalism. Traders like Boesky and Michael Milken raised unprecedented sums of money in creative ways, but in doing so they damaged the credibility of Wall Street; Wall Street firms trade not only in stocks and bonds but also in trust.