7 famous millionaires who filed for bankruptcy

Billionaires don’t go bankrupt, millionaires sometimes do. Ordinary people may wonder how people with wealth beyond what most of us can comprehend managed to file for bankruptcy. It can happen to anyone. Think that all those famous millionaires –popular actors and artists of extraordinary genius, professional athletes and legendary business founders, distinguished writers and accomplished musicians – can be guaranteed against loss of money? Definitely not. There are countless stories of mega-rich stars who have filed for bankruptcy. Some of them could bounce back and go on to have successful careers, others were driven to the brink of ruin. Being an international celebrity doesn’t automatically mean that you will not go bankrupt. They are all in danger of loosing it all. Here is a list of 7 famous millionaires who filed for bankruptcy.

1. The King of Pop, Michael Jackson, is often reported to be in financial trouble. And it’s no wonder: he earns millions, but he is able to shop away millions in a single day as well. (Remember famous TV documentary “Living with Michael Jackson”?). Moreover, pop star wasn’t very wise making decisions in his investments and nearly lost his Neverland Ranch after defaulting on a loan held by Fortress Investment Group.

2. Another one of the world’s most famous bankruptcy stories is that of Larry King. Once popular talk-show host and a multi-millionaire dealt with serious financial problems and he was accused of stealing money from his business partner, Wall Street financier Louis Wolfson. His broadcast career was almost ruined; the scandal also forced Larry King to file for bankruptcy in 1978. A few years later he went on to achieve success in his career. In recent years, due to careful financial planning and some very smart business investments in funds such as high yield Tramita Global Fund and some other investment funds, Larry King acquired wealth which is estimated at about $50 million. Having been affected personally by heart disease in 1987, Larry King founded the Larry King Cardiac Foundation which has provided funding for life-saving treatment for hundreds of individuals who had no insurance or limited means.

3. Donald Trump is a far-famed American business magnate, socialite, television personality and author whose extravagant lifestyle and out spoken manner have made him a celebrity for years. His flagship casino business filed for bankruptcy in 2004 and he saw most of his multi-billion fortune wiped away under massive loan payments carrying billions in loses. Donald Trump climbed out from debt hole after some clever business moves.

4. Mike Tyson or “Iron Mike”, once the youngest heavyweight boxing champion ever, received over $30 million for some of his fights and earned over $300 million in his professional career. He lost it all through lavish spending and bad advice.

5. Despite “Got To Give It Up” going to number-one on the pop, R&B and dance single charts and his “Live at the London Palladium” album becoming one of the top ten best-selling albums of the year, Marvin Gaye, the soul superstar, had to file for bankruptcy and lived in a bread van in Hawaii.

6. William “Bud” Post’s $16,2 million jackpot brought him debt, despair and heartache. He declared bankrupt eight years after winning the lottery. He spent all his money on homes, cars, motorcycles and even an aeroplane. He died in 2006, miserable and broke. Unfortunately, huge financial win doesn’t guarantee happiness.

7. Samuel Langhorne Clemens, better known as Mark Twain, went bankrupt in 1894 thanks to bad investment in new inventions such as bed clump for infants, a new type of steam engine and the collotype. Twain desperately tried to pay off his creditors and did so in full in 1898.

Despite earning millions, celebrities can be just as prone to financial blunders as mere mortals. Famous millionaires who come into their money quickly often have very little experience in dealing with such wealth. Wise investments, which can be made only after taking into account the entire analysis of present markets, are impossible without professional managers who specialize in finding financial investment solutions globally as, for instance, Tramita Global Fund does. In case of maximum growth and limited risk of their investments, celebrity millionaires wouldn’t depend on flops at the box office, or a losing season, or lost record deals, or whatever.

How a lottery winner spends his million dollars

According to Ellen Florian Kratz, Fortune writer, Brad Duke, 34, a manager for five Gold's Gym franchises in Idaho, pocketed a lump sum of $85 million after winning a $220 million Powerball jackpot in 2005. He spent the first month of his new life assembling a team of financial advisors. His goal: to use his winnings to become a billionaire. Here's what Duke has done with his money so far.

• $45 million: Safe, low-risk investments such as municipal bonds


• $35 million: Aggressive investments like oil and gas and real estate
• $1.3 million: A family foundation
• $63,000: A trip to Tahiti with 17 friends
• $125,000: Mortgage retired on his 1,400-square-foot house
• $18,000: Student-loan repayment
• $65,000: New bicycles, including a $12,000 BMC road bike
• $14,500: A used black VW Jetta
• $12,000: Annual gift to each family member

Did you often buy lottery tickets or was this a one-time thing?
I played the lottery often when I won. I had developed a little numbering system. Since I've won, there's been a lot of numbering systems for lotteries all over the Internet. Before that, there weren't any. I really thought I was going to win. I even wrote it down in my journal in 2002.
How did you develop your system?
How to choose my lottery numbers started through a trial and error process. I just started playing number games with myself about how to capture the most diverse numbers. Then I looked at the most recent Powerball numbers over the last six months and took the set of 15 numbers that were most commonly coming up. My Powerball numbers were going to be those 15. So I starting messing around with it, and my number games got a little more complex and a little bigger. I was starting to win smaller amounts like $150 and $500.
So many lottery winners have sad endings. Did you worry about that?
I've always handled responsibility well. If you accept that check, you accept an amazing responsibility to yourself and whomever you decide to include in it. I was quiet about winning for a month before I decided to come out. During that time, I was getting as much research as I could on existing lottery winners and what their stories were. Most of them lose all the money within a short amount of time. I'm looking at statistics where people in ten years have nothing. In ten years, I wanted to be worth about ten times as much. I think a lot of people who play the lottery are people who live on hope.
What was your first major purchase?
A trip to Tahiti for me and 17 of my friends. At the same time, I paid off my mortgage and student loans. [What was your biggest purchase?] The family foundation was the biggest allotment of money. $1.3 million.
What else did you do with your money?
I wanted to make the most of the opportunity that was given to me, so I put together a team with the intent to reach and maintain a $1 billion status over a particular period of time. I wanted to do it in 10 years, which I knew was aggressive. My team talked me into looking at 15 years. But it looks like we're on track for 12 years. When you do something like that, the more you become worth, the quicker your growth curve is. My total net worth right now is at an unofficial value of $128 to $130 million. We've done very well for the first year and a half.
What about a big new house or a fancy new car?
I guess I'm more worried about spending time on my investments and helping my consulting company along and doing fun things with my family and friends. I will have a new home and a great car at some point, but just not now. The great thing about the lottery was that I get to experience amazing things with people I care about. I started up a consulting company and am employing some people that helped me along the way with my employment. I took my family on a cruise.
You had to have treated yourself to something.
I bought bicycles. I'm probably own upward of 17 bikes. I also bought a 2002 Jetta. I gave my 2005 Jetta to my nephew. So it's the exact same car except for his is white and mine is black.
You had a newer car that you gave to your nephew and you bought an older car?
That's correct. I wanted a black VW Jetta with a black interior. Believe it or not, those are really hard to find. I went to the local dealership and had them track one down for me. They had to go to Texas to get it. It fit my bicycle rack really well.
What happened to your job at Gold's Gym?
I still teach a spinning class there twice a week. I took some time off after the whole thing because everybody had investment opportunities that were the greatest thing since sliced bread, and there were 100 of them every day. So I had to get out of there for a while, but when I went back, the people I'd been teaching for the last 8 years were still the same people, and I was still the same instructor.
Have you given money to members of your family?
One of the first things I did was give everyone in my family the maximum amount without tax consequence. I have all of my nieces' and nephews' college funds set up, and they're set. And there's no debt for anyone anymore. Everybody is happy.
Are you happier since you¹ve won the money?
Absolutely. When it comes down to it, I get to do the things professionally that I've always wanted to do. I get to invent a piece of equipment that I've always been thinking about doing. I get to give back to some people that have given to me over years.

Million Dollar Ideas: Debunking the myth of the sophisticated investor

As part of their defense in a messy SEC investigation, Goldman Sachs and investor John Paulson have trotted out a classic Wall Street defense: Their customers were "sophisticated investors."

So buyers, beware -- this is just how the big boys roll. It's a high-stakes game for experienced players; they all know the real rules; the public shouldn't care. Don't fret over the higher workings of the princes of finance, because it's not as though Mom and Pop lost money in their deals. Goldman's Fabrice Tourre told the Senate on Monday: "I was an intermediary between highly sophisticated professional investors -- all of which were institutions. None of my clients were individual, retail investors."

Wall Street loves the "sophisticated investors" argument, and little wonder: It could generate infinite financial fees if only the populace could be convinced that it's okay to fool some of the people all of the time. The problem is that even when only some of the people get fooled, all of us are paying all of the time.

Let's examine what happened with Goldman and Paulson. Goldman Sachs stands accused, in part, of giving favored financial treatment to Paulson's firm, allowing him to advise on the creation of a security, Abacus, that he wanted to fail; Goldman later sold it to investors who wanted the security to succeed, but it didn't tell them Paulson had played a role in creating the thing and shorted it to bet it would fail. To sell the deal, Goldman apparently withheld information about Paulson's involvement from the buyers, including Royal Bank of Scotland and Germany's IKB Deutsche Industriebank. The buyers lost about $1 billion on the deal, according to the Securities and Exchange Commission.

Economists call this "informational asymmetry." Everyone else calls it "not telling the whole story." The hitch is that America's securities laws require disclosing all warts to potential buyers, and banks pay lawyers millions of dollars every year to comply.

Informational asymmetry is also contagious: Once it's started, it becomes easier and easier to withhold information that buyers need in order to make decisions. And if it's done to one client, it can be done to any. Most of those clients can put 2 and 2 together and recognize that what happened in the Abacus deal is probably not an isolated incident; in Wall Street parlance, there's never just one roach. That's why Goldman and Paulson started assiduously groveling to their other clients after the SEC announced its case, hoping to ease those clients' predictable fears that the bank and the hedge fund could have treated them the same way they treated RBS and IKB.

It's not just the big clients, however, that get hurt. What Wall Street would like to ignore when it is taking bets in its casino is that a big pile of chips on the table come from regular consumers -- from their bank deposits, retirement accounts, credit-card balances, car loans and mortgages. That's why the distinction between these sophisticated investors and everyone else is nonexistent. When Wall Street banks omit information and draw profits from "institutional investors," that means they are taking money from your pension funds, your school endowments, and your city and state governments. Other sophisticated investors include hedge funds, which take money from those pension funds, or private-equity funds, which own companies that employ 10 percent of all Americans.

Pension funds, for instance, are considered "sophisticated investors" on Wall Street. But those are just pools of retirement money owed to workers. The pension funds, looking to expand their stash, invest in stocks and bonds sold by Wall Street. These pension funds also give their money to other funds, such as hedge funds and private equity funds, that invest that money in riskier investments, perhaps troubled companies or distressed mortgages. Pension funds play the Wall Street game to score a healthy return -- but when they lose, the money lost belongs to regular people.

Consider synthetic collateralized debt obligations -- which describes bets made on a bundle of securities tied to home loans -- like Abacus. Banks would need to lend $50 billion of mortgages to regular people in order to create a $1 billion CDO like Abacus, according to Michael Lewis in "The Big Short." These deals didn't cause the greatest financial crisis since the Great Depression; what they did was far worse.

They took the basic subprime losses and magnified them to a point at which no one -- not banks, not investors, not entire governments -- could bear the cost of the massacre that followed. It cost only $35 million a year to buy protection against the failure of billions of dollars of assets. When these assets failed, the insurance holders didn't get $35 million a year; they received many multiples of that. Banks nearly collapsed trying to scrounge together the money to pay back these insurance policies. The two banks that bought the Abacus deal both received multiple bailouts from the taxpayers of Germany and Britain. Yet Goldman and Paulson insist their deals concerned only sophisticated investors. Tell that to the foreign governments.

The truth is, there are no real lines dividing Wall Street and Main Street and Washington. They are all interconnected. Promiscuous federal subsidies to homeowners and low interest rates made mortgages and refinancing very popular. Unethical mortgage lenders wrote these terrible, no-money-down, no-documentation deals because they wanted the fees. Wall Street seized on the popularity of those products and churned out more bundles of mortgages to be packaged and sold to big investors. Goldman and other banks sold some of these securities and took some of them onto their own books, and many banks turned around and insured themselves against the failure of the deals by buying policies from American International Group. AIG loaded up on contracts to protect the investments, and when the housing market collapsed, AIG came up short without enough money to pay the contracts.

The banks were caught empty-handed. To save them, the Federal Reserve cut interest rates to zero and ate the banks' poison: It bought with its own money $1.4 trillion of the remaining mortgage dreck; as a result, the Fed is now the least-capitalized bank in the United States and would not pass one of its own stress tests, although there isn't enough money in the world to bail it out if necessary. Besides that, the banks got the law changed so that they could keep optimistically boosting the value of these toxic mortgage securities still on their books, making their financial positions today look far stronger than they are.

So while Wall Street is swearing up and down it was dealing only with sophisticated investors, in reality every single part of the financial system, from high to low, was involved. Taxpayers and investors lost money in the bailouts while the banks made a killing: They were paid by clients to do sloppy deals, then paid again by the government to clean them up.

It's a top-to-bottom mess. So here's a radical million dollar idea: Instead of buying the notion that there's a difference line between sophisticated investors and the mom-and-pop variety, banks should tell the truth. To everyone. Wall Street is the factory for all the financial products in the United States, and you can't allow a factory to put out some poisonous products and claim the rest are healthy.