10 Most Famous Bankruptcies in History
Bankruptcy is an unfortunate yet common outcome for businesses and organizations that are no longer able to meet their debt obligations. In this article, XAUXI takes you through the stories and hard-earned lessons of 10 of the most significant bankruptcies in global economic history.
What Is Bankruptcy?
Defined in the 2024 Bankruptcy Law, bankruptcy is a legal status for businesses or cooperatives that are insolvent and declared bankrupt by a court. If an entity fails to pay its debts within three months of the due date, it may be subject to bankruptcy proceedings.
10 Most Famous Bankruptcies in History
Below are ten high-profile bankruptcy cases that shook the global economy—turning billion-dollar empires into ruins within months or even days.
1. Lehman Brothers (2008) – Over $600 Billion in Debt
Lehman Brothers, once the fourth-largest investment bank in the U.S. with a 158-year history and over 25,000 employees, filed for bankruptcy in 2008 with staggering liabilities exceeding $600 billion.
This collapse triggered the most severe financial crisis in U.S. history, leading to frozen credit markets, a crashing stock market, mass unemployment, and a global recession. The root cause was a housing market bubble fueled by subprime mortgages and irresponsible lending practices.
2. Washington Mutual (2008) – The Largest Bank Failure in U.S. History
Washington Mutual, a 119-year-old bank with $307 billion in assets and 2,300 branches, collapsed due to major losses in mortgage lending and a rapid withdrawal of $53 billion in deposits in just three months. Its stock price plummeted by 95%, dragging 13 other commercial banks down with it.
3. WorldCom (2002) – Fraud that Shook Wall Street
WorldCom, once valued at nearly $180 billion, collapsed in one of the largest accounting frauds ever seen. Founder Bernie Ebbers used deceptive bookkeeping to mask losses for years. At its peak, the company had 88,000 employees and over $40 billion in revenue. The scandal wiped out shareholders and led to Ebbers' 25-year prison sentence.
4. General Motors (2009) – The Heart of U.S. Industry Fails
GM filed for bankruptcy in 2009 with $173 billion in debt, marking the largest industrial bankruptcy in American history. High production costs and poor product reliability led to its downfall. The collapse exposed the long-standing inefficiencies and unsustainable labor costs within the U.S. auto industry.
5. CIT Group (2009) – Fifth-Largest Bankruptcy in U.S. History
On November 1, 2009, CIT Group filed for bankruptcy due to a lack of liquidity amid the financial crisis. Despite receiving $2.33 billion from the U.S. government under the TARP bailout program, CIT was unable to recover, dealing a blow to economic recovery efforts.
6. PG&E Corporation (2019) – Power Crisis and Political Fallout
PG&E filed for bankruptcy after California’s energy deregulation in the early 2000s led to massive blackouts and high production costs. Governor Gray Davis attempted to rescue the utility using state funds, sparking controversy that eventually led to his resignation.
7. Enron Corporation (2001) – Collapse of a Giant Overnight
Enron, once a $90-per-share energy titan, filed for bankruptcy in December 2001. Its collapse cost 20,000 jobs and exposed massive accounting fraud via mark-to-market (MTM) accounting. Executives, including CEO Jeffrey Skilling, were later imprisoned for securities fraud and insider trading.
8. Conseco (2002) – Financial Giant Crumbles Under Debt
Conseco, an insurance and financial services firm, filed for bankruptcy with $6.5 billion in liabilities after acquiring Tree Financial and accumulating toxic mortgage-related debt. Its stock fell from $58 to just $0.04 in less than a decade, making it the third-largest financial bankruptcy at the time.
9. MF Global (2011) – First U.S. Firm to Fail from the European Debt Crisis
Led by ex-Goldman Sachs CEO Jon Corzine, MF Global collapsed due to excessive bets on European sovereign bonds. Over $633 million in customer funds went missing, prompting investigations by the CFTC, FBI, and SEC. With $41 billion in assets, its fall ranks among the top 10 largest bankruptcies in U.S. history.
10. Energy Future Holdings (2014) – Historic Buyout Ends in Collapse
EFH’s record-breaking leveraged buyout by KKR, TPG, and Goldman Sachs led to its downfall after natural gas prices fell dramatically. The firm filed for bankruptcy with $40 billion in debt, making it one of the largest and most misunderstood corporate collapses in modern times.
Each of these infamous bankruptcy cases offers valuable lessons in risk management, corporate governance, and the importance of transparency. By studying their causes and consequences, investors, executives, and policy-makers alike can gain insights into how to better navigate financial uncertainty.
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