Wade Cook - Financial and Legal Troubles

Financial and Legal Troubles

In 1987, Cook filed personal bankruptcy. Two companies he controlled, American Business Alliance and Monarch Funding Corporation, also went bankrupt that year.

In 1989, Cook was charged with securities violations by the Arizona Corporation Commission. The following year, the Arizona Attorney General charged him with several criminal counts, including selling unregistered shares of a company he controlled.

In 1998, Cook won a settlement against self-help guru Anthony Robbins over his claim that Robbins had illegally used concepts (particularly the "meter drop") from Cook's book Wall Street Money Machine to create a financial seminar. Robbins agreed that he had read the book and met with Cook, but disputed the illegality of his use of the concepts. A jury in Tacoma, Washington sided with Cook and awarded damages in the amount of $655,900.

In 2000, WCFC, a company which sold seminars on investing and offered subscriptions to a trading bulletin board service called the Wealth Information Network (W.I.N.), posted $1.7 million in trading losses.

The stated purpose of posting the bulletin board information about these trades was to let attendees of his financial workshops “learn from the master” by seeing what securities Wade Cook bought and sold. Gaining access to “Wade’s Trades” was touted as one of the major advantages of attending these seminars. Subscribers to Wade's Trades could purchase the same securities that Wade Cook purchased and theoretically, could duplicate his results.

The bulletin board often recommended the securities of obscure corporations or options in which there was a fairly small market. When Wade Cook's students began purchasing these investments, they tended to drive up the price. Initial purchasers could then liquidate their own positions in these investments at a profit, thus proving to Cook's students that he had a talent for picking securities that were poised to go up in value. Unfortunately, the increase in the value of the securities was often short-lived; since the price would be driven back down as students began to sell their positions. If most of the activity in the recommended securities was due to transactions by bulletin board subscribers, it is reasonable to conclude that at least some of these investment recommendations would become self-fulfilling prophesies.

On October 5, 2000, Wade Cook Financial Corporation agreed to a settlement with the Federal Trade Commission and 14 state Attorneys General on charges that the corporation misrepresented earnings potential. WCFC claimed 20% monthly returns. As a result, WCFC was required to set up redress program for consumers who purchased its products and to alter its advertised earnings claims.

In 2002 the FTC brought new charges based on failure to comply with the previous order.

In 2002, WCFC was forced into Chapter 11 bankruptcy by a group of its creditors, including several employees and independent contractors, who claimed they had not been paid for several months.

In December, 2005, Wade Cook and his wife Laura were charged with several counts of income tax evasion. Both pled not guilty. According to court documents, the Cooks operated a fraudulent charity, ostensibly to benefit the LDS Church, but instead bought show horses, his and her Cadillacs, a 40-acre (160,000 m2) estate, and the majority share of an oil rig which gave Cook the right to name it. He named it after himself. The trial began on January 17, 2007.

On February 20, 2007, Cook was found guilty by a federal jury of seven charges for failing to pay taxes on $8.9 million that the government says he should have reported as personal income from 1998 to 2000. His sentencing was set for June 22, 2007. On May 16, 2007 Laura Cook, the wife of Wade Cook, plead guilty to obstructing federal tax laws. She faced up to three years in prison and a fine of up to $250,000.

On August 2, 2007, Wade was sentenced to 88 months in prison, his wife Laura Cook was sentenced to 18 months in prison. Wade was also ordered to pay back $3.75 million in owed back taxes.

On September 4, 2008, Cook was taken into custody at the Federal Detention Center in SeaTac, Washington, preceding transfer to a prison where he is currently serving his 88-month sentence. He is currently serving his sentence at the Lompoc Federal Correctional Complex (FCC) in California with a 2015 release date per the federal prison system online search.