Four of the Worst Celebrity Investments
Investing can be tricky, even if you’re a celebrity (in fact, maybe even more so when you’re rich and famous). Everybody makes mistakes, but some mistakes are bigger than others. Here, we share four of the worst celebrity investments.
Bernie Madoff was undoubtedly a celebrity, for better or for worse. He gained notoriety when his $65-billion Ponzi scam went bust in 2008. Mr. Madoff ran a highly successful and legitimate Wall Street brokerage firm for many years, but he also ran a fraudulent operation that took in millions of investors’ money to buy nonexistent stocks in nonexistent companies. New money was used to pay earlier investors handsome returns on their investments.1
This classic Ponzi scheme turned sour during the 2008 financial meltdown, when worried investors wanted to cash out their positions, but there was no money to return. Some of the unfortunate celebrities who were scammed included Kevin Bacon and his wife Kira Sedgewick, Steven Spielberg, John Malkovich, and Zsa Zsa Gabor, among others.2
Risky Real Estate
Owning physical real estate can be a sound investment choice for some investors as a sensible portion of a diversified portfolio as long as you are prepared for the headaches that come with managing it. However, many celebrities have poured their profits into elaborate and risky real estate ventures only to liquidate their holdings for pennies on the dollar when funds became tight and foreclosure loomed.
Hollywood legend Debbie Reynolds put millions of dollars into her Las Vegas hotel and resort casino where she performed nightly. The location was a bit off the bustling Strip, and that, along with bad management, caused the venue to consistently lose money. Eventually, she filed for bankruptcy protection, and the casino was sold at a huge loss.3
Kim Bassinger spent $20 million buying a whole town in Georgia to bring new fortune to the dying community. Unrealistic expectations and poor planning doomed the project, forcing her to file for bankruptcy and sell for a loss of over $16 million.4
Nicolas Cage, a prolific real estate investor, bought two castles, one in Germany and one in the US. These iconic landmarks needed untold amounts of cash for renovations and upkeep. When the financial crisis loomed, Cage had to sell his properties for cheap before they lost all their value.5
Many celebrities jumped on the cryptocurrency bandwagon, only to lose huge amounts of money. Most recently, the collapse of FTX, a cryptocurrency digital exchange, brought to light how many celebrities lost fortunes in the crash.
Many famous investors, including Tom Brady, Madonna, Jimmy Fallon, and Kim Kardashian, are being sued by other investors for promoting these risky investments on their social media sites. With all this crazy crypto news, the mantra “buyer beware” should be a reminder to invest only in what you research and understand and avoid the schemes that are being pushed by biased celebrities, tycoons, or social media influencers. Plus, cryptocurrency markets still lack regulation to protect investors.6
Many celebrities own impressive art collections. This asset appeals to those who want to diversify their investments with high-quality tangible assets as well as stewarding cultural treasures. Investing in art is not for most people, though – it is fairly illiquid, it can have very high transaction and carrying costs, and it pays no dividends. Therefore it is typically better to view it as a spending decision rather than as an investment, and to only buy pieces that are truly meaningful to you rather than necessarily for their potential price appreciation. And there are scammers out there looking to make a quick buck from unsuspecting buyers.
Jack Nicholson, Barbara Streisand, and the band Kiss were taken for $1.9 million in a shady art deal. Robert de Niro lost over a million dollars when a New York art dealer sold 50 of de Niro’s late father’s paintings and never paid a dime to the de Niro estate. John McEnroe lost $2 million when the same art dealer who defrauded de Niro sold him a painting that had liens against it. When it comes to investing, we all need to be careful about who we trust.7,8,9
Just like everyone else, celebrities want to keep their money safe and grow their wealth over time. Unfortunately, these celebrities fell victim to shady investments that cost them. Learn from these mistakes by only working with financial professionals you trust, and understand what you’re buying before investing in an unfamiliar or opaque asset.
This content is developed from sources believed to be providing accurate information, and provided by Strategic Financial Planning, Inc. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered legal, investment, or tax advice.