Enron’s downfall was caused by widespread accounting fraud, where executives used complex schemes and special purpose entities to hide billions in debt and inflate earnings, making the company appear more successful than it was. This deception led to its collapse in December 2001, the largest bankruptcy in U.S. history at the time, resulting in massive losses for employees and investors after the company had peaked at a $70B market cap. The scandal also led to the downfall of Enron’s auditor, Arthur Andersen, and spurred the enactment of the Sarbanes-Oxley Act (SOX) to prevent similar corporate misconduct.
