How The Founder Of Electronic Arts Earned A $100 Million Fortune… Then Lost It All To Private Jets And Bad Tax Advice

A little over two decades ago, Trip Hawkins was on top of the world. As the founder of Electronic Arts, he had transformed a bold vision for a mainstream video game publishing empire thanks to hits like Madden NFL, FIFA, and The Sims. As would be revealed by a federal appeals court in 2014, "by 1996 his net worth had risen to $100 million."

In the mid-1990s, Hawkins looked like a man set for life. He owned a private jet, a fleet of luxury cars, two lavish mansions complete with large household staff, and sent his children to elite private schools.

But behind the scenes, his empire was quietly crumbling. Lavish spending habits, poor financial guidance, and a disastrous attempt at tax avoidance would ultimately push him into bankruptcy, spark years of court battles with the IRS, and threaten to wipe out his wealth. Legal filings would later show that at his peak, his monthly spending was outpacing his monthly income by around $80,000 (EVERY MONTH!). To keep up, between 1996 and 1998 alone, he cashed out over $66 million worth of EA stock. But instead of paying the required taxes, he relied on elaborate accounting strategies that ultimately proved… not so wise.

The Rise of a Gaming Visionary

Before Trip Hawkins was building billion-dollar gaming franchises, he was studying game theory at Harvard. He attended Harvard at the same time as Bill Gates and Steve Ballmer. At Harvard, in addition to playing varsity football, Trip created his own major in Strategy and Applied Game Theory. He then went on to earn an MBA from Stanford. That mix of academic rigor and a lifelong love of games shaped his approach to business from the start.

In 1978, Hawkins joined Apple as one of its first 50 employees, serving as Director of Strategy and Marketing under Steve Jobs. But by 1982, he saw a different kind of opportunity: video games were evolving rapidly, and he believed they could become a dominant form of entertainment. That year, he left Apple and invested $200,000 of his own money to launch Electronic Arts.

At a time when video games were often seen as novelties, Hawkins had a radically different vision. He wanted to create a company that would treat software developers as artists, just like filmmakers or rock stars. EA's early branding even featured headshots of developers posed like album covers, a bold move in an industry that rarely credited creators.

Peak Net Worth

The company's early success came from innovative PC games like Pinball Construction Set, Archon, and M.U.L.E., but the true breakout moment came in 1988 with the release of John Madden Football. EA soon inked licensing deals with professional sports leagues and athletes, leading to the creation of blockbuster franchises like Madden NFL, FIFA, and NHL.

To fund its growth, EA went public on January 9, 1989, listing on the NASDAQ under the ticker symbol "ERTS." The IPO raised significant capital and helped EA scale rapidly, expanding development, acquiring studios, and cementing its dominance in the gaming world. Hawkins' stake in the company made him incredibly wealthy, with his net worth eventually peaking around $100 million.

By the mid-1990s, Electronic Arts' market cap was around $1 billion. Therefore, if Trip's net worth in the mid-1990s was $100 million (as federal prosecutors would later reveal), one could presume he owned around 10% of the company. Keep the number in the back of your mind for a minute…

From Industry Icon to IRS Target

As we stated at the top of this article, between 1996 and 1998, Trip sold $66 million worth of EA stock to pay for cars, houses, jets, and more. But selling shares wasn't just to find a lavish lifestyle, Trip also used that money to invest in his next venture, 3DO. Backed by major players like Panasonic and Time Warner, 3DO aimed to revolutionize home gaming with a cutting-edge console. But the product was overpriced and underpowered compared to rivals like Sony's PlayStation. Despite early hype, 3DO flopped—and with it, much of Hawkins' new fortune.

Unfortunately, when 3DO failed, Hawkins lost most of his investment.

Meanwhile, he'd already triggered around $67 million in taxable capital gains from the EA sale—gains he then tried to shield through KPMG's now-infamous tax shelters.

Still, Hawkins lived large. By the late '90s, he owned two multimillion-dollar homes, maintained a private jet, drove a fleet of luxury cars, and sent his children to top-tier private schools. To fund his lifestyle, he began cashing out significant chunks of his EA stock—over $66 million worth between 1996 and 1998 alone.

Rather than pay the hefty taxes owed on those capital gains, Hawkins followed advice from the accounting giant KPMG, which pitched him on an aggressive tax shelter strategy involving offshore partnerships and Swiss bank transactions. These schemes—known as FLIP (Foreign Leveraged Investment Program) and OPIS (Offshore Portfolio Investment Strategy)—were designed to generate artificial paper losses that could offset real capital gains.

The arrangement allowed Hawkins to claim over $60 million in losses on an investment in which he had only risked about $3.5 million. The IRS later called this structure "close to frivolous" and disallowed the deduction entirely.

In theory, it was all perfectly legal. In practice… Uncle Sam didn't agree.

In 2002, the IRS notified Hawkins' attorneys that the tax shelters, which shielded $60 million in supposed losses, were going to be disallowed for the tax years 1997 to 2000. That put Hawkins on the hook for roughly $36 million in back taxes and penalties.

While he managed to pay about $10 million of that debt, Hawkins continued to live the life of a jet setter until 2006, when he filed for bankruptcy protection. His lavish lifestyle continued unabated, even with taxes on $60 million hanging over his head. For example, his private jet cost $11.8 million in 2000 and carried an operating cost of $1 million annually (hangar fees were $100,000 per month).

Additionally, Hawkins bought a $2.6 million vacation house in the tony San Diego neighborhood of La Jolla, and continued to purchase Giants season tickets for nearly $7,500 per year plus $1,416 for the parking pass.

Hawkins has denied that he spent his money so lavishly in the years leading up to his bankruptcy. In fact, he claims that the only truth to the reports of his spending was the private jet. In a 2015 interview, Trip explained:

"I bought a private jet because I thought it would make me more efficient in my work. That was really stupid."

Hawkins went on to say that the only thing he was guilty of was trusting his accountants, who told him they were setting up legitimate tax shelters.

In his defense, Hawkins wasn't the only wealthy person taking advantage of KPMG's complicated tax sheltering plan. In fact, in 2005, the IRS hit KPMG with a $456 million fine in what was then the largest criminal tax case ever filed. This was  for the "multi-billion dollar criminal tax fraud conspiracy" through the sale of "fraudulent tax shelters." KPMG generated $11 billion in phony tax losses through FLIP, OPIS, and other plans the accounting firm devised. This cost the US Treasury $2.5 billion.

Bankruptcy and Legal Battles

In 2006, Hawkins filed for Chapter 11 bankruptcy. Within months of filing for bankruptcy, Hawkins sold his house in upscale Atherton, California, as well as his La Jolla beachfront condo. The proceeds were used to lower his tax bill, but according to the courts, that wasn't enough. A federal judge believed Hawkins continued living a life of luxury after filing and therefore he denied him the usual bankruptcy benefit, discharging his tax debt.

The court determined that Hawkins' lifestyle showed a "willful attempt to evade taxes." He appealed, arguing that he had trusted professional accountants and hadn't deliberately tried to defraud the IRS.

In 2014, the Ninth Circuit Court of Appeals sided with Hawkins in a 2–1 decision, ruling that lavish spending alone wasn't enough to prove intent to evade taxes. The case was sent back to bankruptcy court to re-examine his intent under a new legal standard.

In her dissent, Judge Johnnie Rawlinson didn't mince words, describing Hawkins' behavior as part of "the shenanigans of the rich," and argued that bankruptcy protection shouldn't extend to "aiding and abetting wealthy tax dodgers."

In 2017, Hawkins lost again. A U.S. District Judge upheld the lower court's ruling, concluding that Hawkins had knowingly tried to defeat his tax liabilities through bankruptcy, all while maintaining an extravagant lifestyle. As a result, his $26 million in remaining tax obligations could not be discharged.

To date, Hawkins remains liable for that debt, and no further public resolution has been reported.

Hawkins feels he's a victim in all this, not a tax dodger. As he explained in a 2015 interview:

"Tax code seems to me to be about as complicated as brain surgery, and I don't pretend to tell either tax experts or surgeons how to do their thing, and I would bet you would feel the same. You ask them to do all the forms, and you trust what they do. If they say they know a way to legally save money on a good investment or deduction, you do what they say. We all make mistakes trusting people, it is just that the higher you are, the further you are going to fall."

"Yes, before I clearly understood and accepted that I had tax problems and obligations, I did spend too much money because I presumed, like most people, that my money was my money and that I was an American living in the USA."

But critics were unsympathetic. As one legal commentator noted, even a basic understanding of tax law should've made it clear that claiming $60 million in losses on a $3.5 million investment wouldn't hold up to scrutiny.

Life After EA

Even after his fortune dwindled and legal troubles mounted, Trip Hawkins never stopped innovating. While his post-EA ventures didn't reach the same dizzying heights as Electronic Arts, they reflect a continued passion for technology, education, and gaming.

In the 2010s, Hawkins remained active in the tech and gaming space through a number of board and advisory roles. In 2012, he joined the board of Israeli tech firm Extreme Reality, which developed 3D motion control software using only a standard 2D camera. A year later, he became a senior advisor to Nativex, a mobile ad platform for games. In 2014, he joined the advisory board of Skillz, a mobile eSports company that helps developers integrate competitive gaming into their apps.

From 2016 to 2019, Hawkins served as a professor of entrepreneurship and leadership at UC Santa Barbara, where he shared insights from his rollercoaster career with the next generation of founders. He currently resides in Santa Barbara, continuing to straddle the worlds of gaming, education, and mentorship.

What Could Have Been

At the peak of his fortune in 1996, Trip Hawkins owned an estimated 10% of Electronic Arts—roughly 5.3 million shares—at a time when the company's market cap hovered around $1 billion. Over the years, EA underwent two 2-for-1 stock splits (in 2000 and 2003), meaning Hawkins' original stake would have grown to 21.2 million shares today had he held on. With EA stock now trading at $154, that stake would be worth $3.26 billion today.