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. As court filings later revealed, Hawkins' private jet cost $11.8 million and required $1 million annually to operate, with $100,000 monthly hangar fees. He bought a $2.6 million La Jolla vacation home, maintained a $3.5 million Atherton residence, and spent over $8,900 annually on Giants season tickets and parking. At one point, the Hawkins family was spending as much as $78,000 more per month than they earned.. 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 Mike Markkula at first, then eventually reporting directly to Steve Jobs.

During his time at Apple, Trip had a very prescient revelation. All of Apple's developers were artistic weirdos. And all of these artistic weirdos were being paid to channel their creative energy into creating boring operating system software or business applications like spreadsheets. Trip's revelation was that these artistic weirdos should actually be channeling their creative energy into developing software that would build a much more … creative… product. For example, a game.

In May 1982, Trip left Apple and invested $200,000 of his own money to launch a video game development company. In December of 1982, he raised his first round of venture capital money. He also brought Steve Wozniak on as a board member.

One of his founding principles was to treat software developers as artists, just like filmmakers or rock stars. Hence the name, "Electronic Arts." EA's early branding even featured headshots of developers posed like album covers, a bold move in an industry that rarely credited creators.

Trip Hawkins (left) and a young business associate at Electronic Arts in 1984 (Photo by © Roger Ressmeyer/CORBIS/VCG via Getty Images)

Hit Games

One of the company's first games turned out to be a smash hit. It was also the first time a celebrity licensed their name and likeness to appear in a game. Actually, two celebrities. The game was called "1 on 1 with Dr. J & Larry Bird." Dr. J and Larry Bird were each paid $25,000 and received 2.5% of royalties.

Peak Net Worth

EA continued to rise thanks to 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 Hawkins sold $66 million worth of EA stock. That money went toward funding an opulent lifestyle—cars, houses, private school tuition, a private jet—as well as investing $12 million into his next big venture: 3DO. Backed by heavyweights like Panasonic and Time Warner, 3DO aimed to revolutionize home gaming with a cutting-edge console. But the device was overpriced and underpowered compared to rivals like Sony's PlayStation. Despite early hype, 3DO flopped—and with it, a significant chunk of Hawkins' fortune vanished.

Unfortunately, by the time 3DO failed, the damage was already done. The EA stock sales that funded his lifestyle and investments had triggered approximately $67 million in taxable capital gains. Rather than pay the taxes owed, Hawkins took the advice of accounting giant KPMG, which pitched him on aggressive tax shelters involving Swiss banks and Cayman Islands entities.

These shelters—known as FLIP (Foreign Leveraged Investment Program) and OPIS (Offshore Portfolio Investment Strategy)—were designed to manufacture paper losses that could offset real gains. Under FLIP, Hawkins invested $1.5 million in UBS shares and an option to buy into a Cayman Islands company called Harbourtowne, which entered a $30 million contract to buy more UBS shares. UBS repurchased the shares before delivery, but KPMG told Hawkins he could still add that $30 million to his tax basis—effectively inventing a massive loss. OPIS worked the same way using a separate offshore vehicle. In total, Hawkins claimed more than $60 million in losses between 1996 and 2000, despite only risking about $3.5 million of real money.

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 would be disallowed for tax years 1997 through 2000. That ruling left Hawkins on the hook for roughly $36 million in back taxes and penalties. He managed to pay about $10 million of that debt, but continued living like a man with no financial worries.

By 2000, Hawkins had purchased a private jet for $11.8 million. Its upkeep cost roughly $1 million annually, and hangar fees added another $100,000 per month. Court records show he used the plane for trips to Hawaii, England, Russia, Italy, Aspen, San Diego, and Long Beach. He kept it until 2003, eventually selling it for $5 million. In 2002, he bought a newly built $2.6 million vacation home in La Jolla. He also maintained a $3.5 million home in Atherton and spent nearly $9,000 per year on San Francisco Giants season tickets and a parking pass.

Despite these lavish expenses, Hawkins denied that his lifestyle was excessive. In a 2015 interview, he claimed his only major indulgence was the jet:

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

He also insisted that his real mistake was trusting his accountants, who told him the tax shelters were legitimate.

In his defense, Hawkins wasn't alone. Dozens of wealthy individuals fell into the same trap. In 2005, the IRS hit KPMG with a $456 million fine—the largest criminal tax case ever filed at the time—for what it called a "multi-billion dollar criminal tax fraud conspiracy." Through FLIP, OPIS, and similar schemes, KPMG generated $11 billion in fictitious tax losses, costing the U.S. Treasury an estimated $2.5 billion. While some KPMG accountants were later prosecuted, clients like Hawkins avoided charges thanks to formal opinion letters that declared the shelters legal at the time.

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 described Hawkins' actions as "profligate spending" and concluded that "Hawkins deliberately decided to spend money extravagantly rather than pay his duly assessed state and federal taxes." She highlighted that Hawkins bought a fourth car for $70,000 despite only two family drivers, and said the bankruptcy court was justified in viewing his "truly exceptional" spending as a willful attempt to evade taxes.

But the two-judge majority saw it differently. They ruled that "bankruptcy law must apply equally to the rich and poor alike," and that simply living beyond one's means—even irresponsibly—does not, by itself, prove an intent to evade taxes. The case was kicked back to bankruptcy court to reevaluate Hawkins' liability under this new, stricter standard of intent.

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.