Entrepreneurship is commonly associated with innovation and the increase of welfare (Schumpeter 1911, 1939, 1949). However, in his seminal works, Baumol (1990, 1993) distinguishes between three types of entrepreneurship: productive, unproductive, and destructive. In the last two cases, entrepreneurial activity results in redistribution of wealth, and new values are not created; entrepreneurship will therefore have a negative effect on society. This fact has been more neglected; furthermore, the distinction between unproductive and destructive entrepreneurship has been tenuous and therefore often ignored (Desai et al. 2013). One fundamental problem has been to operationalize and to distinguish the three concepts of entrepreneurship; since productive, unproductive, and destructive entrepreneurship come in many forms, no universal approach or definition exists. Another problem has been to study the effects of the different forms of entrepreneurship (e.g., Bjørnskov and Foss 2008). In the literature, destructive entrepreneurship has been defined as illegal entrepreneurial activities such as organized crime and economic crime (e.g., Collins et al. 2016). In the present article, we explicitly attend to the notion of destructive entrepreneurship and operationalize it by using comprehensive, aggregate series on bankruptcy fraud in Sweden. The framework of the bankruptcy institute presents an opportunity to elaborate on the Baumolian framework: while the bankruptcy institute can be regarded as a cleansing or selection mechanism that sorts out inefficient firms from the market (e.g., Miller 1991), it can also be regarded as a financial institution that can be used by entrepreneurs for distributing assets in unintended and sometimes unwanted directions. First, it can be employed as a tool for rent-seeking and thus for unproductive entrepreneurship: firms themselves can, strategically, file for bankruptcy and evade payment of debts. The bankruptcy costs are thereby externalized to creditors, suppliers, and taxpayers (Akerlof et al. 1993; Delaney 1992; Stiglitz 2001). Second, economic crimes—destructive entrepreneurship—are committed within the bankruptcy institute. Bankruptcy frauds are typically committed before bankruptcy proceedings are initiated; here, an insolvent firm has illicitly withdrawn or concealed assets from creditors and the state (Gottschalk 2010; McCullough 1997). In the case of bankruptcy fraud, offenders have committed either dishonesty or carelessness towards creditors, favoritism towards creditors, or accounting fraud. Thus, a firm has illegally exploited an economic opportunity in order to gain some form of financial or business advantage. Just as in Bstrategic^ bankruptcies, all or some of the bankruptcy costs are externalized (Friedrichs 2010).