Since the time people started using money, there have been numerous cases of scams and frauds. History shows that scammers are expert in preying on people’s gullibility. But even after stealing millions, the future for these people does not bode well, and usually, their frauds are exposed. In this article, we have collected the 10 biggest scams in history which left the investors penniless and sometimes even destroyed entire economies.
1. In 1996, a Canadian mining company, Bre-X, announced a huge discovery of gold, and in the process went from a penny stock to $280 per share, with a total value of $4 billion. In reality, it was all a fraud and the lead geologist was shaving off gold from his wedding band to add to drill-core samples.
During the late 1990s, geologist John Felderhof believed that a property near the Busang River in Indonesia would produce gold after mining. At his advice, David Walsh, the founder of Bre-X Minerals Ltd., bought the property. The project manager of the gold mining project was Filipino geologist Michael deGuzman. When deGuzman tested the initial samples, he didn’t find any trace of gold, so he shaved off some gold from his wedding band, added it to the samples, and declared the first estimate of the total find to be about 62 metric tons.
The news of the presence of gold in Bre-X’s property soon spread like wildfire. The company claimed that it was going to be the richest gold mine ever discovered. Mining investors rushed to invest and the stock price of Bre-X started climbing, and it rose from pennies to $280 per share.
Michael deGuzman kept on salting the samples, and that worked until 1997. In 1997, the Indonesian government got involved, and from February 1997, the evaluation of the site began. In March 1997, deGuzman committed suicide by jumping from a helicopter. Bre-X and its mine’s reputation started going downhill from then on. On March 26, 1997, an American firm announced that its core sample collected from Busang contains a negligible amount of gold. As a result, the Indonesian government postponed signing the mining deal with Bre-X. Stock prices began to fall, and thousands of investors lost billions. TSE and NASDAQ suspended trading of Bre-X stock, and it went bankrupt on November 5, 1997.(1,2)
2. Founded in 1985, the Enron Corporation claimed revenues of nearly $101 billion during 2000 and employed approximately 20,000 staff. But the real value of the company was exposed at the end of 2001, after which the company was declared bankrupt. Enron was responsible for wiping out over $78 billion in stock market value.
The American company Enron came into focus after 1996 when it began reporting a steady increase in its sales each succeeding year. From 1996 to 2000, the sales of Enron was reported to increase from $13.3 billion to a staggering $100.8 billion. It was declared as “America’s Most Innovative Company” by Fortune magazine for six consecutive years. But at the end of 2001, the actual financial condition of Enron was revealed. The report stated its accounting fraud, also known as the “Enron Scandal,” and the company filed for bankruptcy in 2001.
The Enron Scandal revealed the loopholes in accounting rules in America. The company used to book revenue from huge energy-derivative contracts at their gross value instead of their net value. Basically, Enron served as a middleman on deals. It would put together a seller with a prospective buyer and take “delivery” of the contract. Then it would book the entire “sale” as its own revenue. This was made possible due to a loophole in the procedures approved by the Financial Accounting Standards Board (FASB). According to the board, each company had a “free option” as to how to account for the deals of energy contracts.(1,2)
3. In 1821, a Scotsman, Gregor MacGregor, invented a fictional Central American republic called “Poyais” and convinced hundreds of people in his home country of Scotland to invest in the nonexistent country, and even oversaw the deployment of a ship of 250 people hoping to start a new life in Poyais. When their ship arrived, they found nothing but undeveloped, inhospitable jungle.
Gregor MacGregor was born in 1786 at Glengyle, Scotland. He carved out a place for himself in history by pulling off one of the biggest frauds of the early 19th century, gaining over £200,000 in the process. In the early 1820s, McGregor invented an entirely fictional country and named it “Poyais” He claimed it was located near the Black River in what is now present-day Honduras. McGregor claimed that Poyais covered eight million acres, and he was the prince of this land. He also claimed that the land was rich in natural resources but required manpower to turn it into a developed country.
MacGregor began an aggressive campaign to make people believe in his fictional country. He printed advertisements and leaflets and gave interviews in national newspapers. He even had Poyais-related ballads composed and sung. In mid-1822, a 355-page Poyais guidebook was being sold in London and Edinburgh which contained elaborate maps and details about this fictional country. The official-looking book convinced many people, and they started buying Poyaisian land certificates. By early 1823, about 500 people had bought Poyaisian land.
After that, McGregor began making arrangements to send interested people to Poyais. On 10 September 1822, a vessel with 70 emigrants on board sailed towards the non-existent country. Later, on 22 January 1823, another vessel sailed with almost 200 emigrants aboard. Upon reaching the land which was they believed to be Poyais, the emigrants realized they have been duped. Few travelers were able to return, and most of them died due to diseases like yellow fever and malaria.(1,2)
4. In the early 1990s, the infamous Italian criminal Charles Ponzi scammed investors out of about $7 million by passing on new investors’ money to existing investors and presenting it as a sustainable investment.
In the summer of 1919, Charles Ponzi was living in Boston. The idea for a scam began forming in his mind when he received a letter from a Spanish company. The letter contained an international reply coupon (IRC). This coupon could be redeemed by the recipient for postage to the sender’s country. Ponzi realized that he can buy the coupon in one country and then exchange them for postage in another country with a higher value of postage. Soon, he set his plan into motion, but he required a large amount of capital to buy the IRCs with cheap, European currencies.
To raise the money, he went to his friends and promised them double returns in 90 days. Some people invested and they got the interest as promised. In January 1920, Ponzi opened his own company to promote this scheme. In the beginning, 18 people invested. They got the promised interest the next month. As word spread about this unbelievable scheme, investments started pouring in.
By June 1920, the net total investment in Ponzi’s scheme rose to $2.5 million. People began mortgaging their homes and even invested their life savings in the scheme. But no one realized that Charles Ponzi was paying the earlier investors with the money invested by new investors. Ponzi’s rapid rise drew suspicions, and his publicity agent found incriminating documents related to the scam. The agent wrote an article for the Boston Post which brought Ponzi’s scam into public view. From then on, things went downhill for Charles Ponzi, and his investors lost about $20 million. In November 1920, Ponzi was sentenced to five years in prison.(1,2)
5. After buying the financial institution Lincon Savings and Loan Association, Charles Keating began investing savers’ cash in high-risk ventures without informing the depositors. The scam was revealed in 1989 after the business failed leaving thousands of elderly investors with worthless bonds.
Charles H. Keating was a champion swimmer, activist, lawyer, banker, and real estate developer. But the thing he is most known for is his role in the savings and loan scandal of the late 1980s. Charles Keating became the head of Lincoln Savings and Loan Association in 1984. Immediately after joining the enterprise, he fired the existing management. During those times there were quite loose restrictions on banking investments. Taking advantage of this opportunity, Keating began investing depositor’s money in high-risk investments. For the next four years, Lincoln’s assets increased. It rose from $1.1 billion to $5.5 billion.
In 1989, Lincoln Savings’ parent company, American Continental Corporation, went bankrupt. The day after American Continental Corporation went bankrupt, Federal authorities seized Lincoln Savings. The scam left 23,000 customers with worthless bonds.(1,2)
6. In 1925, a Portuguese named Alves dos Reis forged a government contract authorizing him to print money and “officially” printed himself 100 million escudos, the equivalent of 0.88% of Portugal’s GDP at that time, leading to the “Portuguese Bank Note Crisis.”
In 1924, Alves dos Reis was in jail for embezzling money from a company. During his 54-day stay in jail, he planned a scam which later came to be known as the “Portugal bank note affair.” After being released from jail, Reis forged a contract in the name of the Central Bank of Portugal, Banco de Portugal. Then he posed as a representative from the bank and convinced a London-based company that the bank had authorized him to print his own bank notes. Reis further claimed that the money they were going to print was a part of a secret project, and it would be used to financially aid a struggling Portuguese colony, Angola.
According to Reis’s instructions, the London-based company printed an equivalent of £1,007,963 of bank notes. The notes were then circulated into the Portuguese economy. In June 1925, he created the Bank of Angola & Metropole to help Angola. He even went on to buy the controlling interest in the Bank of Portugal following which he hoped he would be able to successfully hide his scam. But the low-interest rates of the Bank of Angola & Metropole piqued the interest of journalists, and they raised questions. Finally, the Bank of Portugal noticed the bank notes with duplicate serial numbers, and Reis’s scam was exposed. Five years later, he was sentenced to 20 years in jail.(1,2)
7. In the 1920s, Ivar Kreuger, who owned banks, film companies, newspapers, mines, telephone companies, and railways, decided to form a monopoly to control all the world’s safety matches. International banks begged him to let them invest, not knowing that his many companies existed only on paper, profitable only because they were invested in each other.
The Swedish civil engineer Ivar Kruger began his career by helping in building New York’s Plaza Hotel and other landmarks. After gaining experience, he opened a company in Sweden in 1908. His company soon became the best construction firm in Sweden. Then Kruger took over his father’s match business. In 1917, he founded the Swedish Match Company. In the post-depression era after WWI, Kruger began to acquire match-making factories around Europe.
From 1925, Kruger began offering loans to insolvent countries at a bargain that was hard to refuse. He would also provide loans to countries that offered him a national monopoly on match production. Using his skills, he increased the sales in the country. Since the governments taxed matches, the increase in sales would increase tax revenues used to repay the loans. By 1931, the Swedish Match Company controlled 250 factories in 43 countries. But his empire collapsed during the Great Depression. On 12 March 1932, he committed suicide by shooting himself.
The death of Kruger led to the “Kreuger crash.” It hit investors and companies all over the world, especially in America and Sweden. After his death, Kreuger’s forgery of Italian bonds amounting to $142 million was found out. In Sweden, Kruger owed more than the country’s national debt. As a result, the suicide rate increased in Sweden and the prime minister fell. In America, his shares collapsed taking with it the life savings of thousands of people.(1,2)
8. Nigerian scammer Emmanuel Nwude once sold a fake airport to a major international bank for $242 million, and the scam wasn’t discovered until 3 years later.
Emmanuel Nwude is a Nigerian fraud artist who was formerly the Director of Union Bank of Nigeria. In 1995, he defrauded a Brazilian man, Nelson Sakaguchi, who was the Director at the Brazil’s Banco Noroeste. Nwude began his scam by impersonating the then Governor of the Central Bank of Nigeria, Paul Ogwuma. Posing as the governor, he convinced Sakaguchi to invest in a new airport located in Nigeria’s capital, Abuja. In exchange, he asked for a $10 million commission.
The fraud remained undetected until 1997 when a Spanish bank decided to take over the Banco Noroeste Brazil. When an official from the Spanish bank enquired about the large sum of Noroeste’s money which was sitting in the Cayman islands unmonitored, it led to a criminal investigation. It was found that Sakaguchi had paid $242 million in between 1995 to 1998 to Emmanuel Nwude who promised him an airport which actually never existed.(source)
9. When “Count” Victor Lustig discovered that the famous Eiffel Tower was in need of repairs, he faked some government papers and sold the tower to scrap metal dealers twice with a total of over $200,000 in bribes to throw the multi-million dollar contract their way.
Victor Lustig began his conman career through a “money-printing machine.” The machine would produce a counterfeit bill of $100. His client would buy the machine for a high price believing that it would provide them with huge profit in the future, but the machine would produce $100 bills only for the next 12 hours after which its supply became exhausted resulting in blank notes. By the time the person realized the scam, Lustig was long gone.
Lustig’s sale of Eiffel Tower began in 1925 when he read about a repair and maintenance of the tower in a newspaper. He invited six scrap metal dealers and posing as a government official said that Eiffel tower would be taken down. Then he asked them to submit a bid and finally secured a deal with one of the dealers. For finalizing the deal, scrap dealer Andre Poisson offered a large bribe and secured the deal. After receiving the money, Lustig went away and Poisson was too embarrassed to lodge a police complaint. A month later, Lustig returned back to Paris and repeated the same trick. His second victim went to the police, but Lustig evaded arrest.(source)
10. From 1997 to 2002, over 4,000 people paid an advance fee in order to receive new cars at a fraction of their value. The cars supposedly came from the estate of a wealthy Christian man according to his will. The scheme took in over $ 21 million, but neither the deceased, his alleged will, an estate of any kind, or the cars ever existed.
The “miracle car scam” began with a story circulated by a man named Robert Gomez who claimed that he was the adopted son of John Bowers, a wealthy executive of a food company. Three years later, just before Christmas Bowers claimed in his church that he is now the heir of Bowers’ estate which is valued at $411 million. He also said that Bowers had instructed in his will that a fleet of 16 luxury cars would be given to fellow believers as a “gift.” The beneficiary needed to pay an amount of roughly $1,000 to $1,100 as a conveyance fee for each vehicle. The news spread through word of mouth and many church members showed interest in the deal. People started depositing the conveyance fee, and in a course of four years, from 1997 to 2002, 4,000 people deposited the advance fee.
The staggering number of car sales aroused suspicion, and an investigation was launched. Investigators found out that a man called John Bowers, as described, never existed and neither did his estate or cars. It was also revealed that in 2002, Gomez, along with his accomplice, had collected $21.1 million from people. In 2003, he was sentenced to 21 years and 10 months in federal prison.(source)