5 famous fraud stories from history

Throughout history, criminals have been trying to pull the wool over people’s eyes to steal money, jewels and items of value. And with many frauds of the past falling under the definition of ‘weird and wonderful’, we thought we’d share a few with our Noddlers.

The fraud that kick-starts the French Revolution

It’s pre-revolutionary France and King Louis XVI is being approached by jeweller Boehmer and Bassenge to buy a diamond necklace for his wife Marie Antoinette. Instead of splashing the cash and getting this gift for his beloved, the king refuses (big mistake).

Enter Countess De La Motte. This wiley woman buys the necklace for the queen instead and tells the jewellers that a prestigious cardinal will be paying for it. Boehmer and Bassenge believe her and she walks off with the necklace.

Time goes by and the jewellers still haven’t been paid, so go to Marie Antoinnette. The Queen hasn’t seen or heard of the necklace. This is probably because across the channel in London, the Countess De La Motte is busy selling it and it is never seen whole again.

Now how does this contribute to the French Revolution I hear you ask? Well, the incident helped to ruin the reputation of the royal family further among the people and there are rumours that Marie Antoinette has herself participated in the fraud.

The Wolf of Wall Street

You probably know Jordan Belfort as The Wolf of Wall Street, thanks to Leonardo DiCaprio’s portrayal of him.

It’s 1999 and Belfort is pleading guilty to fraud and related crimes after manipulating the stock market and running an outbound call centre that operates a penny stock scam (a scam that exploits common, low price shares in small public companies).

Up to this point, Belfort has been living a lavish lifestyle, but totalled up $1 billion in stock issues to fund it and defrauded 1,513 clients.

When he’s finally caught and pleads guilty to fraud, Belfort is sentenced to four years in jail (of which he served 22 months) and must pay back 50% of his income to those he defrauded. In 2009, he was ordered to pay a further $110 million to his victims.

The fraud so famous other frauds are named after it

World War One is over and an Italian immigrant named Charles Ponzi decides to set up his own business in Boston. In doing so, he encounters an international reply coupon (IRC) for the first time.

An IRC allows someone in one country to send it to someone in another, who can use the IRC to pay the postage of a reply. The IRC can also be exchanged for stamps to cover the cost of postage.

Ponzi quickly sees an opportunity to make money. He identifies that the IRC is always worth what the sender paid for it in the country of origin, so if stamps cost less in the country the IRC is exchanged in, then a profit can be made.

To make the scam work, Ponzi needs more capital to buy lots of IRCs in cheaper European countries and after being rejected by banks, Ponzi sets up a stock company to get money from the public. He also asks friends for cash, telling them they will double their investment in 90 days. This is later shortened to 45 days at 50% interest.

In 1920, Ponzi is making $250,000 a day. He uses the money from new investors to pay old investors and hires a team of scouts to find new victims to cough up cash for the scheme.

But despite the money coming in, Ponzi is operating at a loss. He ends up owing $7 million and is later charged with 86 counts of mail fraud.

So prolific and famous was this case of fraud that all investment frauds or pyramid schemes are now called Ponzi Schemes.

The fake count and the Eiffel Tower

We’re back in France for this fraud and this time it’s Count Victor Lustig – who actually isn’t a count at all – who is up to no good.

It’s 1925 and Lustig has just moved to Paris. He invites people in the scrap metal industry to his hotel, posing as a member of the French government – just one of the 47 aliases he uses throughout his life. He then begins to tell them that the Eiffel Tower must be torn down, because of political problems, costly repairs and engineering faults. The tower will therefore be sold to the highest bidder – an announcement that results in the tower being sold twice.

And what of Lustig? He is eventually caught and sent to Alcatraz in 1935, but not before he commits lots of other frauds, including forging banknotes.

The Scott who invented a country

Scottish soldier General Gregor MacGregor is a confident man. So confident in fact that in 1821 he creates a country known as Poyais to lure British and French investors, and settlers into giving him their savings.

The scheme is an elaborate one. Poyais is a Central American territory ruled over by MacGregor, so he claims. Investors give money to hold Poyaisian government bonds and land certificates, which MacGregor pockets. However, this trickster doesn’t stop there. He allows 250 people to emigrate to his invented country between 1822-1823. When the settlers get to where Poyais supposedly is, they find an untouched jungle and, unfortunately, more than half of them die in their new unfamiliar environment.

We hope you’ve enjoyed these fraud stories from history. Think you are good at spotting signs of fraud in your day to day life? Put yourself to the test here.