5 Infamous Fraud Cases Throughout the Centuries

janko-ferlic-174927-unsplash.jpg

GUEST BLOGGER

Hallie Ayres
Contributing Writer

While the internet serves as a large platform for a considerable number of scams, fraudsters have always been able to find creative outlets for their schemes, long before the advent of modern technology. The names Charles Ponzi and Victor Lustig may be well known among audiences tuned in to the history of con men, but here are stories of lesser known swindlers, going as far back as the fourth century B.C.

Fraud on the high seas
In Ancient Greece, seafaring merchants had the option to participate in bottomry, which was the purchase of maritime insurance that protected their cargo and ship. Insurers charged a premium of around 30% and then reaped a cut of the profits after a successful commercial voyage. Given the risks merchants faced and the high statistics of boats and cargo lost at sea, a 30% premium was fairly justified and common practice. Soon after they invented maritime insurance, cunning Greeks also invented insurance fraud. Documentation of these cases survives in the form of speeches given by the Athenian orator Demosthenes (384-322 B.C.), who wrote speeches for use in civic court cases prosecuting insurance fraud. His speeches “Against Apaturius,” “Against Lacritus,” “Against Phormio” and “Against Zenothemis” detail the schemes of cargo ship captains who either planned to sink their ship with all its cargo or lied to insurers about their ship’s whereabouts, claiming it had been damaged or sunk during a voyage when, in actuality, it sat idly in a foreign port. This type of scam was so common that, if the allegedly sunken boat was discovered to be floating in good shape, the boat owner was forced to pay the insurer twice the premium rate.

The original Nigerian prince
The Spanish Prisoner scam, dating back to the late 1500s, serves as a precursor to contemporary online romance scams. In its original iteration, con men based in Spain would use trade directories to send letters to merchants in Britain. In the letters, the con artist would claim to be in communication with a British aristocrat imprisoned in Spain on false charges. Explaining that the prisoner’s identity must remain confidential, the con artist would swindle victims out of funds that the con artist claimed would be used to free the wrongly imprisoned aristocrat. The con artist would promise, not only financial reimbursement once the aristocrat was freed, but also a reward in the form of marriage to the aristocrat’s daughter. Of course, the aristocrat would have been entirely fictive, but the model worked so well that it’s now the basis for a host of digital confidence scams, including the infamous Nigerian Prince scam.

A Scottish scoundrel
Born in 1786, Gregor MacGregor was a Scottish general who, between 1821 and 1837, convinced investors from England and France to invest in a fictional Central American territory called Poyais that MacGregor claimed to rule as “Cazique,” a title of his own invention. Having been gifted a portion of British colonial territory on the Gulf of Honduras in 1820, by 1822 MacGregor had mounted a campaign within Britain to source money and convince people to immigrate to his country, which he asserted had a complex government system that he had set up. After selling Poyaisian government bonds and land certificates, MacGregor chartered two ships and, while standing safely on the shore of Scotland, waved goodbye to nearly 250 people as they set off for Poyais, where they were greeted with pristine jungle, a far cry from the infrastructure MacGregor had promised. More than half of the emigrants died, and MacGregor spent the next few years evading law enforcement in Britain and France before escaping to Venezuela, where he became a citizen in 1838 and eventually died in 1845.

Glitter and fool’s gold
In May of 1898, nearly half a century after California’s Gold Rush, two conniving businessmen arrived in the remote town of Lubec, Maine, with a financial fraud scheme . Claiming to have engineered a device that could sift sea water for particles of gold, Charles Fisher and Prescott Jernegan set up shop as the Electrolytic Marine Salts Company and hosted potential investors at their factory, where Fisher and Jernegan had manufactured boxes they called “accumulators” that sat underwater for 24-hour periods before being hoisted up to reveal their golden treasure. To market their business, Fisher, who had been trained as a deep-sea diver, manually filled each box with quantities of gold before Jernegan hoisted them up to show investors. By July of 1898, awestruck investors from all over the East Coast had purchased 2.4 million shares in the company, each sold at $1. Soon after, residents of Lubec noticed that Fisher and Jernegan had gone missing, taking their families, all their possessions, and the company books and ledgers with them. Once the company was revealed to have been a sham, stocks fell from $1.40 to $0.30 per share, but Fisher and Jernegan were long gone, their bags filled with cash. Fisher is reported to have died in Australia, and, after spending some time evading arrest in France, Jernegan allegedly fled to the Philippines.

Mona Lisa’s rise to fame
Arguably one of the most famous paintings in the world, Leonardo da Vinci’s “Mona Lisa” may owe much of its fame to a particularly cunning scammer named Eduardo da Valfierno. Before the “Mona Lisa” was first stolen from the Louvre in 1911, Valfierno allegedly commissioned the French artist Yves Chaudron to forge six copies of the painting to be sold on the underground market. On August 21, 1911, Vincenzo Peruggia, a museum employee, hid the canvas under his coat and walked out with it, keeping it in his apartment for two years before he was caught attempting to sell it to the Uffizi Gallery in Florence. According to an article by the journalist Karl Decker published in the Saturday Evening Post in 1932, Valfierno had hired Peruggia to steal the painting after Valfierno had lined up buyers for his six forgeries. Once the original work went missing, Valfierno was able to convince his buyers that it had been stolen for them and landed immense profits. Not much else is known about Valfierno, and some critics of the tale of the theft argue that he never even existed. Regardless, his financial fraud scheme caused the painting’s popularity — and security — to skyrocket, an unintended outcome of one of the art world’s most notable scams.

As entertaining as these frauds are, it’s a sobering reminder that when fraudsters discover a loophole in the system, they will use creativity and ingenuity to exploit it. To learn valuable lessons from more recent but equally noteworthy fraud cases, be sure to check out 10 Infamous Fraud Cases of the 21st Century.