Financial scandals have taken off during the last decade, with the new frauds yielding billions of dollars worth of illegal profit. However, the history of these frauds is much longer than you might think. Instances of the largest financial frauds are far from developed modern markets and can be dated back to the unpleasant sale of the Roman Empire in 193AD.
In spite of increasingly strict laws aimed at fighting frauds and with government agencies trying to enforce those laws, the world hardly witnesses any decrease in the number of financial frauds. Quite the contrary, its number is constantly growing. Let’s look at some of the world’s biggest financial frauds a little closer.
The Sale of the Roman Empire
Of course, we couldn’t forget 193 A.D. which was the date of the Roman Empire sale. Let’s take a closer look at the events that took place at the time.
During disorders and unrest in the Roman Empire, the current emperor was killed by the Praetorian Guard who should have supposedly faithful to the emperor. After that, the empire was offered to the highest bidder. Julianus became the winner because he offered the highest price anyone could pay: 250 pieces of gold for every army member.
- Lending Club scandal 2016.
In today’s money, it can be estimated as somewhere about $1 billion, which is a truly astronomical price. Where is the fraud you will ask? Well, the truth is that guards sold something that wasn’t in their ownership and didn’t belong to them, which makes the whole story a classic financial fraud. As a result, the new emperor wasn’t recognized by people and was later deposed.
The Mississippi Scheme
In 1710 famous John Law from Scotland decided to start up a company to develop Louisiana. He suggested it was okay to hype the possibilities instead of reality. He persuaded investors together with the French government to back his scheme for the state development.
After that, shares in his company quickly went up and French currency rapidly grew up too, since it was believed that France would earn a lot from what was back then just a boggy swamp. Once investors found out what they bought, shares dropped down immediately.
In the end, John Law escaped being lynched only by pretending to be a beggar. This didn’t save him, thought, in about nine years he died in poverty.
The Diamond Necklace Leg-Pull
There are different types of financial frauds but Cardinal Prince de Rohan certainly occupies the seat of honor in the list of the biggest financial frauds. The whole situation is even more interesting due to its comicality.
Cardinal was one of those priests whose chastity and holiness could be called into question. He thought he was having an affair with Queen Marie Antoinette and he decided to purchase her a diamond necklace worth six million livres.
Unfortunately, he was actually having an affair with one of the prostitutes who was dressed up as the Queen. This trick was arranged by his former courtesan mistress Jeanne de la Motte. She hoped to slip away with this diamond necklace herself. After all, she was caught and sentenced to be branded with a hot iron and stripped naked in public.
The Ponzi Scheme
The next story is about Charles Ponzi whose original financial scheme gave life to a famous “Ponzi scheme” expression. It means a type of fraud where the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.
In 1920 Charles decided that he could buy postal coupons at a discount, then send them abroad, and sell them for the full price. Thousands of people paid their money because Charles exaggerated the financial profit from this deal. He claimed people could get a 50% benefit in 45 days which was an obvious lie.
After his scheme blew up, people who invested in it lost about $10 million. Charles Ponzi had to flee the country.
The Eiffel Tower Sale
The last but not least fraud case is a story about Victor Lustig trying to sell the Eiffel Tower. In 1925 Victor decided that the Eiffel Tower needed to be fixed and repaired, so he faked the official papers and made himself authorized to sell the Eiffel Tower for scrap metal.
Fortunately, he didn’t do that, but he found a few scrap metal dealers who paid him $200,000 in bribes. Having the money in his pockets, he ran away to the USA, where he continued his successful career as a famous financial fraudster.