Top 10 Greatest Frauds in History

Charles Ponzi

One of the most notorious, but still surprisingly common confidence tricks is the great ‘Ponzi Scheme’. Investigators, criminologists and economists consistently express amazement that this simple, yet evergreen scam can still reap such lucrative rewards. The greatest fraud in modern history, the Bernie Madoff episode, netted a breathtaking $65 billion, and Madoff owes his pedigree to the man who gave his name to the mighty pyramid scheme, Charles Ponzi.

The Ponzi Scheme works on a simple but powerful formula. Greed drives every successful confidence trick, and the willingness of otherwise intelligent and educated people to suspend their disbelief in the interests of quick and healthy profit never seems to fail.

Charles Ponzi had a particular angle on this scheme. Born in Parma, Italy in 1882, he arrived penniless in Boston in 1903. Like most immigrants, he began work doing odd jobs, passing off bad checks as a sideline, which earned him three years in a Quebec prison. Another two years was spent in prison in Atlanta for people trafficking, before he finally alighted on the idea that would make him a fortune.

One day he received a letter from a Spanish company that contained what was known then as an International Reply Coupon. This, in essence, allowed the receiver to purchase stamps at the expense of the sender by cashing the coupon in at a local post office. Ponzi realized that the amount laid out in Spain, or Italy for that matter, was much less than the cost of the stamps in the United States, so he began to organize a network of suppliers abroad to send him IRCs, which he used to buy stamps, which he then sold for a profit.

It was a simple, and reasonably legitimate business model, but to ramp-up sales, he offered access to the scheme by investment, and this very quickly morphed into a pyramid scheme. Promising investors the usual outrageous returns, he slipped into a pattern of attracting investment and paying the promised return by exploiting new investment. This, of course, is a commonly understood principal now, but then, in the freerolling, capital-heavy days before the great stock market crash, it was a new idea, and Ponzi made a fortune.

As, of course, was inevitable, the scheme began to unravel as the press began to investigate the astronomical returns. The investigation triggered a run on Ponzi’s company, and inevitably it collapsed. Ponzi was arrested on August 12, 1920 and charged with 86 counts of mail fraud. He subsequently spent 14 years in prison, and he died penniless in Rio de Janeiro in 1949.

Charles Ponzi may have made and lost fortunes, but the genius of his scheme lies in its simplicity. For so long as man is driven by greed, the sleight of hand and slick tongue of men like Charles Ponzi will seduce investors to put their hands in their pockets and hand over the loot in pursuit of quick and easy profit. It never lasts forever, but while the going is good, it is very good indeed.

Oscar Hartzell

One of the most successful and audacious scams of recent history was the Drake Fortune Swindle, the brainchild of brilliant con-man with one superb trick.

Oscar Hartzell was born in 1876, the son of a modestly wealthy farmer from Madison County, Iowa. Sometime in 1915, he ran into couple of grifters who promised him that they could turn $6,000 held by his mother into $6 million by cutting him in on a share of the unclaimed inheritance of the great English maritime explorer Sir Francis Drake.

Hartzell was not taken in at all, and the two cons went on their way. But the idea settled in his mind, and he thought he would try it out himself. Approaching the con in a slightly more scientific manner, he created fake documentation and credentials and set about contacting anyone in Iowa with the surname ‘Drake’, spinning a well research but elaborate story on the same basic lines.

Sir Francis Drake certainly died a very wealthy man. He was, according to the terminology of the time, a ‘privateer’, which was a polite word for pirate. During the Elizabethan Era, private agents were authorized by the crown to attack the Spanish fleet, and loot Spanish ports in the Caribbean, which Drake did with both delight and enormous success. Some of the booty went to Crown, but most remained in his own hands.

Oscar Hartzell claimed that upon Drake’s death in 1596, his estate was never paid to his heirs, with the result that it remained in the Bank of England accruing interest, and was now worth in excess of $100 billion dollars. Everyone bearing the name ‘Drake’ was entitled to a share, assuming his legal campaign to sue the British government for the release of the funds was successful. He invited investment of any sum, promising a return of $500 on every $1 invested. To add a little glitter to the bait, he also stated that the inheritance would include the entire British city of Portsmouth.

Money flooded in, and in the end, tens of thousands of credulous Iowans dipped into their pockets and handed over their savings. Hartzell then expanded the ruse to subscribers outside of Iowa, including many with no connection to the name Drake at all, and still the money flooded in. Realizing that it had probably run its course, Hartzell then took himself to London, ostensibly to attend to legal proceedings, but in reality simply to live well and keep sucking on the pipeline for as long as a little cash trickled through. Periodically he submitted a request for additional funds, which invariably were given. Somehow he managed to keep the whole ship afloat until the Great Depression, and even then a few die-hards continued to support him.

It was not until 1933 that the law finally caught up with him. He was deported from Britain to the United States, where he stood trial for fraud. He died in Leavenworth in 1943, leaving up to 100,000 still waiting for their share of Drakes fortune. Even in prison, donations kept coming through.

Frederick Cook

The second to top spot in this list is reserved for a man who certainly did not do it for the money. The enigma, however, is whether he did it at all. The Cook/Peary controversy over who exactly reached the North Pole first could place Frederick Cook in the seat as the conman, but it could quite easily also place his rival, Robert Peary, in the same seat, and that is what make this story so interesting.

Cook was the son of German immigrants who made his way up through the hardscrabble streets of New York. In 1890, he graduated from New York University Medical School, but he lost his wife in childbirth, and sought distraction as an expedition doctor on the first major journey of Robert Peary.

Peary, a bombastic and attention seeking US Navy officer, was as much interested in fame as he was geographic discovery. As an expedition leader, he tended to promote his own interests at the cost of his crew. His relationship with Cook, therefore, did not survive that first adventure, after which the two men fell into competition to be the first to reach the North Pole.

Cook set off from Gloucester, Massachusetts, in July 1907, while Peary’s expedition took to the ice almost exactly a year later, in August 1908. Cook was the first to emerge, in February 1908, almost 14 months after he had set out. A few months later, he announced to the world that he had attained the pole.

Now the crucial point is simply that Cook reached civilization at Annoatok, on the northwest coat of Greenland, and storing his journals and instrumentation for later forwarding, he hurried south to announce that he had reached the Pole.

Initially, his claim was treated with the respect it was due, and matter was inserted into the record. Peary, however, soon returned to civilization himself, and he too claimed to have reached the Pole. He also returned via Annoatok, but once he had passed through, en-route south to make his own claim, none of Cooks journals, documentation or instrumentation were ever seen again.

Peary, with the naval establishment behind him, challenged Cook to prove that he had discovered the Pole, which, without documentation, he could not do. Peary’s own documentation presented a more authentic picture than no picture at all, and in the end the historic record shifted in the favor of him. Cook retired from the battle, and never pressed the point, but for years he has been regarded as a fraud. Recent comparisons, however, between Cook’s description of the Pole and those of modern explorers has tended to reinforce his claim. Since his and Peary’s description of the Pole differed, one or other of the two was lying, the question is simply who.

The first undisputed overland claim was made on April 19, 1968, by the explorer Ralph Plaisted.

Donald Crowhurst

The top spot on this list goes to the man who faked victory in the Sunday Times Golden Globe Race, a non-stop, single-handed around the world yacht race. The Donald Crowhurst story is part adventure, part fraud and part tragedy.

The story begins in 1968 with the launch of the competition by the Sunday Times, with a prize of £5,000. The race attracted the cream of the international solo yachting world, but one late entry was a complete outsider. Donald Crowhurst, an English electronics engineer put his name in the hat at the last minute.

Crowhurst was seen as an enthusiastic amateur, a weekend sailor, but nothing more. He invented and patented various maritime navigation devices, and had a keen interest, but no real experience at all. He mortgaged his house and business to build his own boat, a forty-foot trimaran. It was an untested design that performed badly in trials, but as the date of the race neared, Crowhurst had no choice but to pull it into commission and hastily prepare and provision it for an around the world journey.

On the afternoon of October 31, 1968, Crowhurst set off from Teignmouth in the English West Country. Initially, things seemed to be going well. Crowhurst’s press agent in England received the news on December 10, after about six-weeks at sea, that his client was averaging an astonishing 243 miles a day, putting him well ahead of the pack. By then, quite a number of his competitors had retired from the race, and it was beginning to seem that this weekend sailor might just pull off the impossible. Christmas came, and Crowhurst reported a position off the coast of Cape Town. Then, in April, 1969, the triumphant announcement came through that Crowhurst had cleared Cape Horn, and was on the home straight, sailing northwards across the Atlantic.

Now it takes no genius to imagine what was taking place. Crowhurst’s trimaran was a dud, it was leaking like a sieve and could manage just a few knots with the wind behind it. It is hard to tell exactly when it began, but at some point in the mid-Atlantic, Crowhurst began sending out false positions, and as he lingered in the South Atlantic, the world cheered his incredible performance.

He reasoned that if he did not come first, his performance would not be too deeply investigated. Two competitors were ahead of him, but as misfortune would have it, one dropped out and another registered a slower time. Crowhurst would be the winner. He was sunk.

Only July 1, 1969, Crowhurst trimaran was found drifting off the Cayman Islands with no sign of its captain. Madness, desperation and isolation clearly drove him into the water. His body was never found, but his logs revealed the ruse. That is the story of Donald Crowhurst, the weekend sailor with a vast ambition.

Where did we find this stuff? Here are our sources:

“William Chaloner, Master Counterfeiter”. Ciaran Conliffe, Headstuff

“The King of Conmen”. The Economist, December 2012

“Affair of the Diamond Necklace”. Faust, The legend of Faust from the Renaissance Times

“The Story of the Diamond Necklace”. Henry Vizetelly, 1881. 3rd Ed. Revised. London

“The Smoothest Con Man That Ever Lived”. Gilbert King, Smithsonian. August 2012

“Victor Lustig: Biography. People Pill.

“The Man Who Sold The Brooklyn Bridge Twice a Week for 30 Years”. ‘Ramsay’, Blog Tyrant

“Study reveals culprit behind Piltdown Man, one of science’s most famous hoaxes”. Michael Price, Science Mag. August 2016

“Charles Ponzi Biography”. Biography, April 2015

“Charles Ponzi”. Time Magazine, Samantha Grossman. March 2012

“Oscar Hartzell and the Francis Drake Fortune Swindle”. Rupert Taylor, Owlcation. March 2017

“Who Discovered the North Pole?”. Bruce Henderson, Smithsonian. April 2009