The 12 Most Famous Fraud Cases Of The Century
Sabrina McClune
In recent years, there has been a dramatic increase in the number of fraud cases. While fraud dates back centuries, it has evolved into sophisticated modern-day threat that affects people globally.
This is largely thanks to the rise of new technologies and the ongoing digitisation of the financial system, which offers threat actors a broader surface for their attacks.
In the past 100 years, there have been several prominent fraud cases that have hit headlines and had a devastating impact on those involved, costing investors billions of dollars. In this article, we dive into some of the most famous fraud cases of the century.
For Sale: National Architecture
Victor Lustig And The Eiffel Tower
Image Source: Medium
Count Victor Lustig was a master of deception, with his true identity and background remaining a mystery to this day. The title of ‘Count’ is just one element of his many aliases, his life of crime seeing him operate under 47 different identities.
One of Lustig's most audacious schemes took place in 1925 in Paris, where he convinced individuals in the scrap metal industry that he was a member of the French government.
To feed the ruse, he commissioned stationery carrying the French government’s seal and took residence at the prestigious Hôtel de Crillon.
Under this pretence, he managed to sell the Eiffel Tower, not once, but twice, claiming it had to be dismantled due to engineering faults, costly repairs, and unspecified political issues.
Lustig was finally apprehended by the Secret Service in New York in 1935. Not that this held him back, as he managed to escape from the supposedly inescapable Federal Detention Centre in Manhattan by cutting through the window bars then using a handmade rope to scale the building.
Despite this ability to evade the authorities, Lustig was captured again and imprisoned in Alcatraz, eventually succumbing to pneumonia in 1947.
George C. Parker And The Brooklyn Bridge
Image Source: NYC Walks
Ever heard of the phrase "I have a bridge to sell you"? The origin stems from the antics of George C. Parker, who managed to sell ownership of the Brooklyn Bridge 4,160 times.
Parker's scam involving the Brooklyn Bridge began in the 1880s, where he would target newcomers to New York City and convince them that he was the rightful owner of the Brooklyn Bridge.
Investors parted with as much as $50,000 to purchase the bridge, planning to heavily profit from installing tolls that charged all those who crossed it.
The investors’ hope was short-lived as the police swiftly shut down any toll booths that they attempted to build in the area. In the end, Parker’s activities became so frequent that Ellis Island officials began pre-warning incoming immigrants that they couldn’t buy public assets.
Brooklyn Bridge wasn’t the only landmark he sold – Parker successfully convinced individuals to purchase the Statue of Liberty, Madison Square Garden, Ulysses S. Grant's tomb, and the Metropolitan Museum of Art.
Unfortunately for him, detectives eventually apprehended Parker, where he faced charges of larceny, forgery, and impersonating a police officer.
False Promises & Fake Products
Elizabeth Holmes And Theranos
Image Source: NPR
Elizabeth Holmes made bold promises to revolutionise the healthcare industry with her biotech startup, Theranos, and its diagnostic technology that produces results from a single pinprick of blood.
Theranos claimed to be able to perform over 240 tests, ranging from cholesterol levels to complex genetic analysis, using substantially less blood than current practices.
The concept was considered a medical breakthrough and caught the attention of a vast number of investors, causing Theranos' valuation to climb to an impressive $10 billion by 2014.
Subsequent investigations brought to light the harsh reality that Theranos' technology was deeply flawed and unreliable. They showed Holmes knowingly deceived investors by exaggerating the capabilities of the technology and using alternative products to conduct tests.
With the life-threatening consequences of these actions now clear, severe legal consequences and a wave of public backlash was aimed at Holmes and led to the eventual downfall of her enterprise in 2018.
Holmes and her co-conspirator were found guilty and sentenced to lengthy prison terms of 11 and 12 years respectively, as well as being ordered to pay restitution costs of $452 million to the victims of their fraud.
Charles Ponzi And The Securities Exchange Company
Image Source: Smithsonian Mag
Charles Ponzi was a notorious Italian immigrant who, between 1918 and 1920, orchestrated an international trading scheme that saw him earning $250,000 a day.
Ponzi's story began in Boston, where he discovered the International Reply Coupon (IRC) created by the United States Postal Service (USPS).
The coupons allowed senders to pre-purchase postage and include it in their letters. Recipients in other countries could then exchange the IRCs for airmail postage stamps, making it convenient for international correspondence. Ponzi first encountered the IRC in a letter from Spain, where it was valued at 30 centavos.
In the U.S., the same IRC could be exchanged for five cents, presenting a profitable arbitrage opportunity.
Recognising the potential for massive profits, Ponzi devised a scheme that involved purchasing IRCs from weaker European economies at a lower price and selling them in the US at a higher rate.
While his operation started legitimately, Ponzi's greed saw him transforming his personal trading scheme into a large-scale scam, creating the Securities Exchange Company.
Ponzi told potential investors he had an extensive network of agents in Europe acquiring coupons in bulk for him and promised a 50% return on investments within 90 days.
However, Ponzi didn't invest newly gained funds into more IRCs as promised – he instead kept some money for himself and paid off earlier investors with the rest.
As more individuals came on board, a cycle formed where new funding paid for those who had invested previously. The scheme continued for some time, but as inquiries into his operations grew, Ponzi's deception quickly came to light.
Eventually, an audit exposed that Ponzi only had $61 worth of postal coupons, leading him to be arrested for charges of mail fraud.
After serving three and a half years in federal prison and an additional nine years on state charges, Ponzi was deported and lived in poverty until his death.
Ponzi’s scam was so renowned that it has since become another term to describe a pyramid scheme.
Would The Real Mona Lisa Please Stand Up?
Wolfgang Beltracchi And The Fake Art Collection
Image Source: The Art Newspaper
Wolfgang Beltracchi gained his reputation by orchestrating a sophisticated forgery scheme, selling counterfeit paintings worth over $100 million.
After presenting himself as the heir to his grandparents’ rare art collection, Beltracchi and his wife duplicated work by renowned artists, such as Max Ernst and Heinrich Campendonk, and sold them internationally to collectors.
Eventually, he was charged with forgery and found guilty of selling 14 fake pieces of art for a combined $45m. However, the actual number of successful sales is thought to be 50 pieces or more.
During his 6-year prison sentence, he was placed in an open prison that allowed him to continue following his artistic passions.
Since his release, he has embarked on a new chapter of his creative journey and is selling authentic pieces under his own name.
Eduardo De Valfierno And The Mona Lisa
Image Source: The Wire
In 1911, an Argentinian con man named Eduardo de Valfierno allegedly paid a Louvre employee to steal the world’s most famous painting - Leonardo Da Vinci’s Mona Lisa.
While this was a feat in itself, Eduardo had no interest in the real painting. Instead, he just needed the world to know it was missing in order to sell his forged copies to underground collectors, and he let the employee keep the painting himself.
Valfierno arranged for French art restorer and forger Yves Chaudron to create six copies of the Mona Lisa before the heist was carried out, as he knew that once the Mona Lisa was stolen it would be harder to smuggle copies past customs. He shipped the duplicates around the world before the robbery took place and in preparation to be sold to various buyers.
Eventually, the Louvre employee was caught trying to sell the painting, leaving the Mona Lisa to be returned to its rightful place in 1913.
Food For Thought
Chinese Milk Scandal
Image Source: CFR
In 2008, Chinese companies sought to cut costs by watering down milk. However, in order to avoid detection during mandatory protein tests, they decided to add melamine to their product - an industrial chemical typically used in the creation of plastic.
The introduction of melamine increased the nitrogen content of the milk, making the product appear to have a higher protein content than it actually did and passing control tests.
Those who consumed the altered milk experienced an array of kidney problems, with an estimated 300,000 children falling ill and at least six losing their lives. The problem spread across multiple countries, with companies such as Cadbury and Nestle needing to recall their products after discovering their products were affected.
To this day, many parents find themselves mistrusting infant formula. Two culprits were eventually executed after being found guilty of selling 1.3 million pounds of tainted milk powder.
The Horse Meat Scandal
Image Source: Irish Times
The European 'horsemeat scandal', also known as the 2013 'horsemeat crisis', came to light in 2013 when horsemeat was unexpectedly found in processed meat products containing ‘beef’.
This discovery exposed a widespread and complex network of fraudulent practices within the food supply chain, with investigations revealing that horsemeat had been unknowingly incorporated into a variety of burgers, meatballs, and frozen lasagnas.
The scandal affected numerous countries, with companies from France, the United Kingdom, Ireland, and other European nations implicated.
Many were concerned over the potential health risks this introduced, as horsemeat had not undergone the same rigorous food safety checks as beef.
Questions were also raised about the adequacy of food regulation, leading consumers to demand greater transparency and accountability from food producers and retailers.
In response, European governments worked together to enhance food traceability, improve testing protocols, and impose more stringent penalties for food fraud.
What’s In A Name?
Oscar Hartzell And The Drake Estate
Image Source: The Crime Wire
Hartzell was the brains behind what is now known as ‘The Sir Francis Drake Estate’ fraud, which is estimated to have begun in 1916.
The scam involved targeting those with the surname of Drake and leading them to believe that they had a distant claim to Sir Drake’s estate – which was worth over $100 billion.
Hartzell told them that he was filing a lawsuit to take the property back from the government and into the hands of Drake’s rightful descendants, asking each person for an investment to fund it and promising hefty returns in exchange.
Over the next few years, Hartzell collected thousands of dollars from Drakes across America, enlisting the help of agents to collect further funds on his behalf while he moved to England.
His lies caught up with him in 1933 when he was deported back to the US and sentenced to ten years in prison. It is estimated that he earned over $800,000 from the scam before he was apprehended and continued to earn a further $500,000 while imprisoned.
Harry Gordon And The Fake Funeral
Image Source: Wired
In June of 2000, millionaire and businessman Harry Gordon faked his own death, claiming that he was on the run from Ukrainian gangsters. However, most people believe his main motivation was his life insurance payout.
After faking a boating accident, convincing authorities he had drowned after being thrown overboard, Gordon left behind his wife and daughter to begin a new life that spanned 5 different countries and saw him take on the new identity of Rob Motzel.
During his time in Auckland, Gordon moved on and found a new wife, who remained unaware of his past until they accidentally bumped into his brother – who was evidently shocked to see his sibling alive. Shortly after, Gordon was arrested while flying to Sydney with a fake passport.
Gordon pleaded guilty and was sentenced to 15 months in prison for conspiring to obtain $3.5 million from his life insurance company, false representation, and possession of falsified travel documents.
Since then, he has gone on to write an autobiography titled ‘How I Faked My Own Death and Did Not Get Away with It.’
Bad Enterprises
Wells Fargo And Fake Bank Accounts
Image Source: CNBC
The Wells Fargo scandal involved the creation of millions of unauthorised bank and credit card accounts, carried out by employees in various branches across the United States.
The fraudulent accounts were created to meet aggressive sales targets set by management, with employees resorting to unethical practices, such as forging customer signatures, creating fake email addresses, and moving money between accounts without customers' knowledge.
The Consumer Financial Protection Bureau eventually launched an investigation into the bank's sales practices, resulting in Wells Fargo paying regulators a $1 billion fine and suffering from a severely damaged reputation.
However, new crimes have recently come to light, with the bank having been accused of improper loan charging, wrongfully repossessing borrowers’ property, and denying thousands of mortgage loan modifications.
Wells Fargo has now been fined with a further $2bn repayment to consumers and a $1.7bn penalty.
The Enron Bankruptcy (2001)
.jpg?width=600&height=338&name=The%20Enron%20Bankruptcy%20(2001).jpg)
Image Source: BBC
The Enron bankruptcy was one of the most significant corporate collapses in history centred around the Enron Corporation, previously one of the most innovative and successful energy companies in the United States.
At its peak, Enron was a powerhouse in the energy sector, involved in trading natural gas, electricity, and other commodities.
To further boost their image of having great success and profitability, Enron’s CEO engaged in aggressive mark-to-market accounting - a practice that allowed the company to estimate the future value of long-term contracts and record those projected profits immediately.
This method was deeply flawed and lacked transparency, enabling Enron to portray inflated financial figures and create an impression of financial stability, attracting investors and driving up stock value.
The scandal eventually was revealed, and Enron's stock price plummeted, with the company ultimately filing for bankruptcy after revealing they were billions of dollars in debt.
Thousands of employees lost their jobs, and investors suffered massive financial losses, with the events also leading to the dissolution of a major accounting firm that was involved with Enron.
Final Thoughts
Looking back at the past 100 years, we can see that fraud can come in any shape or form – from the food you eat to your bank.
With the sharp increase in online services, digital platforms present threat vectors that we need to be aware of and actively protect ourselves against.
It’s clear that fraud will never be totally eradicated from our lives, but learning from past fraud cases and taking clear steps to protect ourselves going forward is vital.
References:
How a Con Artist Effortlessly Sold the Eiffel Tower Twice, Shenbaga Lakshmi, 2024
A judge rules that Elizabeth Holmes cannot remain free during appeal, NPR, 2023
In Ponzi We Trust, Smithsonian, 2021
The Time Machine: The Grand Theft of the Mona Lisa, The Wire, 2017
The 2008 Milk Scandal Revisited, Council On Foreign Relations, 2014
Oscar Hartzell and the Francis Drake Fortune, The Crime Wire, 2024
Lost and Found: Other People Who Tried to Vanish, Wired, 2009
The collapse of Enron and the dark side of business, BBC, 2021
Reviewed By:
Sam Kendall, 05.06.24
Sabrina McClune, 05.06.24
|
Originally posted on 01 08 23
Last updated on July 4, 2024 Sabrina McClune, an expert researcher with an MA in Digital Marketing, was a finalist in the Women In Tech Awards 2022. She excels in conducting and compiling research for B2B tech companies. Sabrina enjoys reading fantasy novels and collecting special edition books. |
Previous post