The article "Butchers, fake deaths and falling from helicopters: History’s craziest frauds" from the Financial Times details how fraud, despite its often complex appearance, largely adheres to a few basic patterns. Author Dan Davies categorizes all frauds into four types: "long firm" (a business created to defraud suppliers), counterfeiting, control fraud (insiders abusing their positions), and market crimes. He illustrates these patterns with historical examples like the Great Salad Oil Swindle and the elaborate Poyais scheme of 1822, where Scottish nobleman Gregor MacGregor sold land and titles for a non-existent Central American colony, duping investors like banker Gauger out of substantial sums.
The article emphasizes that while the tools and victims of fraud change, the underlying human weaknesses exploited—greed, trust, and the desire to believe—remain constant. For instance, the Poyais scheme, where Gauger paid a considerable sum for a general manager role and transported $5,000 worth of worthless Poyais dollars, is described as an early investment fraud. This echoes modern scams, such as the "pig butchering" romance cons where victims like Divya lost an entire $8 million inheritance after months of emotional manipulation, illustrating how new technologies enable old tricks.
The piece also touches upon other significant frauds throughout history. It references the widespread counterfeiting in 19th-century America, where up to one-third of all paper money in circulation was fake, making every transaction a gamble. It highlights the ingenuity of fraudsters like James Brown, dubbed "the hardest working man in counterfeiting." Furthermore, it cites the 1920 Ponzi scheme, where Charles Ponzi, paying early investors with new money, took in $250,000 a day at its peak, before it was exposed as mathematically impossible, owing $2 million to $4 million more than he possessed. These cases demonstrate that while the scale may vary, the fundamental mechanics of deceit persist over centuries.
The article also includes more recent examples, such as the 2016 Bangladesh Bank heist, where hackers attempted to steal $951 million from the Federal Reserve Bank of New York. A single typo—"fandation" instead of "foundation"—alerted a banker at Deutsche Bank, preventing the loss of $850 million, though $81 million was still laundered through Philippine casinos. Only about $15 million has been recovered, with $66 million still in dispute. This incident underscores the importance of robust controls and vigilance in preventing large-scale financial crime, and how even minor details can avert major catastrophes.
Ultimately, the article, drawing from Dan Davies's book "Lying for Money," suggests that understanding the historical evolution of fraud can sharpen one's "fraud sense." Reviews cited in the article from sources like the Financial Times and Kirkus Reviews commend Davies's ability to illustrate the nuances of financial malfeasance, making complex economic concepts accessible while demonstrating that patterns of deception repeat across millennia, from ancient maritime loan scams to modern digital cons. Nassim Nicholas Taleb is quoted as saying, "If you want to learn to fend [off] fraud, read this. And if you want to commit fraud ... don't. But if you absolutely must, first read this."
