The Biggest Scams in History

Posted on August 9, 2021

Scammers — they never let up. They've even found ways to exploit the pandemic to scam Canadians out of their money. You might even know someone who's been personally scammed.

However, no matter how big it was, you can rest assured it was nothing compared to some of the biggest scams in history. Imagine: millions of dollars stolen, thousands of people betrayed, consumers forever mistrusting businesses for fear of scams. 

If you've found yourself wondering about scams, schemes, and scandals, you've come to the right place. This article will walk you through some of the worst scams this world has ever seen. 

Charles Ponzi and the Ponzi Scheme

The Ponzi Scheme is practically synonymous with scams. In contemporary life, people use the term the same way some of us use the term "Kleenex" to describe all brands of tissues. But how many people know what the original Ponzi Scheme consisted of? 

This dastardly scheme dates all the way back to the early 20th century. Ponzi first came up with it in 1919.

Ponzi Scheme is a form of investment fraud that pretends to be a good guy by luring the investors with a promise of high returns in a short period by using the money of the newly recruited investors.

This is how it worked: he used the name of his security company, the Securities Exchange Company and invited investors to take shares in his company. He promised returns of fifty percent in 100 days. Anyone who's a fan of the stock market knows how amazing this sounds.

However, Ponzi didn't actually invest the money. He used the money taken from later investors to pay earlier investors. Then found even later investors, and paid the later investors with the money. To pay the even later investors, he found more investors. . . you see how this works. 

Schemes like this work in the beginning. The scammer makes a profit, the earlier investors make a profit. And everyone/s happy, right? — wrong. 

These schemes are doomed to bottom out.

Sooner or later, new investors stop coming in; there's so much money in the world. When new investors stop coming in, there's no money around to back the other investors. While the few earlier investors make some money, the later investors lose a boat load of funds.

A similar type of scam is the pyramid scheme

The Drake Estate Scam

Between 1919 and 1934, a man named Oscar Hartzel started a strange scheme that specifically scammed people in Iowa with the surname "Drake". 

Hartzell contacted people with this last name and told them that they were the distant relatives of one Sir Francis Drake. He told them that they had claims to Sir Francis Drake's large estate, but there was a catch. Sir Francis Drake had never completely paid out his dues to the British government. 

How would these Iowa Drake's gain access to this estate? By sending money to Oscar Hartzel, of course. 

This scam went so well that Oscar Hartzell eventually moved to a large house in London, and hired people to scam drakes from around the world. He was arrested in 1934 and sentenced to jail. 

Wirecard Financial Scam

Fast-forwarding to the present day, we have the Wirecard financial scam.

Wirecard was a "trustworthy" electronics company over in Germany. Think of Samsung or Sony. However, things at Wirecard weren't the way that they seemed.

This one's the product of some big, complicated, corporate collusion. All you need to understand, however, is that around 2 billion dollars mysteriously disappeared from the company books. 

As it turns out, that 2 billion dollars never existed. The company had faked two-thirds of its sales and owed tons of money in debt. Its fancy, fraudulent, financial scheme planted it at the top of the stock market in Germany however; never judge a book by its cover. 

Frank Abagnale Jr. – Catch Him if You Can!

While Ponzi's name has dominated schemes, Frank Abagnale Jr. might have the most star power of anybody on this list. 

The story of Frank Abagnale Jr.'s life was turned into the popular movie Catch Me If You Can, where he was portrayed by none other than Leonardo DiCaprio. The movie was adapted into a Broadway musical.

So what sort of trouble did Frank get himself into? 

Frank Abagnale Jr. was a master of disguise; he was all about being an imposter. At just 16 years old, he got himself free flights at airlines by posing as a pilot. Eventually, he upped this to cashing fraudulent cheques in his disguise. 

When his scheme started to surface, he posed as a doctor in Georgia, and a lawyer in New Orleans, actually passing the bar exam. The whole time, he was befriending people, and forging cheques in their name. 

It all came crashing down when he was arrested in 1969. He now works with the U.S. government to help identify cases of fraud. 

ZZZZ Best Scheme

ZZZZ Best was an updated, 1980's version of a Ponzi scheme. The company was a carpet cleaning and restoration company, which a young man named Barry Minkow opened in his parent's garage. The company tanked, and he often found himself on the wrong end of customer complaints. 

Barry turned to illegal activities to gain money and create the illusion of a successful business. Barry and his partner created a fake insurance company, which he used to forge documents that claimed ZZZZ Best was doing work. Like Wirecard, this is an example of a business appearing that never was. 

Because of this, just like in Wirecard, the market value of ZZZZ Best grew, and investors become interested. He started getting money from investors, and since he didn't have a business he, just like Ponzi, paid the earlier investors off with money for later investors. 

It all came crashing down when a homemaker that Barry Minkow scammed in his early years led a campaign against ZZZZ Best. While she was only one person, she caught the public eye. Investigations into ZZZ Best were launched, and the whole scheme came tumbling down. 

Enron Scandal

Now we're playing with the big dogs; energy company Enron pulled off one of the biggest financial scams in history. At the end of the day, however, what they did isn't all that complicated. Enron used multiple companies and paper-only transactions to hide major losses that the business was suffering, and keep investors happy. 

Enron was hugely successful at this, and at one point became the seventh-largest corporation in the United States. Enron is notable not for the ingenuity of the scam, but for just how huge it was. How could so many people be duped by a corporation they trust?  How could we let criminals get this successful? 

Enron's collapse was the biggest corporate bankruptcy to ever hit the financial world. It makes you wonder if this effect had ripples that led to the large distrust of companies that you see today. 

For a more trustworthy investment opportunities, check out our article on interactive brokers

Theranos Scandal

Theranos was a blood-testing startup that promised innovation in the medical field. They claimed to be able to provide extremely high numbers of tests with one prick of blood. This would allow the world of blood testing to become much, much faster, and launch into the future. 

Theranos was the company that everyone dreamed of, with the personality to back it up. Elizabeth Holmes, the CEO, was the woman with the dream that everyone wanted to succeed. 

But, you know that extremely efficient blood testing we mentioned earlier that seemed too good to be true?

It was. 

An acclaimed journalist named John Carreyou broke the story in 2015 after receiving an anonymous tip. He started to attack the foundations that the company was built on, even questioning the credentials of Elizabeth Holmes. 

After rocking the boat long enough, things started to fall off. Higher-ups and employees alike came forward sharing stories of lies, corruption, coercion, and collusion. It eventually came out that Theranos wasn't even using its own technology. 

At the end of the day, this was one of the most heartbreaking ones. People got their hopes up for this young woman, and for advancements in the medical field, only to get scammed out of cash. 

Bernie Madoff’s Ponzi Scheme

This one's a big one. When you get right down to it, all Bernie Madoff really did was run a Ponzi Scheme. If you want to know the technicals of the Madoff scam, just read the Ponzi section.

However, his legitimate position in the financial world, his extremely charming demeanour, and his brains (he gave people lucrative returns, but only 10-20 percent, not the ridiculous percentages provided by Ponzi) made him trusted by many. 

Bernie's scam lasted half a century. He was forced to fork over 170 billion dollars, and thousands of investors lost their life savings; some even took their own lives. 

With all of the scammers out there, it might be good to look at the different types of investments you can safely make. 

Alves dos Reis Causing an Economic Crisis

Portuguese conman Alves dos Reis a contract with the Bank of Portugal that "allowed" him to print money. This allowance led to reliable printers that produced real-looking cash. Alves dos Reis printed so much money that he caused massive inflation in Portugal, causing a financial crisis, and a military coup d’etat

This is probably the biggest consequence a scam has ever had. 

Understand The Biggest Scams in History

Now that you understand some of the biggest scams in history, you're more likely to avoid these scams yourself.

That's why we provide services for you to find the best insurance coverage. In a world where such risks are imminent, we believe that protecting your, and your families livelihood is crucial.  Our financial comparison tool will provide you with the best quotes on the market for travel, life and health insurance policies.

For more information, get a quote with us today. 

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