Hoaxes Throughout History
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Financial Scams

In 1812 a Philadelphia man, Charles Redheffer, claimed to have invented a perpetual motion machine that required no source of energy to run. He built a working model of the machine and applied for funds from the city government to build a larger version. But when inspectors from the city examined it, they realized that Redheffer had simply hidden the power source. To expose Redheffer, they commissioned a local engineer to build a similar machine, and when they showed this to Redheffer he fled the city. (This replica is still owned by the Franklin Institute in Philadelphia.) A year later, Redheffer attempted the same scam in New York City.... More…
In 1814 a man wearing a British military uniform rowed up to a dock on the coast of the English Channel and told the guards there that Napoleon had been killed. Immediately riders were sent to London. When traders on the London stock exchange heard the news they celebrated by bidding up the price of stocks. But soon after they realized the truth, that the war against Napoleon was still raging on. They had been tricked. Immediately the market dropped again. But in the meantime, someone had profited handsomely from the temporary rise. The mysterious military officer who had initially delivered the news had long since disappeared, so it was... More…
John Worrell Keely founded the Keely Motor Company in 1875 in order to develop and commercialize his invention: a "vibratory generator" that required only a quart of water to generate the equivalent of the power needed to pull a fully-loaded train for over 75 minutes. Following successful demonstrations of this miraculous device in his workshop, investors rushed to give him money, even though the scientific community derided his claims. For fourteen years he kept working on his engine, promising investors that the moment was just around the corner when he would unveil it to the world. The investors believed him and kept pouring money into his... More…
In the mid-1880s, Henry C. Freund showed up in New York, claiming he had invented a process that would revolutionize the sugar refining industry. He said he could refine one ton of raw sugar for 80 cents, whereas the techniques currently in use cost around $10 a ton. Plus, his method took only ten minutes, and it produced a high-quality granulated sugar, far finer than any seen before. But he insisted on keeping his process secret, disclosing only that it somehow involved electricity. On this enigmatic premise alone, he found investors willing to help him form a business, The Electric Sugar Refining Company, valued at one million dollars. But... More…
Prescott Jernegan claimed he had found a way to cheaply extract gold from sea water. His "Gold Accumulator" consisted of a wooden box, inside of which was a pan of mercury mixed with a secret ingredient. A wire connected the mercury to a small battery. When lowered into the ocean, this contraption supposedly sucked gold out of the water. A test conducted in Narragansett Bay in February 1897 proved the gold accumulator worked. After a few hours the box was raised, full of gold flakes. Soon Jernegan had found investors who helped him found the Electrolytic Marine Salts Company. When the company offered stock, the share price rapidly rose... More…
Charles Ponzi (1883-1949) Charles Ponzi, an Italian immigrant living in Boston in the early twentieth century, was said by his worshipful followers to have "discovered money." In fact, what he really discovered was a way to bilk the public out of millions of dollars by means of a financial pyramid scheme. There were pyramid schemes before Ponzi came along, but his was so outrageous that this type of scam has ever since borne his name. More…
In September 1950, police in Miami, Florida accidentally discovered a crime ring that had been stealing thousands of dollars from the local phone company for years. The thieves were young women, employed in the counting room of the Southern Bell Telephone Company, who were smuggling money out of the building by hiding coin rolls in their bras. The combination of attractive young women, lingerie, and money proved irresistible to the media, and the exploits of the "brassiere brigade" made headlines across the nation. The case took an unusual turn when prosecutors realized that, despite the women having made verbal confessions, they couldn't be charged with a crime because the phone company couldn't specify how much money, if any, had been stolen. So for a while it seemed as if the women were going to get away with it. However, an accountant was eventually able to establish "definite shortages during definite month's" in the phone company's accounts, and on the basis of this the women were convicted on a charge of grand larceny. More…

The Emulex Hoax (Aug 2000)

The share price of Emulex Corp. plummeted after news went out over wire services stating that its accounting practices were being reviewed by the SEC and that its CEO was resigning. However, none of this was true. The bad news had been invented by a college student, Mark Jakob, who had figured out that he could get a wire service to distribute a fake story if he submitted the story to the service at night, since night staffers were less likely to fact-check press releases. Jakob had hoped to profit by manipulating Emulex's stock price, and he did initially make $250,000. But the FBI arrested him within a week, so he didn't have long to enjoy the money. More…

Phony 9/11 Deaths (The months following Sept. 11, 2001)

As estimates of the death toll rose in the days following the 9/11 attacks, enormous amounts of sympathy and media attention flowed out towards those who had lost loved ones in the attack. Those who had participated in rescue efforts were hailed as national heroes. But simultaneously, many people (motivated, perhaps, by a desire for sympathy or attention) fabricated tales of phony heroics and lost loved ones in the weeks and months following 9/11. Listed are a few of the more notable cases of these phony 9/11 tales: More…
Bernard Madoff founded Bernard L. Madoff Investment Securities LLC in 1960. It became a prestigious firm on Wall Street, acting both as a market-maker (a middleman between buyers and sellers of shares) and as an investment fund that managed money for high-net-worth individuals and institutions. Year after year Madoff delivered reliable annual returns of around 10% for his investors. He managed to do this even in down markets when everyone else was losing money. These returns inevitably created suspicions, but billions of dollars continued to be entrusted to him, principally because he always paid out if anyone requested their money. More…