Great frauds in history: Ivar Kruger

Swedish match magnate Ivar Kruger built what looked like a profitable business – but it was all a deception. Matthew Partridge explains.


Match magnate Ivar Kruger

Born in Sweden in 1880, Ivar Kruger graduated from the Royal Institute of Technology, then set up Kruger and Toll in 1908 to take advantage of advances in building technology he had come across in the US. He then turned his attention to his father's match company, floating it, then merging it with other firms. Swedish Match would go on to become the largest match company in the world.

What was the scam?

Kruger initially raised funds through a flotation, but he supplemented this with bank loans and further stock sales in the US, paying investors dividends of up to 15%. To create the illusion of profitability, he would shuffle funds and assets around his business empire, in some cases using money he had borrowed through one company to repay the debts of another. Later on, Kruger turned to forgery, adding £28.7m in forged Italian bonds to the balance sheet in 1930.

What happened next?

The Wall Street Crash and Great Depression led many bankers to start questioning whether Swedish Match would survive, given its large debts and huge loan exposure to heavily indebted European countries. In an attempt to raise enough cash to pay out dividends, he attempted to sell his stake in Swedish phone company Ericsson to IT&T for $11m. However, IT&T's auditors discovered that Ericsson's balance sheet was padded with fake assets and the deal was cancelled. After the Swedish Central Bank refused to lend him more money, Kruger killed himself in March 1932.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Lessons for investors

Auditors brought in to investigate Swedish Match's books after it was declared bankrupt in August 1932 estimate that at least $250m (and possibly as much as $400m) in assets that were supposedly on his empire's balance sheet were either missing or didn't exist. Although many of the companies in Kruger's empire still operate today (including Swedish Match), shareholders were wiped out by the bankruptcy and American bondholders only got around 30% of the face value of their bonds. Kruger's story proves that you should be suspicious of firms that are outliers, especially those (like Swedish Match) that claim to be booming even in the depths of a bitter depression.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri