Great frauds in history: Adelheid Luise Spitzeder

Adelheid Luise Spitzeder operated a classic Ponzi scheme in the 19th century, and conned 32,000 people out of £152m

Putting money in envelope
(Image credit: mjrodafotografia)

Adele spitzeder © Getty Images

(Image credit: Adele spitzeder © Getty Images)

Adelheid Luise Spitzeder was born in Berlin in 1832 and won minor fame as an actress, debuting to great acclaim in 1856. In subsequent years, however, she was unable to achieve a level of success sufficient to sustain her lifestyle. In 1869, desperate for money, she borrowed 100 gulden (roughly £400 today) from a woman she met in Munich, promising that she knew someone who was willing to take the sum and pay 10% a month for it. Spotting her opportunity, Spitzeder advertised similar services via a newspaper and the number of people who were willing to lend to her increased exponentially. She set up the Spitzedersche Privatbank in 1869. By 1872 the bank was so successful that she was considered to be the wealthiest woman in Bavaria.

What was the scam?

The Spitzedersche Privatbank operated as a classic Ponzi scheme, using new deposits to pay interest to the original depositors. Spitzeder's public philanthropy boosted the profile of the bank, as well as improving its reputation as a financial institution. She also bribed newspaper editors to defend her from accusations of fraud, and took advantage of prevailing anti-Semitic attitudes, attacking her critics for being part of a (fictitious) "Jewish cabal".

What happened next?

As early as 1871 newspapers and government officials were asking questions. But since Spitzeder wasn't breaking any laws at the time, they could do nothing and the attacks only succeeded in attracting customers. By 1872, however, the authorities insisted she start following proper accounting procedures. Shortly afterwards, 60 customers (at the prompting of her rivals) arrived at her house and demanded their money back, causing her to flee. She was quickly arrested and the bank closed down. In 1873 Spitzeder was sentenced to nearly four years in prison. Overall, 32,000 people lost a total of 38 million gulden (£152m).

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Lessons for investors

Investors had ample warning from the authorities and the press that her scheme was a fraud, but chose to believe her claims of a conspiracy against her a classic case of confirmation bias (ignoring evidence that doesn't fit with your preconceived notions). Understanding this tendency can help you to overcome it by seeking out contrary views.

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