Great frauds in history: Harry Marks and his dodgy tips

Harry Marks used his position as the owner of a financial newspaper to con investors into putting their savings into a non-existent gold mine.

Harry Marks

Credit: Antiqua Print Gallery Ltd / Alamy Stock Photo

Harry Marks was born in London in 1855 and left school at 16 to seek his fortune in America. After a brief stint as a salesman, he became a journalist in Texas, and then New York, eventually becoming editor of the Daily Mining News. After moving back to London in 1883 he set up the Financial and Mining News (later shortened to the Financial News), remaining editor until 1909. The magazine focused on giving financial advice and exposing financial and public corruption.

What was the scam?

Marks' most flagrant abuse of his position was with the Rae-Transvaal Gold Mining Company, a firm that he tipped heavily in his newspaper. Unknown to his readers, it was created when he acquired a farm in the Transvaal (South Africa) for £10,300, and then sold it to a shell company he had created for £50,000, half of it in shares. The company, which claimed to have discovered gold in the area, was then floated on the stockmarket in 1887 to great acclaim. After the company's shares soared in value, Marks discreetly sold his shares for a huge profit.

What happened next?

Despite the hype, the company made little effort to even pretend to live up to its expectations, spending a grand total of £138 on drilling equipment. As a result, the share price quickly crashed and the company was wound up in 1888, having failed to mine a single ounce of gold. Despite losing a libel action in 1890 against George Butterfield, a rival promoter, who published an expos of the fraud (along with other evidence of Marks' past misconduct), he escaped prosecution, and was even elected to parliament in 1895.

Lessons for investors

While the exact amount of money that Marks made from his scam is unknown, shareholders ended up losing their entire investment in the venture and even creditors only received a fraction of their money back. Even today, investing in single-mine companies remains a very high-risk proposition and you should always do your own research, and be sceptical. As Marks himself wrote, "the [stock] promoter is a species of animal in financial zoology whose position has not clearly been defined. And the City does not quite know what to do with him. It fears him, distrusts him, looks down on him, and runs after him, all in a breath."

Recommended

The MoneyWeek Podcast: nuggets of positivity in an extended bear market
Investment strategy

The MoneyWeek Podcast: nuggets of positivity in an extended bear market

Merryn and John talk about he need for higher wages and lower house prices, and why the fact that this is the least dramatic bear market they’ve ever …
1 Jul 2022
Don’t try to time the bottom – start buying good companies now
Investment strategy

Don’t try to time the bottom – start buying good companies now

Markets are having a rough time, so you may be tempted to wait to try to call the bottom and pick up some bargains. But that would be a mistake, says …
1 Jul 2022
Gold has been incredibly boring to own – but that’s no bad thing right now
Gold

Gold has been incredibly boring to own – but that’s no bad thing right now

Stocks, bonds and cryptocurrencies have all seen big falls this year. But gold remains at its one-year average. It may be dull, but it’s doing what it…
29 Jun 2022
How to find the best dividend stocks
Income investing

How to find the best dividend stocks

Stocks that pay dividends tend to outperform the market over the long run - as well as providing an income. Here, Rupert Hargreaves explains the best …
28 Jun 2022

Most Popular

UK house prices are definitely cooling off – but are they heading for a fall?
House prices

UK house prices are definitely cooling off – but are they heading for a fall?

UK house prices hit a fresh high in June, but as interest rates start to rise, the market is cooling John Stepek assesses just how much of an effect h…
30 Jun 2022
How to invest in copper, the most important metal in the world
Industrial metals

How to invest in copper, the most important metal in the world

As the world looks to electrify and try to move away from fossil fuels, copper looks set to be the biggest beneficiary. But how can you invest? Rupert…
30 Jun 2022
Don’t try to time the bottom – start buying good companies now
Investment strategy

Don’t try to time the bottom – start buying good companies now

Markets are having a rough time, so you may be tempted to wait to try to call the bottom and pick up some bargains. But that would be a mistake, says …
1 Jul 2022