Ferdinand Ward was born in New York in 1851. He was dismissed from various clerical jobs in his early working life until finding a post as secretary to the superintendent of one of the New York commodity exchanges. A marriage to the daughter of a wealthy merchant allowed him to start speculating in commodities, and he had some initial success. By 1880 he had become established enough to set up his own brokerage, Grant & Ward, in partnership with Ulysses “Buck” Grant Jr, the son of former president Grant, and James Fish, who ran the Marine National Bank and was a friend of his late father-in-law.
What was the scam?
Ward quickly dominated the partnership, making all the decisions, and persuaded Grant Jr and his father to invest another $200,000 into the business. When this capital was squandered through bad investments, Ward simply altered the books to give the impression that the firm was making money. Greedy for cash to fuel an extravagant lifestyle, Ward then raised yet more money by launching a Ponzi-style scheme based on fictitious government contracts. Ward promised to pay investors interest rates of 10% a month, but no money was in fact invested, and investors were paid with funds raised from new depositors.
What happened next?
Fish’s Marine National Bank had heavily invested in Grant & Ward, financing this with a loan of $1.6m from New York City. By April 1884, the New York City comptroller decided to reduce the city’s deposits with the bank. Despite an emergency loan of $80,000 from the tycoon Cornelius Vanderbilt (underwritten by the former president), the bank collapsed, causing a minor financial panic and exposing Ward’s scam. Ward, who had briefly been known as the “Napoleon of finance”, quickly became the “best-hated man in the United States” and spent nearly seven years in jail.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely 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
Lessons for investors
The creditors of the Marine National Bank were able to recover only half the $5.2m ($141m in today’s money) that the bank owed when it went bankrupt. Those who had invested with Grant & Ward recovered virtually nothing of the $14.5m ($393m) supposedly in their accounts when it collapsed (much of this sum represented fictitious profits that had been reinvested). The former president Grant was not involved with the scam, but his family connection was taken as a badge of respectability. Never invest just because a scheme has celebrity backing.
-
Landlords ‘positive’ about buy-to-let market despite Renters Reform BillNews New research has found landlords are not being put off investing in the rental market, even though the Renters Reform Bill is on its way.
-
Lloyds Bank unveils new pension service – is it any good?Lloyds is the first high-street bank to launch a ready-made pension service. How does it work, is it any good and who can save in it?
-
UK wages grow at a record paceThe latest UK wages data will add pressure on the BoE to push interest rates even higher.
-
Trapped in a time of zombie governmentIt’s not just companies that are eking out an existence, says Max King. The state is in the twilight zone too.
-
America is in deep denial over debtThe downgrade in America’s credit rating was much criticised by the US government, says Alex Rankine. But was it a long time coming?
-
UK economy avoids stagnation with surprise growthGross domestic product increased by 0.2% in the second quarter and by 0.5% in June
-
Bank of England raises interest rates to 5.25%The Bank has hiked rates from 5% to 5.25%, marking the 14th increase in a row. We explain what it means for savers and homeowners - and whether more rate rises are on the horizon
-
UK wage growth hits a record highStubborn inflation fuels wage growth, hitting a 20-year record high. But unemployment jumps
-
UK inflation remains at 8.7% ‒ what it means for your moneyInflation was unmoved at 8.7% in the 12 months to May. What does this ‘sticky’ rate of inflation mean for your money?
-
VICE bankruptcy: how did it happen?Was the VICE bankruptcy inevitable? We look into how the once multibillion-dollar came crashing down.
