Great frauds in history: the downfall of Ferdinand Ward – the "Napoleon of finance"

Ferdinand Ward launched a Ponzi-style scheme based on fictitious government contracts, bringing down the Marine National Bank.

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.

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. 

Recommended

Share tips of the week – 2 December
Share tips

Share tips of the week – 2 December

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
2 Dec 2022
Is it cheaper to leave the heating on low all day?
Personal finance

Is it cheaper to leave the heating on low all day?

The weather is getting colder and energy bills are rising, but is it really cheaper to leave the heating on low all day or should you only turn it on …
1 Dec 2022
The best offers for switching banks – get up to £200 free cash
Personal finance

The best offers for switching banks – get up to £200 free cash

Looking to move bank accounts? You can now bag as much as £200 for switching current accounts from two major banks
1 Dec 2022
UK stock market opening times: when will the stock market close for Christmas?
Stockmarkets

UK stock market opening times: when will the stock market close for Christmas?

Here is everything you need to know about UK stock market opening times during the Christmas period of 2022.
1 Dec 2022

Most Popular

Fan heater vs oil heater – which is cheaper?
Personal finance

Fan heater vs oil heater – which is cheaper?

Sales of portable heaters have soared, as households look to cut their energy costs. But which is better: a fan heater or an oil heater? We put them t…
21 Nov 2022
Best regular savings accounts – December 2022
Savings

Best regular savings accounts – December 2022

You can earn an attractive rate on the best regular savings accounts. We tell you the best on the market to take advantage of right now
1 Dec 2022
2 investment trusts with growing dividends: which one should you invest in?
Investment trusts

2 investment trusts with growing dividends: which one should you invest in?

They might not have spectacular yields but these two trusts have increased their dividend every year for 55 years.
24 Nov 2022