Great frauds in history… William Strahan’s stolen bonds

Eton-educated William Snow, AKA William Strahan, inherited a huge fortune and joined the family bank. On the face of it he was a pillar of respectable society. But he and his partners sold investors' assets to bail themselves out when they went broke.

William Snow was born in 1807, going on to study at Eton and Cambridge before changing his name to William Strahan in 1830 in order to inherit a large fortune of around £200,000 (equivalent to £18m today) from his great uncle. Two years later he joined the family bank (then known as Snow, Snow, Strahan, Paul and Paul) as a partner. Over the next two decades his wealth and social position led to his being granted the honorary title of High Sheriff of Surrey as well as being appointed to the boards of various companies.

What was the scam?

By 1850 the bank was barely solvent, even taking into account the partners’ personal assets. Over the next few years things got even worse as they made large loans to support various unsuccessful projects, including railways in France and Italy, as well as a colliery in Mostyn in Wales, which ended up requiring increasing amounts of cash. In desperation they sold bonds that they were keeping on behalf of clients, hoping that they would be able to buy them back before the clients noticed that they were missing.

What happened next?

By 1854 Strahan and his two other partners, John Dean Paul and Robert Makin Bates, had run out of money to steal and rumours were flying around London that the bank was insolvent. John Griffith, canon of Rochester Cathedral and one of the bank’s oldest clients, went to the bank’s offices and demanded to withdraw £5,000 (£472,000 today) in bonds that they held on his behalf. Strahan confessed that the bonds had been sold, along with other bonds totalling £100,000 (£9.45m). Strahan and the other two partners were arrested, convicted and sentenced to 14 years in prison (though this was later reduced to three years).

Lessons for investors

By the time the bank collapsed, its liabilities were £652,593 with only £127,670 in assets, leaving a deficiency of £524,923 (£49.5m). The bank’s depositors and creditors got some of their money back through the liquidation of the partners’ estates, but they would have to wait more than two decades, and even then would only get a fraction of what they were owed. Given that the bank’s dire position was mostly due to bad loans to two firms totalling £483,000 (£45.7m), the bank’s lending portfolio was clearly not diversified enough. The bank should also have been more ruthless in cutting its losses, rather than lending more money to doomed projects.

Recommended

The MoneyWeek Podcast: Barry Norris on why he's shorting vaccine-makers
Biotech stocks

The MoneyWeek Podcast: Barry Norris on why he's shorting vaccine-makers

The news of Covid vaccines has delighted many. But not Argonaut Capital's Barry Norris. He tells Merryn why vaccines aren't the panacea people think t…
3 Dec 2020
The MoneyWeek Podcast: Stephen Yiu on why, in a low quality market, you should buy only the best stocks – and don't over diversify
Investment strategy

The MoneyWeek Podcast: Stephen Yiu on why, in a low quality market, you should buy only the best stocks – and don't over diversify

Merryn talks to Stephen Yiu of the Blue Whale Growth Fund about his investment approach and the sectors he likes, plus why you should stick with top q…
2 Dec 2020
Too embarrassed to ask: what are “bulls” and “bears”?
Too embarrassed to ask

Too embarrassed to ask: what are “bulls” and “bears”?

Two common terms you’ll hear when reading about markets are “bulls” and “bears”. But what do they mean? 
1 Dec 2020
Great frauds in history: Meyer Blinder's Blind ’em & Rob ’em
People

Great frauds in history: Meyer Blinder's Blind ’em & Rob ’em

Meyer Blinder’s brokerage firm cold-called unsuspecting punters and pumped shares in fraudulent shell companies while stiffing them with huge commiss…
1 Dec 2020

Most Popular

This week’s rally in value stocks is just the beginning
Value investing

This week’s rally in value stocks is just the beginning

The arrival of a vaccine this week saw huge gains in the markets and investors switching out of big-tech growth stocks and into “value” stocks in more…
13 Nov 2020
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
13 Nov 2020
Time for investors to be fearful, not greedy – and sell?
Investment strategy

Time for investors to be fearful, not greedy – and sell?

The Covid-19 crash proved a great investment opportunity. Does the vaccine mean it’s time to sell?
23 Nov 2020