Great frauds in history: the Independent West Middlesex Fire and Life Assurance Company's early Ponzi scheme
The Independent West Middlesex Fire and Life Assurance Company (IWM) offered annuities and life insurance policies at rates that proved too good to be true – thousands of policyholders who had handed over large sums were left with nothing.

Thomas Knowles was born in 1782 in Hythe, Kent, and went on to work as a servant in London. He was declared insolvent in 1819 and 1825, before finally being admitted to debtors’ prison for several months in 1829. William Hole, who was also born in Hythe, in 1793, worked as an apprentice before moving to London to set up his own shop. Like Knowles, he also faced personal financial problems and was declared bankrupt in 1827. In 1836 the pair teamed up with two other bankrupts to form the Independent West Middlesex Fire and Life Assurance Company (IWM).
How did the scam work?
IWM offered annuities and life insurance at rates that were far more generous than the competition, supposedly backed up by £1m in capital. They claimed the Duke of Wellington was a policy-holder and rented plush offices in the West End of London to give the impression of wealth. In reality, it was run as an early Ponzi scheme. The money coming in that was left over from interest payments, and the operating expenses, were embezzled by the directors and spent on maintaining an extravagant lifestyle of servants and carriages.
What happened next?
By 1839 doubts were being raised in the press. An article in a Glasgow newspaper led many investors to demand their money back. A libel suit issued by the company enabled it to keep taking in money from investors for a while, but by the end of 1840 its offices were shut down and its staff and directors disappeared. Hole, who had left the company in 1839, was pursued by creditors and was eventually declared bankrupt and died in poverty. Knowles managed to escape to the continent and was later spotted gambling in the German resort town of Baden-Baden.
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
One estimate puts losses from the scam at between £160,000 (£14.5m today) and £240,000 (£21.8m); another puts them at £300,000 (£27.3m). Either way, thousands of policyholders who had handed over large sums to purchase annuities were left with nothing. The investors in the scheme should perhaps have realised that the high spread between annuity and life insurance rates, allowing investors buying both sets of policies simultaneously to earn an effective rate of 6% a year, should have raised suspicions since rival companies’ spreads were just 1.5%.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.

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
-
What is the 25x retirement rule and does it work?
The 25x retirement rule has been around for decades but many experts question if it is a suitable strategy
-
When is the self-assessment tax return deadline?
If you are self-employed, rent out a property or earn income from savings or investments, you may need to complete a self-assessment tax return. We run through the deadlines you need to know about
-
Are wealthy whisky enthusiasts leaving Britain?
Collectables Wealthy whisky enthusiasts are heading to tax-friendly countries such as Dubai, where there is more disposable income to spend on collectable luxuries like rare whisky.
-
'The rise and fall of Kodak is a lesson for the tech giants'
Opinion The long decline of Kodak – a once-dominant company – shows why no business is safe from disruption, says Matthew Lynn
-
8 of the best properties for sale with kitchen gardens
The best properties for sale with kitchen gardens – from a 17th-century timber-framed hall house in Norfolk, to an Arts & Crafts house in West Sussex designed by Charles Voysey with a garden by Gertrude Jekyll
-
Why investors can no longer trust traditional statistical indicators
Opinion The statistical indicators and data investors have relied on for decades are no longer fit for purpose. It's time to move on, says Helen Thomas
-
Investors rediscover the virtue of value investing over growth
Growth investing, betting on rapidly expanding companies, has proved successful since 2008. But now the other main investment style seems to be coming back into fashion.
-
8 of the best properties for sale with shooting estates
The best properties for sale with shooting estates – from an estate in a designated Dark Sky area in Ayrshire, Scotland, to a hunting estate in Tuscany with a wild boar, mouflon, deer and hare shoot
-
The most likely outcome of the AI boom is a big fall
Opinion Like the dotcom boom of the late 1990s, AI is not paying off – despite huge investments being made in the hope of creating AI-based wealth
-
What we can learn from Britain’s "Dashing Dozen" stocks
Stocks that consistently outperform the market are clearly doing something right. What can we learn from the UK's top performers and which ones are still buys?