10 Famous financial frauds you should know

9) Republic of Poyais frauds

The Poyais fraud was a major scandal in the 1800s. This fraud was certainly the most audacious and imaginative of all, as the perpetrator, Gregor MacGregor, created an entirely fictional country.

MacGregor served in the British army and was involved in various operations in the Americas. During his travels, he visited the coastal areas of present-day Honduras and Belize. MacGregor claimed to have received a land grant from a local native leader, and upon his return to London, announced the new nation of the Republic of Poyais.

MacGregor created a flag, a coat of arms, currency, and other trappings of a sovereign nation, and then proceeded to sell off land to investors and settlers in the London markets. He also issued sovereign debt backed by the promise of this new nation, and induced people to emigrate there with glowing accounts of the capital city and the fertility of the soil.

The first group of settlers arrived in Poyais in 1823, and found nothing except dense jungle and abandoned wood shacks. Three other shiploads of settlers arrived over the next few years and found a similar situation.

The news eventually reached London and the authorities arrested MacGregor. While awaiting trial, he fled to France and attempted the same Poyais scam on French investors. MacGregor ended up in Venezuela, where he helped the nation in its fight for independence and for his efforts was awarded a pension and the title of general by the newly established government.

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