History's Greatest Conman!

Gregor MacGregor was a Scottish soldier, adventurer, and con man who invented a Central American country called “Poyais,” in 1820 which he claimed to rule as the “Cazique.” MacGregor attempted to draw British and French investors and settlers to his fictional country. Hundreds invested in Poyaisian government bonds and land certificates, while about 250 emigrated to MacGregor’s invented country. MacGregor’s Poyais scheme has been called one of the most brazen confidence tricks in history.

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Transcript

In 1821, Gregor MacGregor a 19th century Scots soldier and adventurer pulled off possibly the most audacious fraud in history when he made up a fictional country and then made a fortune selling bonds on its behalf. McGregor deceived the public, banks, investors and the governments of France and Venezuela. While not as famous today as Ponzi, Madoff or Bankman Fried, it is possibly fair to describe him as the greatest conman the world has ever seen.

MacGregor’s bond-market frauds raised 1.3 million pounds – which is equivalent to around 5 billion dollars in today’s money which is a lot less than Madoff’s scheme, but Madoff’s investors got most of their money back and Madoff ended up in jail. Gregor MacGregor on the other hand got off scott free.

MacGregors scheme didn’t involve convincing the world that he was a great investor, he was far more ambitious than that. He invented an entire country larger than Wales that was rich in natural resources but in need of development. He persuaded people to not only invest their savings in the bonds of a non-existent government, but also to emigrate to his fictional country. In today’s video we’ll look at how this happened, but we have to go back to the very start.

Born on Christmas eve 1786 Gregor MacGregor was the son of an East India Company sea captain. He joined the British army at the age of 16 (the youngest age possible) when his family paid for a commission as an officer.  Before the Crimean war, British military ranks were mostly bought and sold rather than being earned - conveniently avoiding the need to wait for promotion based on merit or seniority.

A year later Gregor married the daughter of an Admiral, receiving a significant dowry which allowed him to buy the rank of captain for about £900. Around this time, he is said to have developed an obsession with uniforms, rank, insignia and medals – an obsession which would stick with him for life.

Gregor is described as being an unremarkable soldier and he resigned in 1810 after an argument with one of his superiors. He had been part of the 57th regiment, who about year after he resigned - earned the nickname – The Die Hard’s – for their bravery during the Peninsular war. Never one to worry too much about the details, MacGregor made much of the regiment’s fighting reputation – leaving out the fact that it had been earned after he had left.

When he returned to Edinburgh, he took on the title of "Colonel" and wore the badge of a Portuguese knightly order – no one loved military insignia more than Gregor MacGregor. 

The Scots didn’t care much for his stories and so he moved to London introducing himself as "Sir Gregor MacGregor, Bart.", falsely claiming to be a knight, to be the chieftain of the MacGregor clan and a Baronet and a Colonel. He did this without even buying one of those Scottish Lordship Title Packs like so Many YouTubers did a bit over a year ago... [Clip] “As of today, that’s right – I’m officially a Lord”

MacGregor’s tall tales seem to have worked a bit better in London, and according to his biographer, he was soon the toast of the town.

Unfortunately for him, the Venezuelan revolutionary General Francisco de Miranda was in London at the same time and was drawing even more attention than MacGregor, which gave him the idea that adventures in the New World might boost his status.

At the time, the Spanish were occupied fighting Napoleon and this distraction allowed Spanish colonies in Latin America to rise up against Spanish rule. 

MacGregors wife died around this time, bringing an end to his main source of income and so he sold the small Scottish estate he had inherited from his father and sailed for Venezuela seeking adventure and wealth. He landed in Caracas to find that an earthquake had recently leveled the city and the revolutionaries were starting to get quite desperate. MacGregor read the room quite well when he met the revolutionary leadership and dropped his claims of nobility, which might not have gone down too well with them. His false credentials and his tales of having led the 57th “Die Hards” impressed the revolutionary leadership enough that he was made a colonel and put in charge of a cavalry company.

In 1812 he married a wealthy Venezuelan woman Josefa Antonia Andrea Aristeguieta y Lovera MacGregor (a name that would never fit on a modern driving license). She also happened to be a cousin of Simón Bolívar.

As the revolution began running out of steam, MacGregor fled to Curacao, later joined by Simon Bolivar who - now that General Miranda was imprisoned in Spain - was the new leader of the Venezuelan independence movement.

MacGregor fought along with Bolivar for Venezuelan independence and his biographer says he demonstrated genuine military skill at this time.  Bolivar even wrote him a letter which read “The retreat which you had the honor to conduct is in my opinion superior to the conquest of an empire.”

In 1817 – in a toned-down version of the frauds that would soon follow, MacGregor travelled to the United States to raise money and volunteers to invade Florida which was at that time a Spanish Colony. He sold 160 thousand dollars’ worth of scrip to investors promising either land in Florida – or their money back with interest. This is equivalent to around $4 million dollars in today’s money and none of those investors ever saw their money again.

Having raised money and volunteers in the United States, MacGregor sailed from Charleston South Carolina in a ship with 80 men to capture Amelia Island – a small island off the coast of Florida that is 13 miles by 4 miles, with the words: "I shall sleep either in hell or Amelia tonight!" The Spanish commander guarding the island, overestimated the size of MacGregor's force and immediately surrendered. 

MacGregor named the island The Republic of the Floridas which he was (of course) the leader of. He designed a flag – a green cross on a white background and set about taxing the locals. His troops were unhappy as he wasn’t paying them, so he quickly designed and printed his own currency – Amelia Dollars - which didn’t make them a whole lot happier.  When he saw the Spanish forces building up on the mainland opposite Amelia Island he turned over command to one of his troops – a former US Congressman and fled to the Bahamas where he had medals made up commemorating his victory.

MacGregor claimed that he had achieved a great victory in taking Amelia Island and that he then sold it to a Frenchman who went on to lose it to the Spanish. He can’t be blamed for that…

This story repeated itself over the next few years, in total he captured three towns that were later “more or less” abandoned to the Spanish.  Large sums of money were either embezzled or lost in these adventures and of course, titles were made up and medals were awarded.  Unfortunately, by the end of 1819 MacGregors luck was starting to run out.

At this point MacGregor was wanted in Jamaica for piracy and Simon Bolívar who was now the president of Colombia having heard the stories of MacGregors awful behavior ordered his death by hanging if he ever set foot on the South American mainland again. 

Michael Rafter – the brother of Colonel William Rafter who had been left behind to be killed by the Spanish army in one of these campaigns published a book in London that year entitled “Memoirs of Gregor M'Gregor” describing the terrible behavior and the lies that had been told. The book concluded, "that any person could be induced again to join him in his desperate projects, would be to conceive a degree of madness and folly of which human nature, however fallen, is incapable".

It turned out that human nature was more capable of folly than Rafter’s estimates…

Gregor MacGregor – was… only getting going.  He disappeared for about six months in late 1819, resurfacing at the court of King George Frederic Augustus – the Mosquito king. MacGregor was now ready to kick off the most brazen confidence scheme in history by inventing an entire country with documentation to prove its existence.  He would convince people to invest and to even move to the country he had invented.

The Mosquito Kingdom – overseen by King George Frederic Augustus - was a British protectorate that straddles the border between modern day Nicaragua and Honduras. The British authorities had been crowning the most powerful chieftains in the region as "kings" since the 17th century. These Kings had no real power, but the façade allowed the British to obstruct Spanish claims in the region with the argument that these were sovereign territories under British protection.

The Mosquito King granted Gregor MacGregor a twelve thousand five hundred square mile plot of (mostly useless) land along the mosquito coast in exchange for rum and jewelry – the currency of the day... MacGregor named this plot of land "Poyais" and returned to London a year later calling himself the Cazique of Poyais. A Cazique - he explained was the equivalent of a Prince. He claimed to have been given this title by the Mosquito King.

Now look, I might be mispronouncing Cazique and I might be mispronouncing Poyais too, but these are words made up by a man who mostly spoke Scottish Gaelic in his youth, so odds are that he mispronounced them too. 

MacGregor claimed to be visiting London as a guest of King George the Fourth having arrived to attend the coronation as a representative of the nation of Poyais, he explained that he was also there to seek investment and immigrants for the new country.

This story would not have sounded as crazy in 1820 as it does today as at the time given the turmoil in Latin America where governments were rising and falling all the time and borders were constantly shifting.  The idea that a decorated general like MacGregor might be leading a small Latin American state was not entirely implausible.

Financial markets in the early 1820s made the atmosphere ripe for a con man like MacGregor too. Napoleon had been defeated a few years earlier and the British economy was now booming, driven on by manufacturing. Inflation was low and wages were rising. Interest rates drifted down, and the most popular British government bond (the “consol”) yielded as low as 3%.

British investors were seeking more exciting investment opportunities with higher expected returns. They bought the bonds of Russia, Prussia and Denmark which were riskier but yielded 5%.

They looked to invest in mining companies too, which offered massive potential returns.  Shares in the Anglo-American mining company rose more than 300% in a single month at the end of 1824. 

The collapse of the Spanish empire meant there was now a new list of countries to invest in and London was in the middle of its first emerging-market boom, bonds issued by the new governments of Brazil, Colombia, Mexico and Guatemala yielded twice the interest rate of the British consol.

David Sinclair in his book “The Land that Never Was” shows how MacGregor convinced the public to invest in his bonds and even sell their homes and convert their savings into Poyais dollars to move to his made up country. MacGregor conducted interviews in the national papers and supported his claims with a 355 page book (supposedly written by Doctor Thomas Strangeways, but which was actually written by MacGregor himself), that promised friendly natives, a mild climate and fertile soil. Poyais’s forests were said to be filled with valuable timber. 

The book was filled with believable information as huge sections of it had been copied from other books that had been written about neighboring regions.  It was filled with descriptions of the wildlife, the capital city of St Joseph (which was entirely made up).  St Joseph was supposed to be a town of 20 thousand people with palaces, banks, cathedrals, opera houses, theatres and more. The book described how the country was so rich in gold that the rivers and streams contained huge nuggets and that you could reach down and grab fistfuls of pure gold from the riverbeds. 

The book was not the only printed material. There were pamphlets, land certificates, documents describing the parliamentary system, a fictional constitution – even trading and commerce laws. 

MacGregor, being a lifelong lover of insignia had illustrations of the Poyais coat of arms, drawings of the uniforms worn by the different ranks of the army –and he explained in detail the system of nobility and honors.

It would have been extremely expensive to print all of these books and certificates at the time and people were taken in by it.

Poyaisian land certificates were sold at a price roughly equivalent to a working man's daily wage in 1820. There was enough demand that MacGregor eventually almost doubled the price without diminishing sales.

In October 1822 MacGregor offered a two hundred-thousand-pound Poyais bond yielding 6%, a similar rate to that paid by other Latin American countries. This was equivalent to raising around 300 million dollars in today’s money. Unlike the other Latin American countries that were issuing bonds, Poyais had no record of collecting taxes, but MacGregor argued that Poyais was so abundant in natural resources that export-tax revenue would easily cover the interest payments on the debt. Investors went with it and the bond was successfully floated – funding secured.

While MacGregor targeted Londoners for capital, he targeted his fellow Scots as settlers, and this is where the story takes a rather dark turn. This wasn’t just the Fyre Festival… As tempting as it may be to view Gregor MacGregor as a bit of a rascal who took money from foolish investors who should have known better, we have to remember that he shipped hundreds of his fellow Scots to a tract of land in South America incapable of supporting such a settlement, the majority of these people died.

In the 1820s emigration to America, which had slowed due to the war, had started to gain momentum once more. MacGregor’s pitch found a natural audience in a public excited about the idea of a fresh start abroad. MacGregor just needed to persuade potential emigrants that Poyais, a brand-new country, had more to offer them than America did.  

MacGregor preyed on the Scots who were envious of England because Scotland, unlike England, had no foreign colonies, he rounded up people in Glasgow and Edinburgh with the promise of this new Scottish territory. Settlers were told that while anyone could invest, the people of Scotland had been specifically selected for their skills and bravery to colonize Poyais, righting a national wrong.

Hundreds of people lined up to board emigrant ships. In September and October of 1822 two ships set out – shipping people to their deaths on the other side of the world. Passengers enthusiastically exchanged their British pounds for MacGregors made up currency before boarding the ships.

The ships made it safely across the ocean in a two-month journey, but the emigrants were shocked to find nothing there when they arrived, there was no port, no city and no gold laden streams. The local tribes, while friendly enough, were not particularly helpful. At first, the settlers thought that a mistake had been made and they had been dropped off in the wrong place. A search party was sent out by the leader of the expedition to find the city of St. Joseph.

The settlers decided to stay where they had landed while the mistake was clarified. They didn’t really have much of a choice at this point as their tickets had been one way and the ships had already left. They had tools, medicine and a year’s basic provisions, so they should hopefully be ok.

There were rows between the settlers, the officer class initially refused to help set up camp. Hunting and fishing trips were unsuccessful, and the settlers began to go hungry. When the rainy season set in, disease began to spread. One settler attempted to escape in an improvised canoe and drowned, another shot himself.

In May a ship transporting the Chief Magistrate of Belize to visit the Mosquito King landed near the settlement.  The magistrate was horrified by what he saw and informed the settlers that the whole story was a lie. There was no country, no city, no Cazique and that they would all die if they did not leave with him for Belize. 

While the settlers were deciding what to do, the Mosquito King arrived and told the settlers that he was revoking MacGregor's land grant, that he had never given MacGregor any princely title, nor had he given him the right to sell land or raise loans against it. The settlers were told that they were on the Kings land illegally and would have to go unless they pledged allegiance to him. The government of Belize sent three ships in total to rescue the settlers who all left except for about 40 people who were too sick to make the journey.

Malaria, yellow fever and malnutrition killed two-thirds of the settlers, including many that made it to Belize. 180 settlers in total died. Word of the disaster reached London and the British Navy was able to dispatch ships to intercept and turn back the five additional boats that were already enroute.

Things were not working out for MacGregor’s bond investors even before the news of his lies got back to London. Worries had started to emerge over the legitimacy of debt raised for the new Latin American governments, many of which were not officially recognized by Britain. A panic in Colombian bonds quickly spread to Peruvian debt, and on to Poyais. To add to these difficulties, the French announced plans to depose the Spanish government, and the expectation that Spain would default on its debt caused further contagion in the bond markets. Latin American bonds fell sharply with the price of Poyais bonds down by 16% before news of the lies had even reached London.

Once news of the fraud reached London, the bond prices collapsed.

MacGregor who was at this point still busy recruiting settlers and raising money realized that it might be time to skip town.  He announced that he was making a trip to Italy for the health of his wife, but instead secretly traveled to Paris.

Much to MacGregors surprise, instead of blaming him, the surviving settlers blamed Hector Hall, an ex-British Army officer who had been made the commander of the first emigration party who the other settlers decided had conned MacGregor. 

MacGregor couldn’t believe his luck and joined in with this story additionally accusing wealthy people from Belize of sabotaging the settlement to prevent competition from Poyais.

MacGregor sued a number of newspapers, accusing them of knowingly printing lies about him.

Surprisingly enough, once settled in Paris, MacGregor simply set about repeating the same old trick of trying to raise capital and recruit settlers. Once again, he is successful with his pitch, persuading 60 people to emigrate. This time around though, the French authorities became suspicious when French settlers began applying for passports to travel to a country that no one could prove existed. This triggered an investigation and MacGregor was arrested and imprisoned in France.

MacGregor demanded that he be released immediately – as the Cazique of a sovereign nation he claimed to have diplomatic immunity. This didn’t work and he ended up standing trial in France along with three of his associates. A fourth associate had fled to the Netherlands with all of the paperwork which was needed as evidence.

MacGregor and his associates accused the man who had escaped with the evidence of defrauding them and everyone else. MacGregor wrote up a complicated backstory exonerating himself.  The French court, unable to prove anything without the missing evidence goes on to acquit MacGregor and not just that, but the judges praise MacGregor for aiding with investigation.

MacGregor returned to London a free man and once again attempted to take loans in the name of Poyais.  Amusingly – this time around he is less successful as other conmen having worked out the scheme are also issuing Poyais bonds and offering better interest rates than MacGregor.

In 1826 he attempted to float £800,000 worth of Poyais bonds but by now his reputation was irreparably damaged and the taste for Latin American investments had faded. The bond flopped. 

MacGregor returned to Edinburgh at this point for a few years.  In 1838 after his wife had died, he sold up and set sail for Venezuela once more at the age of 52.  He had one last con to pull.

Simon Bolivar who had threatened to have him hanged if he ever set foot in Latin America again was now dead.  MacGregor managed to talk his way back into his old position as high-ranking army officer in Venezuela, his bad reputation from twenty years earlier had mostly been forgotten and he was able to pass himself off as a war hero. He was given a comfortable army pension along with backpay. Both the Venezuelan President and defense minister vouched for him, having both been around when he had fought for the country’s liberation 20 years ago. 

MacGregor lived out the rest of his life as a celebrated war hero on generals’ pension in Venezuela until his death in 1845 at the age of 58. He was given a full military funeral with a procession through the city attended by the president and was buried in Caracas Cathedral.

The area that MacGregor called Poyais remains undeveloped to this day. 

In his book “The Land that Never Was” (I’ll link to it in the video description) David Sinclair argues that much like Charles Ponzi a hundred years later, McGregor possibly actually believed in what he was doing, which often seems to be the case with con men.  

A puzzling and disturbing part of this story is that MacGregor was responsible for hundreds of settler deaths which were entirely unnecessary if all he was after was money.  MacGregor had already sold land rights and floated his bonds long before the settlers’ boarded ships. There was no need to transport them to the jungles of South America to die.

Sinclair argues in his book that MacGregor appeared to believe that one of his ancestors had been involved in the Darien scheme, an unsuccessful attempt by the Kingdom of Scotland, to establish a colony in the Darién Gap on the Isthmus of Panama in the late 1690s and he was possibly convinced that the Scots should try again in Central America. He was possibly so deluded that he believed that it was his birthright to eventually lead a South American Colony.

MacGregor, it would appear, was a narcissist (as many conmen are) awarding himself titles, medals, pins and stripes. He created flags, heraldry and complex honors systems both in Amelia Island and for Poyais. Giving titles to the most senior settlers and of course keeping the grandest titles for himself. 

Thomas Plante, a psychology professor at Santa Clara University argues that fraudsters frequently construct rationalizations in their heads that allow them to mercilessly carry out their scams, even when it comes at the great personal expense of their victims. He says they’re able to see people as objects to use for personal gain and have no remorse. They can easily justify their behaviors using various kinds of psychological gymnastics.”

MacGregor appears to have shown no concern for the people he harmed. They were just a source of funds, and a way of demonstrating to investors that things were really taking shape in Poyais.

Now, what about the victims?  Why did they fall for it? In particular the ones who risked their lives to relocate to another part of the world? Tamar Frankel of Boston University, who studied hundreds of victims of financial cons pointed out in an Economist article that MacGregor specifically targeted those with a natural tendency to trust him. He looked for settlers in Scotland telling them that hardy and adventurous Highlanders had the skills and character to develop the new land. He played on the trust that people grant those from their own religious or ethnic group. Bernie Madoff did the same thing targeting members of the Jewish community in his Ponzi scheme.

Amusingly MacGregors bonds, banknotes and land rights do still turn up at auction from time to time and are bought by collectors.  While you can buy one, you can also just print one off from the internet. It is after all a fake bond from a fake country – do you really need a genuine version?

Thanks for tuning in to today’s podcast. If you found it interesting do subscribe and send a link to a friend who you think might enjoy it too, as that’s how podcasts grow.  Have a great week and talk to you again soon.  Bye.