In 1869, a failing German actress took a small initial investment for a new business and became one of the richest women in Germany.
But by the time she was done, 38 million Guilders (~$475 million today) had vanished into thin air.
Who's up for a story?
👇👇👇
But by the time she was done, 38 million Guilders (~$475 million today) had vanished into thin air.
Who's up for a story?
👇👇👇
1/ Adele Spitzeder was destined for greatness.
Born in 1832 in Berlin to a family of highly-acclaimed actors and singers, Spitzeder grew up preparing for a life of fame.
By 1856, all signs pointed to her fulfilling her destiny, as her acting debut was met with great fanfare.
Born in 1832 in Berlin to a family of highly-acclaimed actors and singers, Spitzeder grew up preparing for a life of fame.
By 1856, all signs pointed to her fulfilling her destiny, as her acting debut was met with great fanfare.
2/ But in the years to follow, Adele Spitzeder would fall on hard times.
As with many young stars, she was unable to find any degree of lasting success.
By 1868, with a lifestyle that never came back in line with her now modest means, Spitzeder found herself completely broke.
As with many young stars, she was unable to find any degree of lasting success.
By 1868, with a lifestyle that never came back in line with her now modest means, Spitzeder found herself completely broke.
3/ Adele was still accustomed to the good life, so rather than adjust her lifestyle, she began to borrow.
In late 1869, she gained the trust of a poor carpenter's wife in Munich and pitched her on an investment.
She promised the woman an interest rate of >10% per month!
In late 1869, she gained the trust of a poor carpenter's wife in Munich and pitched her on an investment.
She promised the woman an interest rate of >10% per month!
4/ Excited, the woman lent her 100 Guilders as an initial investment.
One month later, as promised, Spitzeder gave the woman 20 Guilders and said much more was coming.
The woman began telling all of her friends in the poor Au district of Munich of her investment's success.
One month later, as promised, Spitzeder gave the woman 20 Guilders and said much more was coming.
The woman began telling all of her friends in the poor Au district of Munich of her investment's success.
5/ The news of this money-making opportunity spread in the poor districts filled with illiterate workers.
Spitzeder even took out an ad in a newspaper to surface new investors.
Inundated with interest, she branded it as Spitzedersche Privatbank to legitimize the operations.
Spitzeder even took out an ad in a newspaper to surface new investors.
Inundated with interest, she branded it as Spitzedersche Privatbank to legitimize the operations.
6/ Money flowed in at a rapid clip.
Spitzeder stored the cash in sacks in her house or in a safe at a nearby salon.
She took care to deliver the promised returns to the early investors.
The fact that these "returns" came from the funds of new investors felt like semantics.
Spitzeder stored the cash in sacks in her house or in a safe at a nearby salon.
She took care to deliver the promised returns to the early investors.
The fact that these "returns" came from the funds of new investors felt like semantics.
7/ As many of the customers were poor and illiterate, the receipts and records of their deposits were often just scratch marks on paper.
Soon, Spitzedersche Privatbank had taken in millions from these unsuspecting, hard-working individuals.
And Adele Spitzeder was now rich.
Soon, Spitzedersche Privatbank had taken in millions from these unsuspecting, hard-working individuals.
And Adele Spitzeder was now rich.
8/ But as with most scams, with success comes scrutiny.
Munich authorities began investigating the legitimacy of Spitzeder's operations.
They tried to shut her down, but as she was paying the stated interest to investors, they could not find a reason to do so initially.
Munich authorities began investigating the legitimacy of Spitzeder's operations.
They tried to shut her down, but as she was paying the stated interest to investors, they could not find a reason to do so initially.
9/ Impressively, the bad press articles questioning Spitzedersche Privatbank led to an influx of new investors at first!
But finally, in 1872, it all caught up with Adele Spitzeder.
A group of 60 customers arrived at her door, demanding a return of their invested capital.
But finally, in 1872, it all caught up with Adele Spitzeder.
A group of 60 customers arrived at her door, demanding a return of their invested capital.
10/ Not having the capital to return to this many customers at once, Spitzeder did the only thing she could.
She ran.
She was caught and sentenced to 4 years for improper accounting and fraudulent bankruptcy.
She ran.
She was caught and sentenced to 4 years for improper accounting and fraudulent bankruptcy.
11/ Interestingly, Adele Spitzeder was not convicted of fraud itself. Her scheme (a Ponzi scheme before it was so named!) did not meet the legal definition at the time.
In all, 32,000 customers were defrauded out of 38 million Guilders, equivalent to ~$475M today!
In all, 32,000 customers were defrauded out of 38 million Guilders, equivalent to ~$475M today!
12/ Adele Spitzeder would live out her remaining days as a struggling musician, performing under the name Adele Vio and living off money from friends and family.
She died in Munich in 1895 at age 63.
But the legacy of her scheme would inspire fraudsters for generations to come.
She died in Munich in 1895 at age 63.
But the legacy of her scheme would inspire fraudsters for generations to come.
13/ If you enjoyed this story, check out this book, which covered this and many more scams and hoaxes from history. amazon.com/gp/product/178…
14/ And for more educational threads on finance, money, business, and economics, check out my meta-thread below.
