I have been collecting stock certificates for many years and because I am interested not only in Polish pieces I try to keep in touch with international scripophily market in order to be able to add from time to time something new to my collection.
One would expect that old bonds and shares are of interest to collectors only but it’s not the case – there appears to be grey area between pure scripophily market and the one where standard financial instruments are being traded.
In this grey area a lot of dodgy dealings take place, historic documents are being traded as an investment rather than collectibles and various scams are going on. The most common ones are typical “pump and dump” schemes, while other involve more sophisticated fraud, where practically worthless (although genuine) scrip is marketed under an umbrella of HYIP’s (High Yield Investment Programs). In the most extreme cases underlying “securities” are not even real fakes (as there has never been an original in the first place) but outright fantasies.
First type of scam involves holders of large number of certain historic bonds who act together in order to create artificial demand for certain type of bond. This is achieved by publicizing alleged transactions involving large sums and backing them with some wild stories about forthcoming redemption of underlying securities. Quite often this sort of scam could be observed in respect of German bonds issued between 1924 and 1930 and denominated in gold dollars (in particular so-called Dawe’s and Young’s), bonds issued by Chinese Empire and early republican issues of China, but at different points in time also bonds of Russian Empire were used for this purpose. Typical object of such scam is a government bond or bonds issued long time ago and never repaid because the government which issued such bond was later overthrown one way or another. Technically such bonds may actually constitute legal claim against certain countries however in practice the chances that anybody would redeem them are almost none existent. To draw the attention of gullible “investors” scammers are usually publicizing wild stories which are backed by other scammers pretending to be experts in international finance.
Second type of scam is a bit more sophisticated. It also involves (more or less) historic bonds but is aimed directly at “investors” i.e. idiots who think that they found a magic way of making millions without really trying. It usually starts as the first type, with one or two well publicized transactions where it is alleged that some sort of “crazy” price had actually been paid for certain type (or types) of historic securities. Bonds used for this type of scam are actually existing but were either repudiated (Chinese), invalidated (Germany) or their value was destroyed to dust particles by high inflation (case of Brazilian Treasury Bills so-called LTN’s).
This is followed by large number of posts on various forums or portals catering to “get rich quick” crowd which contain offers to buy or sell such securities. Not only posts but also dedicated internet sites do appear all over the net, claiming to represent various “investment and development” blah, blah, blah “incorporated” blah. blah, blah, “companies” or “trusts” or take your pick (an example zipped pro memoria by me is here). All such offers/publications/sites contain a lot of babble stuffed with financial (or looking as such) jargon (Holder, trustee, KYC, remittance, assets, clean delivery, pledge, Custodial Trustees, Guardians and so on and so on), usually the only contact is an email address and most of those sites are usually spiced with number of fake testimonials. Ah, and to enter into any dealings with promoters of those investments you have to provide your full details and copy of your passport so at least you are risking identity theft.
Be aware that any attempt to question viability of such schemes is always met with strong resistance and many opinions to the contrary (see some archived pages), even if the fact that such securities are worthless can be easily established. Usually the story goes that “there is a secret way of doing things which is not publicized but available to those “in the know” and obviously the party questioning whole scam is not “in the know”. Publications supporting scammers are published either by them or by idiots believing in all this bullshit but it is really difficult to tell who is who
Some appear to be very convincing: “…there are some rare cases where historic LTNs are legitimate”; “you still don’t get it. if it is recorded and acknowledged properly it is legal and has value…but that is rare and most are not legitimate.”; “they are a fraud?! ha ha ha! The Rothschild consortium is buying them right now … I work for the platform of investments of the Rothschild family and I know what I am talking about, because I have the cash…” and of course you would believe a guy working for Rothschild’s wouldn’t you? Well I wouldn’t because if he’s got the cash then why the hell is he wasting his time and participates in such discussions? But of course I am not “in the know”…
In majority of those scams underlying scrip is referred to by pretentious names such as Queen Victoria, Super Black Eagle, Pink Lady, Four Presidents, Napoleon and similar which sometimes relate to graphics of particular certificate (Pink Lady, Four Presidents, Super Black Eagle), sometimes to famous political figure related somehow to the certificate (Napoleon) but sometimes they do not make any sense at all because so-called Queen Victoria Bond does not depict queen in general a Queen Victoria in particular, was issued 4 years after Queen Victoria’s death and is not even a real bond but a share of long defunct Mexican bank which however has some reference to London in its name so this may be viewed as distant link to QV if one is desperate to find one.
Typically the following scrip is used for those scams:
- German gold dollar bonds issued between 1924 and 1930 (Dawe’s, Young’s).
- Chinese bonds issued before 1945 (Reorganization, Liberty bonds, Lung Tsing u Hai, Super Petchili, Farmers)
- Mexican bonds (and some shares) issued before 1939 (Queen Victoria bond, Super Black Eagle, Pink Lady, Blueberry, Blue Dove, Queen Elizabeth, Christopher Columbus, Winston Churchill, Umbrella)
- Brazilian bonds issued before 1979 (LTN, Petrobras)
- Russian bonds issued before revolution in 1917.
- Kingdom of Westphalia bonds of 1809 (Napoleon)
- German bonds from the time of inflation 1920-1923 (for now attempt to “market” them failed).
The list is by no means complete. From time to time there are attempts to “market” other types of such “investments” .In brackets I have provided nick-names commonly used by scammers in their offers. Only few of them are genuine nick-names used to refer to particular type of bond while it was actually traded in the past. For example all nick-names of Mexican bonds are modern inventions, same applies to Kingdom of Westphalia scrip.
Important thing is that in all such “dealings” the value of underlying bonds is enormous and certificates worth couple of dollars as collectibles are presented as worth tens or hundreds of thousands if not millions, this claims being usually supported by various “certificates” and other “documentation” which in general does not make much sense in relation to bearer securities (as in principle bearer security doesn’t need any such things for ownership transfer to be valid) and sometimes does not make any sense at all.
Scripophily dealers say that such hype is good for our hobby. I disagree – in my opinion it is good for dealers as they can off-load large number of otherwise unsaleable certificates but for normal collectors it is really bad as it creates totally unreasonable expectations on the part of sellers. Certificates which are touched by this “investment” malady become unreasonably expensive. On the top of that “investors” promote proliferation of “certification” gangrene into field of scripophily which was until recently free from this US invented crap so prevalent in numismatics.
And there is third type of scam. This one is most fantastic and involves completely bogus securities – not even fakes as one can not fake something which did not exist as an original in the first place. So those “bonds” are invented and fabricated from the scratch together with fantastic stories to back them up. And those stories are really wild – there is Marshall Chang-Kai-Shek, secret CIA financial operations, Philippine tunnels, Japanese Army, gold bars exchanged for those bonds, US Government who was forced to pay up on them by some secret (of course) ruling of (even more secret) international tribunal. Everything is so secret that nobody knows anything except those “in the know” who may cash in, and if you are one of them then you are going to get a fortune if you can provide KYC, MYC, BLITZ and gobbledygook… Each story is more stupid than the previous one, “bonds” are worth not millions but billions or trillions and I am surprised that there is no mention of Little Red Riding Hood attempting to recover her grandma’s securities eaten by the wolf, of Snow White protecting her investments from step-mother who turned bad or of Little Dwarfs hiding whole crates of gold-backed bonds in those Philippine tunnels. The fact that Zionists and bikers are not mentioned is also a big disappointment but I have to admit that at least communists are mentioned in those stories so it is not so bad after all
In this case fantasy of perpetrators knows no limits – bonds worth trillions are being mentioned and offered not as single pieces but wholesale by boxes (numbered, sealed and padlocked with proper “certificates” certifying among others the number of box and padlock. The most funny thing is that all those “bonds” look like trashy monopoly money. Very low-quality paper, offset print, dull colours – hardly acceptable in case of flyers advertising local bar in a poor neighbourhood not to mention any securities. Only complete idiot would fall for them. Examples of this trash and accompanying “documents” as well as boxes they allegedly come in are available below:
A lot of information on that subject is available from US Treasury Dept: Frauds, Phonies, & Scams.
If you search the net you might get an impression that whole new financial sector has grown supported by an immense supply of freshly squeezed and apparently limitless stupidity spiced with greed 😉
Finally, I have a few tips I want to share with fellow collectors:
- Old stock and bond certificates are extremely interesting as collectibles but 99,999% of them are just collectibles and you should never ever consider them as any sort of investment. In principle collecting is irrational activity and should not be confused with any activity which should be rational by definition such as investing should be. So if you are approached with an offer of such investment then tell the guy to take a hike.
- While collecting old shares and bonds one may come across valid certificates. It happens very seldom and in order to identify such certificates a lot of practical knowledge and experience is required. And even if “alive” certificate is found it is most often worth more as a collectible than as an investment and it’s never trillions, billions or millions, but usually tens, sometimes hundreds of dollars.
- If you are a collector and you are approached by an “investor” who would offer you crazy (in your opinion) price for something you are not too much attached to then sell it. You might not get another chance to get as much sacrificing so little. But if the price is not crazy enough for you or you like the particular piece very much then keep it. As I said before – collecting is by definition irrational so do with your collection what makes you happy and not what is wise.
- Stay away from any “certification” people – they would “certify” things which can be easily established by an average collector (I mean collector, not gatherer) so they are not needed at all in particular in the field of scripophily. This bullshit has been invented only for the benefit of service providers who try to convince everybody that they do possess some secret powers for which they should receive remuneration from the public at large. “Investors” need them because they fatten them, collectors of old stocks and bonds do not. So do not waste your hard-earned cash on “certificated” items because they are grossly overpriced.
As for “investors” I invite them to watch this short film about “investments”: