The Currency of Trust: On the Social Dimension of Financial Fraud in the Nineteenth and Twentieth Centuries

Exploring the rise and fall of two financial criminals, the article examines practices and perceptions of financial fraud in the nineteenth and twentieth centuries. In implementing what is nowadays known as a ‘Ponzi scheme,’ both fraudsters – Adele Spitzeder (‘Dachauer Bank’) and Damara Bertges and her colleagues (‘European Kings Club’) – succeeded in gaining the trust of their clients in a time of economic upheaval, before using client assets to finance payouts to other clients. In both cases, they held out a promise not only of high returns, but also of the social advancement that they themselves seemed to have accomplished. The article examines financial fraud as a social practice, in which the appearance and actions of fraudsters and middlemen are just as central as the expectations and attributions of clients and journalists. I interpret financial fraud as a collective performance, sustained by the investors’ imaginations: by participating in the imposture and clinging to it despite warnings and its exposure, they preemptively experience their own social ascent in an imagined future. I argue that both frauds exploited a smoldering social tension that had gained momentum during a period of heightened economic change: tensions tied to a rural-urban divide, economic class and power, or religious differences. As the comparative perspective reveals, the fraudsters also used a pre-existing critique of the economic system. Through their accessibility, charitable activities, and social interactions, they seemed to offer their clients a counter-model to an ‘unfeeling’ economic order allegedly dominated by greedy elites. In each case, their services and rhetoric were circulated through media outlets, which celebrated their respective investment models as counter-models resistant to common economic practices and social hierarchies. The article argues that the phenomenon of financial fraud serves as a prism, focusing and concentrating societal conflicts, critiques, and imaginaries.