Pigeon King International and the History of the Ponzi Scheme

Arlan Galbraith, a.k.a. the Pigeon King, began racing pigeons at the age of six.  By the time he was 67 he had embezzled thirty-three and a half million dollars* from innocent farmers on both sides of the Canadian/American border.

Like most con-men, the Pigeon King was not who he claimed to be. He did not sell racing pigeons, nor did he want to bring their meat to the masses. Instead, he ran a Ponzi Scheme.  The ruse was surprisingly simple.   Galbraith convinced close to a thousand farmers to buy pairs of breeding pigeons from his company, Pigeon King International, promising to buy back the squabs (babies) at a set price. At first Galbraith maintained that the squabs were being bred in order to be sold as racing pigeons, a sport that remains popular in Africa and the Middle East, although he later changed his story, claiming that the time was ripe to sell squab meat on a large scale. Some investors spent almost $60,000 at a time on P.K.I pigeons, eagerly awaiting massive returns while Galbraith used the money from his latest dupes to pay back earlier clients.  It was a classic Ponzi Scheme.

Ironically, the first ever Ponzi Scheme wasn’t created by Charles Ponzi, since historians now credit New York’s William Miller with the idea. In 1899, Miller claimed to “have an inside window into the way profitable companies operated” and successfully collected $25,000,000 from his clueless investors. Miller then used the tactic that turns a normal scam into a Ponzi Scheme: Instead of investing his client’s money in large corporations, he simply paid back his early investors with money collected from newer victims with extra interest while taking money off the top for himself. Miller never had any knowledge of big business, but by paying back his first few clients with added interest, he was easily able to spread the word about how profitable it was to invest with him. The money he stole from his victims’ investment went straight into his bank account.

Countless crooks have perpetrated Ponzi Schemes since William Miller in 1899, but Charles Ponzi and Bernard Madoff are undoubtedly the most famous. Ponzi’s 1919 scheme centered around the claim that European postage was cheaper than that of the United States. On the surface, this pretense appeared to be true (European postage was cheaper), but Ponzi was just following the classic formula, and was eventually deported in 1934 (his scheme only lasted until 1920). Bernard Madoff, however, was able to keep up the act much longer. It is thought that Madoff began his scam in the early 1960’s by “managing money” and investing in stocks. In reality, Madoff never made the trades and managed to accrue about 65 billion dollars by duping investors with fake printouts from his old IBM computer. By the time Madoff was caught in 2008, he had become the ringleader of the largest Ponzi Scheme ever.

Ponzi Schemes are found out when the ringleader can no longer recruit new investors, and by the time he was caught, Arlan Galbraith had dug himself into $1.2 Billion** of debt. He represented himself in the Ontario Superior Court and was sentenced to seven years, three months in prison. He had ruined hundreds of investors and caused 175,000 pigeons to be gassed over a period of five weeks. Galbraith had been exposed, and with him, the startling amount of lies that innocent people will swallow in order to make some money.

*Galbraith officially stole 42,000,000 Canadian Dollars.

** 1.5 Billion Canadian Dollars

Thanks to:

http://www.nytimes.com/2015/03/05/magazine/the-pigeon-king-and-the-ponzi-scheme-that-shook-canada.html?_r=0

http://content.time.com/time/business/article/0,8599,1866680,00.html

http://archive.fortune.com/2009/04/24/news/newsmakers/madoff.fortune/index.htm

https://hbr.org/2009/06/what-did-bernard-madoff-do.html

http://www.cambridgetimes.ca/news-story/4418470-galbraith-gets-seven-year-prison-term-for-pigeon-king-scheme/

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