This is the Part 2 of the “Ivan Rykov’s bank — the first Ponzi scheme in Russia” article. Read the Part 1.
Collapse of coal scam
Rykov’s Empire began to collapse from the moment when at his initiative exploration of coal deposits was held and coal was discovered in three villages of the Skopin district. But there was not enough coal for industrial development. But only the owner of the city Ivan Rykov knew about it. He immediately founded and headed Joint Stock Company “Skopin coal mines”.
Vladimir Makovsky’s picture ‘The Collapse of the Bank’, 1881.
Except Rykov the founders of the company became landlords, merchants and tradesmen, whose estates and houses were pledged in Rykov’s bank, so these people kept silence too. Rykov issued shares. the newspapers that he controlled began to write about the coal joint-stock company, but the shares were bought badly. And then Rykov made an adventurous trick – he sent his agents to Moscow and St. Petersburg Exchanges to imitate trading. For a whole year, Rykov’s people bought and sold from each other shares of the coal company, declaring transactions to stockbrokers.
While his people were playing on the stock exchange, Rykov received permission from Reitern, the Minister of Finance to accept his coal stocks as collateral for excise stamps for alcohol at the rate of 75 rubles per 100. That is, he would receive 75 real rubles for his phony unsecured shares with the nominal value of 100 rubles. If Rykov succeeded, he could sell securities of non-existent coal mines without any problems and receive one million rubles, and the Treasury would lose a lot of money. But this grandiose plan was spoiled by a minor official – senior auditor of the Ryazan Excise, who was not too lazy to go to the place of coal mining. There he just found the mines covered with earth. Through his contacts in the capital Rykov managed to hush up this scam.
It was getting increasingly difficult for Rykov to attract new investors to the bank to pay off interest. In addition, he used depositors’ money which was disappearing very fast. once a newspaper published an article which informed that 12 million rubles of deposits in Skopin bank was secured by just one million invested in unreliable securities. Having heard about this, alarmed investors came to Skopin and demanded a refund. Soon the bank ran out of money and was declared insolvent. Ivan Rykov and other 26 people were taken into custody. Investigators were surprised by the scale of the banking fraud: the bank, which didn’t have the authorized capital but paid high interest rates giving millions of credits – all at the expense of those who deposited money in the bank, tempted by large profits.
The investigation into the cause of the Skopin bank collapse lasted two years and in the end Ivan Rykov and several other people were sent to Siberia. Nothing else has been ever heard about the Russian fraudster.