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The Great Stock Exchange Fraud of 1814 was a
hoax A hoax is a widely publicized falsehood so fashioned as to invite reflexive, unthinking acceptance by the greatest number of people of the most varied social identities and of the highest possible social pretensions to gull its victims into pu ...
or
fraud In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law (e.g., a fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compen ...
centered on false information about the
Napoleonic Wars The Napoleonic Wars (1803–1815) were a series of major global conflicts pitting the French Empire and its allies, led by Napoleon I, against a fluctuating array of European states formed into various coalitions. It produced a period of Fre ...
, affecting the
London Stock Exchange London Stock Exchange (LSE) is a stock exchange in the City of London, England, United Kingdom. , the total market value of all companies trading on LSE was £3.9 trillion. Its current premises are situated in Paternoster Square close to St Pau ...
in 1814.


The du Bourg hoax

On the morning of Monday, 21 February 1814, a uniformed man posing as Colonel du Bourg, aide-de-camp to
Lord Cathcart Earl Cathcart is a title in the Peerage of the United Kingdom. History The title was created in 1814 for the soldier and diplomat William Cathcart, 1st Viscount Cathcart. The Cathcart family descends from Sir Alan Cathcart, who sometime bet ...
, arrived at the Ship Inn at
Dover Dover () is a town and major ferry port in Kent, South East England. It faces France across the Strait of Dover, the narrowest part of the English Channel at from Cap Gris Nez in France. It lies south-east of Canterbury and east of Maids ...
,
England England is a country that is part of the United Kingdom. It shares land borders with Wales to its west and Scotland to its north. The Irish Sea lies northwest and the Celtic Sea to the southwest. It is separated from continental Europe ...
, bearing news that
Napoleon I of France Napoleon Bonaparte ; it, Napoleone Bonaparte, ; co, Napulione Buonaparte. (born Napoleone Buonaparte; 15 August 1769 – 5 May 1821), later known by his regnal name Napoleon I, was a French military commander and political leader wh ...
had been killed and the
Bourbons The House of Bourbon (, also ; ) is a European dynasty of French origin, a branch of the Capetian dynasty, the royal House of France. Bourbon kings first ruled France and Navarre in the 16th century. By the 18th century, members of the Spani ...
were victorious. Requesting this information to be relayed on to the Admiralty in
London London is the capital and List of urban areas in the United Kingdom, largest city of England and the United Kingdom, with a population of just under 9 million. It stands on the River Thames in south-east England at the head of a estuary dow ...
via
semaphore telegraph Semaphore (; ) is the use of an apparatus to create a visual signal transmitted over distance. A semaphore can be performed with devices including: fire, lights, flags, sunlight, and moving arms. Semaphores can be used for telegraphy when ...
, "Colonel du Bourg" proceeded on toward London, stopping at each inn on the way to spread the good news. Three "French officers" dressed in Bourbon uniforms were also seen celebrating in London, and proclaiming the restoration of the Bourbon monarchy.


Effects on the stock market

Rumours of Napoleon's defeat had been circulating throughout the month, and the combined events had a significant impact on the
London Stock Exchange London Stock Exchange (LSE) is a stock exchange in the City of London, England, United Kingdom. , the total market value of all companies trading on LSE was £3.9 trillion. Its current premises are situated in Paternoster Square close to St Pau ...
. The value of government
securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...
soared in the morning, after the news from Dover began to circulate among traders at the Exchange. Lacking official confirmation of the news, prices began to slide after the initial rush, only to be further propped up at noon by the French officers and their handbills. However, the entire affair was a deliberate hoax. In the afternoon, the government confirmed that the news of peace was a fabrication. The affected stocks' prices immediately sank to their previous levels.


Investigation

The Committee of the Stock Exchange, suspecting deliberate
stock manipulation In economics and finance, market manipulation is a type of market abuse where there is a deliberate attempt to interfere with the free and fair operation of the market; the most blatant of cases involve creating false or misleading appearances ...
, launched an investigation into the hoax. It was soon discovered that there had been a sale that Monday of more than £1.1 million of two government-based stocks, most of it purchased the previous week. Eight people were eventually convicted of conspiracy to defraud, including Lord Cochrane, a
Radical Radical may refer to: Politics and ideology Politics * Radical politics, the political intent of fundamental societal change *Radicalism (historical), the Radical Movement that began in late 18th century Britain and spread to continental Europe an ...
member of Parliament and well-known naval hero, his uncle the Hon.
Andrew Cochrane-Johnstone Andrew James Cochrane-Johnstone (24 May 1767 – 21 August 1833) was a Scottish soldier, politician, swindler and adventurer who was found guilty of participation in the Great Stock Exchange Fraud of 1814. He was born in Edinburgh, Scotland. Li ...
, Richard Butt, Lord Cochrane's financial advisor, and Captain Random de Berenger, who had posed both as du Bourg and as one of the French officers. Six, including those involved in the purchases, were tried, and sentenced to twelve months of prison time, with the most prominent also sentenced to the public
pillory The pillory is a device made of a wooden or metal framework erected on a post, with holes for securing the head and hands, formerly used for punishment by public humiliation and often further physical abuse. The pillory is related to the sto ...
; fines were also imposed. Lord Cochrane was stripped of his naval rank and expelled from the
Order of the Bath The Most Honourable Order of the Bath is a British order of chivalry founded by George I on 18 May 1725. The name derives from the elaborate medieval ceremony for appointing a knight, which involved bathing (as a symbol of purification) a ...
and from the House of Commons.
Andrew Cochrane-Johnstone Andrew James Cochrane-Johnstone (24 May 1767 – 21 August 1833) was a Scottish soldier, politician, swindler and adventurer who was found guilty of participation in the Great Stock Exchange Fraud of 1814. He was born in Edinburgh, Scotland. Li ...
fled the country after hearing the verdict of the trial.


Culpability of Lord Cochrane

Though convicted of the fraud, Lord Cochrane continued to assert his innocence. In 1816, he brought an (unsuccessful) charge of "partiality, misrepresentation, injustice and oppression" against
Lord Ellenborough Baron Ellenborough, of Ellenborough in the County of Cumberland, is a title in the Peerage of the United Kingdom. It was created on 19 April 1802 for the lawyer, judge and politician Sir Edward Law, Lord Chief Justice of the King's Bench from ...
, the presiding judge in his case. Popular opinion certainly backed Cochrane; his sentencing was followed by his re-election unopposed to the House of Commons for
Westminster Westminster is an area of Central London, part of the wider City of Westminster. The area, which extends from the River Thames to Oxford Street, has many visitor attractions and historic landmarks, including the Palace of Westminster, B ...
. The pillory portion of his sentence was dropped, for fear of public reaction. Due to public outcry over his treatment, the punishment of the
pillory The pillory is a device made of a wooden or metal framework erected on a post, with holes for securing the head and hands, formerly used for punishment by public humiliation and often further physical abuse. The pillory is related to the sto ...
was limited to those found guilty of perjury in England and Wales in 1816. Its use was completely discontinued in 1837 in England and Wales (though the
stocks Stocks are feet restraining devices that were used as a form of corporal punishment and public humiliation. The use of stocks is seen as early as Ancient Greece, where they are described as being in use in Solon's law code. The law describing ...
, a similar device, were used over the rest of the nineteenth century). Lord Cochrane continued to petition the government for redress; in 1832, he was granted a free pardon, including reinstatement to his rank of Rear Admiral. Restoration of the Order of the Bath and other honours followed in the subsequent decades, and, in 1877, a
Select committee Select committee may refer to: *Select committee (parliamentary system) A select committee is a committee made up of a small number of parliamentary members appointed to deal with particular areas or issues originating in the Westminster system o ...
found that his treatment since 1832 constituted "nothing less than a public recognition by those Governments of his innocence." Lord Cochrane's culpability has been a subject of continued debate. In 1965, the judge Henry Cecil set out an argument that supported Lord Cochrane's guilt in ''A Matter of Speculation: The Case of Lord Cochrane''; Brian Vale's 2004 book ''The Audacious Admiral Cochrane'' also argues for his guilt. In his 1981 PhD thesis, John Sugden argued that "the question of his guilt cannot satisfactorily be resolved." Two other historians, Christopher Lloyd in 1947, and David Cordingly in 2007, concluded that Lord Cochrane was innocent.


Literary references

Security speculation based on allegedly accurate news delivered by semaphore telegraph forms a plot event in the novel ''
The Count of Monte Cristo ''The Count of Monte Cristo'' (french: Le Comte de Monte-Cristo) is an adventure novel written by French author Alexandre Dumas (''père'') completed in 1844. It is one of the author's more popular works, along with ''The Three Musketeers''. L ...
'' (published 1844). The Great Stock Exchange Fraud forms the basis for the 11th novel in
Patrick O'Brian Patrick O'Brian, CBE (12 December 1914 – 2 January 2000), born Richard Patrick Russ, was an English novelist and translator, best known for his Aubrey–Maturin series of sea novels set in the Royal Navy during the Napoleonic Wars, and cent ...
's
Aubrey–Maturin series The Aubrey–Maturin series is a sequence of nautical historical novels—20 completed and one unfinished—by English author Patrick O'Brian, set during the Napoleonic Wars and centring on the friendship between Captain Jack Aubrey of the ...
, '' The Reverse of the Medal'' (published 1986). The Great Stock Exchange Fraud is a key plot element in Katherine Cowley's ''The True Confessions of a London Spy'' (published 2022).


Note

In the terminology of 1814, ''stocks'' refer to interest-bearing securities of the type that are today called
bond Bond or bonds may refer to: Common meanings * Bond (finance), a type of debt security * Bail bond, a commercial third-party guarantor of surety bonds in the United States * Chemical bond, the attraction of atoms, ions or molecules to form chemical ...
s. The fraud particularly involved government
bearer bond A bearer bond is a bond or debt security issued by a business entity such as a corporation or a government. As a bearer instrument, it differs from the more common types of investment securities in that it is unregistered—no records are kept o ...
instruments called 'Omniums', which were partly-paid government bonds, where the purchaser initially only had to pay 10% or 15% of the face value and later made further installment payments. This feature gave the securities a great deal of price volatility, as a small change in the value of the fully-paid bonds would represent a much greater change in the value of the partly-paid Omniums.


References

{{Reflist * Yapp, Nick. ''Great Hoaxes of the World (and the hoaxers behind them)''. Robson Books. 1995.
Civilising Mammon: Fraud and Profit in Nineteenth-Century London


External links


The Trial of Charles Random de Berenger, Sir Thomas Cochrane et al.
taken in shorthand by
William Brodie Gurney William Brodie Gurney (1777–1855) was an English shorthand writer and philanthropist of the 19th century. Biography Gurney was the younger son of Joseph Gurney, shorthand writer, who died at Walworth, Surrey, in 1815, by a daughter of William ...
, from
Project Gutenberg Project Gutenberg (PG) is a volunteer effort to digitize and archive cultural works, as well as to "encourage the creation and distribution of eBooks." It was founded in 1971 by American writer Michael S. Hart and is the oldest digital libr ...
1814 in the United Kingdom 19th-century hoaxes Hoaxes in the United Kingdom 1814 in economics London Stock Exchange February 1814 events 1814 in London 1810s crimes in London 1814 crimes in the United Kingdom