Home » Ivan Rykov’s Bank — First Ponzi Scheme in Russia (Part 1)

Ivan Rykov’s Bank — First Ponzi Scheme in Russia (Part 1)

the-greatest-scams - Ivan Rykov’s Bank — First Ponzi Scheme in Russia (Part 1)

There is a common but mistaken opinion that MMM Ponzi scheme, one of the world’s largest financial scam of all time, was also the first Russian Ponzi scheme. That is not the case. The first Ponzi scheme Russia was designed by the landowner Ivan Rykov, who was successfully fooling citizens in the 70’s of the 19th century.

Ivan Rykov was born in 1833 in the family of a poor landowner Ovodov. The parents died early, and the orphaned boy was adopted by a relative — a rich merchant Andrei Fedorovich Rykov, who gave him his name.

the-greatest-scams - Ivan Rykov’s Bank — First Ponzi Scheme in Russia (Part 1)

Photo of Ivan Rykov. Picture of Skopin dated 1852-1885.

The boy was 15 years old when his benefactor died and left him a solid fortune — 200 thousand rubles. By the age of thirty the young man had squandered all his money and went to work in the local municipal government.

How it all began

Soon he was able to obtain a position of the mayor. He widely donated for the improvement of his native city, built a church in the town cemetery at his own expense, and thus conquered the local community, who invited him to become the bank director. At the meeting of the bank board it was decided that the third of the income from the banking business went to the needs of the city, another third — for charity and the other third — to the increase of capital.

In a short time Rykov contributed to the bank getting millions of turnovers. Then Russia did not have a single land bank and “Skopin public bank” began to give loans secured by property. The young banker was eager to embark on a risky venture, but he was hindered by the mayor – an honest merchant Mikhail Leonov.

Then Rykov announced his candidacy for the post of the mayor in the next election, and easily beat the old merchant Leonov. But because it was impossible to combine two responsible positions he gave the position of the mayor to another merchant, who owed the bank a huge sum and therefore was not dangerous for Rykov’s bank fraud.

So the advertisement of “Skopin public bank” was published in the metropolitan and provincial newspapers, which promised high interest on deposits — up to 7.5% instead of the usual 3-5%. The people brought their savings to Skopin bank. And at first the interest was paid accurately. From a small nondescript town Skopin quickly began to turn into a big city. There appeared the railroad, a series of educational and charitable institutions were opened.

To attract new depositors Rykov issued interest securities on deposits that were not provided with the bank’s capital and had no government guarantee. But that time no one cared. All believed Ivan Rykov, admiring and idolizing him. Even Ryazan governor and vice-governor used Skopin credits. Ivan Rykov became a real owner of the city. He maintained his authority, i.e. disbursed it — all the newspapers, telegraph, bailiffs, police department officials and other officials received additional monthly fees from the bank. Those who became objectionable or those who, for whatever reason, proved guilty, were sent off from the city or a criminal case was initiated.

Continue to the Part 2

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