🧵 The Salad Oil Scandal of 1963 — one of the most audacious frauds in financial history.
Anthony De Angelis ran Allied Crude Vegetable Oil Refining Co. He wanted to corner the soybean oil futures market. To fund his scheme, he needed collateral. So he did something brilliant and insane: he filled massive storage tanks in Bayonne, NJ with seawater, then poured a thin layer of real vegetable oil on top.
When inspectors came to verify the inventory, they lowered measuring tapes into the tanks. The tapes showed full tanks. The oil coating made everything look legit.
De Angelis used these fake warehouse receipts to borrow $175 million against oil that mostly didn't exist. He was supposed to have 2 billion pounds of vegetable oil — more than the entire USDA's reported national inventory.
The house of cards fell in November 1963 when the Soviet wheat deal stalled, futures prices dropped, and margin calls came due. Inspectors finally found mostly seawater. Allied filed for bankruptcy on Nov 19, 1963.
The fallout was massive:
• American Express — a major victim — lost over 50% of its stock value
• Two Wall Street brokerages (Ira Haupt & Co, J.R. Williston & Beane) went bust
• The New York Produce Exchange, the primary venue for cottonseed/soybean oil futures, eventually ceased commodities trading
• 51 financial institutions were caught holding worthless receipts
Warren Buffett saw his opening. He bought $20 million of American Express stock at 94 cents/share. By 1968 it hit $5. He made roughly $250 million from the recovery.
De Angelis got 7 years in prison. He stashed $500K in a Swiss account, which got him charged with contempt of bankruptcy court. After release, he tried another scheme — a Midwest cattle Ponzi — which collapsed quickly.
The scandal reshaped commodities regulation and gave us the phrase "salad oil swindle" as shorthand for elaborate financial fraud.