Trump should realise that fake news, like fraud, is nothing new

The US president, with his extensive experience in the business world, should know by now how often the same scams are tried

If you listen to Donald Trump you could be forgiven for supposing the current US president created the concept of “fake news”. He cites it regularly, to dismiss the coverage of his administration by mainstream media outlets such as CNN, The Washington Post and the New York Times.

He was at it again last week, tweeting on Sunday: “Had a very good and interesting meeting at the White House with AG Sulzberger, Publisher of the New York Times. Spent much time talking about the vast amounts of Fake News being put out by the media & how that Fake News has morphed into phrase, “Enemy of the People.” Sad!”

In fact, fake news has been around for centuries. In 1814, Charles de Berenger disguised himself as a Bourbon officer and appeared in Dover to announce that Napoleon had been been killed by the Prussians. He sent a semaphore telegraph saying the same to the Admiralty in London, knowing it would be picked up by the press. De Berenger then rode from Dover to London, stopping off at hostelries along the way, and handing out handbills also relaying the dramatic development.

Three French “officers” were later seen in London celebrating a Bourbon triumph, and a commemorative parade was even held on London Bridge.

The price of gilts soared on the news, prompting de Berenger and his pals, including the three dressed as French officers, to sell the government bonds they’d bought.

Subsequently, the government announced there’d been no such victory, and that Napoleon was very much alive. Gilts came crashing down, and de Berenger and his co-conspirators were arrested and charged with fraud.

The De Berenger case is described in a report from the FICC Markets Standards Board, or FMSB, into misconduct in the financial markets stretching back to 1792, covering 26 countries, and looking at the patterns of behaviour of those responsible. The FMSB was itself set up after the attempts to rig the currency markets.

What’s remarkable is just how often the same scams are tried, albeit with variations. Indeed, the report is entitled Behavioural Cluster Analysis – Misconduct Patterns in Financial Markets. In all, it identifies 25 recurring types of malpractice that can be grouped into seven broad categories.

One of these is price manipulation, as in the de Berenger example. Another was what became known as the Great Salad Oil Swindle. In 1963, in the US, Anthony DeAngelis, owner of Allied Crude Vegetable Oil Refining Corp, created false warehouse receipts for nonexistent soybean oil. One of his wheezes was to fill storage tanks with water and cover the water with a thin layer of soybean oil on top. He used the receipts as collateral to finance his heavy trading in soybeans, soybean oil and cottonseed oil futures, and an attempt to corner the soybean market.

As well as price manipulation the other broad categories listed by the FMSB are: circular trading; collusion and information sharing; inside information; reference price influence; improper order handling; and misleading customers.

The lessons here are in the FMSB’s conclusions. Having looked at 225 years’ worth of trickery and cons, there is a limited number of plots – 25 – that repeat over time. Any enforcement compliance officer worth their salt should study and learn these 25.

The 25 occur across different jurisdictions and countries. They are not confined to a single country – cheats will try anything anywhere.

Neither are they restricted to particular asset classes. It does not matter what the asset or market or instrument is – the crook will vary the ruse accordingly.

Significantly, given the hype surrounding the advent of new technology, the FMSB stresses that the 25 have nothing to do with technological advances. There is a tendency today to believe that something is revolutionary, that boundaries are being tested. Not so, where frauds are concerned. All that happens is that the 25 change to absorb the new technology or different market structure. Says the FMSB: “Technology is not new – it has been a feature for markets for years and these same behaviours have adapted to new technologies and new forms of communication.”

In 1792, in the US, William Duer, Alexander Macomb and others borrowed large sums of money to corner the market in US debt securities and shares in the Bank of the United States. Their plan was to sell to European investors at a profit. But they exhausted their credit and were unable to meet contracts for security purchases, and eventually they suspended payment on their obligations. With Duer and his pals no longer able to buy shares in the Bank of the United States, the stock price collapsed.

Move forward 200 years to 1994 and Paul Mozer and Thomas Murphy, former bankers at Salomon Brothers, tried the same thing. The pair used the names of Salomon customers without their knowledge or authorisation, again to try and corner the market in US debt securities.

Where fraud is concerned, there is not much that is new. And that includes fake news. As someone who spent many years at the sharper end of business, Trump must know that.

Chris Blackhurst is a former editor of The Independent, and director of C|T|F Partners, the campaigns and strategic communications advisory firm