What can the Kingdom of Poyais teach you about scams and how to avoid them?

The Kingdom of Poyais was a 19th century paradise situated along the Central American coastline. The land was described as being blessed by perpetual summer, fertile earth that produced rich and regular harvests, and redwood forests full of all manner of local game.

The capital city, St Joseph’s, was an architectural wonder located between majestic, gold-rich, mountains, plantations brimming with crops, and crystal-clear ocean waters practically overflowing with fish.

It all sounds like a beautiful utopian dream – and that’s because it was all made up, a façade, a lie, a scam.

Long before the Ponzi scheme came the Poyais scheme.

According to the Guardian, more than £1.3 billion was stolen from UK citizens in 2021 through scams, as fraudulent crimes continue to rise across the nation.

Read on to discover what the story of the fictional Kingdom of Poyais, and its eponymous scam, can teach you about avoiding falling victim to modern day con artists and the dire consequences that await you if you do.

Don’t let emotions cloud your judgement and be wary of stories that sound “too good to be true”

In 1821, a charming, well-decorated, Scottish officer by the name of Gregor MacGregor returned from his service in the Americas to regale the London aristocracy with tales of an exotic paradise called Poyais of which he’d been named its ruler (or “Cazique”).

He backed up his claims with sketches of the land, a recital of its national anthem, and a land deed signed by King George Frederic Augustus of the Honduran Mosquito Coast bestowing 8 million acres to MacGregor and his descendants.

In a time when communication across vast oceans was slow moving and full of inaccuracies, and the landscape of new nations across the Atlantic was constantly changing, it was believable fiction that a new nation known as Poyais had been founded.

The post-Napoleonic depression that began in 1815 had put pressure on wealthy Brits to protect their savings and opened them up to making risky investments as they desperately tried to maintain their fortunes.

Making emotional investment decisions can be extremely detrimental to your financial outlook, just as much today as it was in the 1800s. It can skew your judgement and lead to poor choices that are influenced by a state of mind known as “loss aversion”.

In 1821, rich investors looking to preserve their way of life acted emotionally and found themselves sucked in by MacGregor’s “too good to be true” story before parting with their money in exchange for plots of land, or “Poyaisian” government bonds, and a new life on the sunny Poyais coast.

If you are propositioned with an offer that seems too good to be true, don’t act impulsively, seek professional advice, do your research, and only invest if you’re absolutely certain it’s the real deal.

Scams often hide behind a thin veil of truth — investigate before investing

There was some truth behind MacGregor’s scam. As part of his expeditions through Central America, he had found himself in Honduras and befriended King Augustus, who did indeed bestow the land to MacGregor and his descendants.

The land was scenic but full of thick jungle, not fit for cultivation and with few natural resources. Not exactly a spitting image of the land MacGregor had described on his return to the UK.

The King also did not grant MacGregor the right to rule or the ability to sell off the land for financial gain. But it was enough for him to build his deception upon and deceive those brash few who didn’t bother to investigate any further.

The best scams make you doubt that voice in your head that says: “I can’t believe this is real”. They might present themselves as a reputable company that you are familiar with such as an energy company or bank with window dressing of logos and other details to seem legitimate.

They may call you from a number that presents a fake caller ID or offer up information about you that you might think only a verified institution might know.

But if you dig deeper, the scam begins to fall apart.

Scam victims face severe consequences and retrieving their lost funds is notoriously difficult

Some of MacGregor’s victims paid the smaller price of financial losses when they realised their government bonds were worthless. Those who opted to become settlers in Poyais paid a far greater price – their lives.

Two settler ships arrived in Poyais to discover that the nation they had been sold on simply didn’t exist. There was no infrastructure, no population, no resources, and soon many of the settlers became ill or perished at the hands of tropical diseases or malnutrition.

As word finally filtered back to London and investors began to realise that they had been fooled, all the bonds, and land deeds given out on behalf of this fictional kingdom suddenly became worthless.

The Poyais scheme was a direct contributor to the panic of 1825 and the resulting collapse of UK stock markets.

MacGregor not only attempted the scam again on French soil, but would evade justice, being acquitted of his crimes, before eventually retiring to Venezuela where he settled down with a military pension until his death in 1845.

While there are greater protections against fraud in 2022 than there were in the 1820s, many scam artists escape the law and victims may never see their funds again.

UK Finance reports that 98% of victims of unauthorised scams, those done without their knowledge or consent, were reimbursed for their losses.

However, only 47% of those involved in an authorised scam, in which they were tricked into parting with their money, received any form of reimbursement.

When you’ve been scammed, quick communication can be key

It was a bit more difficult in 1821 to pass on information quickly and clearly. But nowadays we don’t face the same issues.

If you think you are potentially a victim of a scam you should contact your bank and the relevant authorities as soon as possible and give a clear and detailed account of what happened.

It could help them track down the scammers or at the very least make the process of retrieving your lost funds that much easier.

You should also take steps to protect yourself in the future by changing all your passwords, cancelling any compromised cards, and requesting a credit report to check for any other violations of your personal data.

Get in touch

When in doubt about a new opportunity, always act with a degree of caution. It is a smart move to consult a financial planner before making any investment decisions and ensure you aren’t being exploited.

If you would benefit from professional advice, or if you’d like to check if an investment opportunity you’ve been offered is genuine, contact us at helpme@aspirellp.co.uk or call 0117 9303510.

Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

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