Napoleon is dead! Buy securities now?!

Felix Schläger

Published in

Trudia

4 min readJul 19, 2018

(“History of Fake News” — Part 2)

OMG — mein team ist zulangsam

In 2017, Shimon Kogan and Tobias Moskowitz published an article about Fake news in financial markets (sources below). Their findings show that Fake News articles had substantial consequences for financial markets. Fake News especially had temporary impacts on the stock prices of small firms.
But the manipulation of financial markets through false information is probably as old as these markets itself. In this article, we are presenting a historical example of how “Fake News” were used to push prices.

It was on the 21st of February 1814, when a man appeared in the pre-dawn hours at the harbor of Dover, England. He posed himself as Colonel du Bourg, an aide-de-camp of Lord Cathcart, the British ambassador of Russia at that time. But the news he presented was far more important than his status.

He claimed that Napoleon Bonaparte had been captured by Cossack troops and was killed shortly after.

In early February of 1814, the war against France was proceeding on two fronts. English troops were driving north out of Spain into the south of France. At the same time, Russians were entering France from the east. Rumor was that they were only about fifteen miles away from Paris.
In England, it was widely believed that the defeat of France was only a matter of time.

And now the British hopes were satisfied. Napoleon I. seemed to be dead.

It was claimed that the Bourbon family had reclimbed the throne and the war was over.
Once the Colonel had managed to send his essential message to Admiral Foley, the port admiral at Deal, he left immediately for London. On his way, the man who claimed to be a high official stopped in various post houses along the way to proclaim the incredible news. When he arrived in London, the news spread quickly all over the city and hit the London Stock Exchange. After traders and investors heard the news, government securities soared. A few hours later the jubilation among investors faded as the report was still not confirmed. But after a group of companions of the false colonel moved through London and celebrated the victory over Napoleon, the prices of government securities went to even higher levels.

Trustable information is key in financial markets. Portrait of the London Stock Exchange in 1810 Image: https://www.thehistorypress.co.uk/articles/napoleon-is-dead-the-great-stock-exchange-fraud-of-1814/

At the end of the day, the excitement was gone. Government officials announced, that the news of Napoleon’s death and the Bourbon family reclimbing the French throne was utterly false. As a result, the government security prices sank to their previous levels.
The question remained, who profited from the events described above and the price swings at the financial market. The Committee of the London Stock Exchange started an investigation and discovered something interesting. Someone had purchased government bonds worth more than 1.1 million pounds the previous week. This Person sold his position on the 21st with a huge profit before the hoax was exposed.

Buy low, push prices and sell at the highest point…?

The man behind the plot ? Portrait of Lord Cochrane in 1807 Image: https://en.wikipedia.org/wiki/Thomas_Cochrane,_10th_Earl_of_Dundonald

The traces were pointing towards a group around Lord Cochrane, a well known naval hero. A man named de Berenger had played the role of Colonel du Bourg and was arrested soon.
Although Lord Cochrane asserted his innocence, he was stripped of his naval rank and imprisoned. Manny questioned whether Cochrane was really guilty because there was no real evidence that Cochrane profited from movements in financial markets. It was claimed that he was accused by his politicalenemies.

The King pardoned him in 1832 and he got his rank as Admiral back. It remains unknown whether he was the genius behind the Manipulation or someone else.