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ECONOMY ▸ PEOPLE

Great frauds in history: the

Pigeon King’s Ponzi scheme
Pigeon-fancier Arlan Galbraith claimed to
have created a new breed of elite racing
pigeon, but his Ponzi scheme defrauded
investors of over £200m.

Newsletter

BY DR MATTHEW PARTRIDGE
PUBLISHED SEPTEMBER 23, 2020

Arlan Galbraith was born in 1947 in Stouffville,

Ontario, in Canada. After dropping out of school he
bought a farm with his brother Norman, raising pigs
and cattle. By 1980 the brothers declared bankruptcy,
forcing Galbraith to turn to farm work to support
himself and his family. During this time he acquired a
reputation in local pigeon-racing circles, a hobby that
he had pursued since he was introduced to the sport
as a child. In 2001 he claimed that he had created a
new breed of elite pigeon and formed Pigeon King
International to exploit it.

WHAT WAS THE SCAM?

Pigeon King International sold breeding pigeons to

investors, particularly Mennonite farmers (because of
their reluctance to go to the authorities), in return for
promising to buy any offspring at a fixed price for ten
years. Since a pigeon typically produces several
offspring a year, they would supposedly make their
money back in a very short period of time. However,
although Galbraith initially claimed the pigeons would
be sold on to professional breeders, and later sold as
meat, they were instead re-sold to other investors,
with the money used to repay the original buyers –
turning it into a Ponzi scheme.

WHAT HAPPENED NEXT?

The scheme seemed to go well initially, but in 2007 a

Mennonite farmer, worried about the impact on the
wider farming community, tipped off an online
vigilante, who started warning people about the scam.
The authorities and many investors initially dismissed
the allegations, but when the magazine Better
Farming published a detailed exposé in December
2007, the negative publicity drastically reduced the
flow of investors. With nowhere to store the tens of
thousands of unsold pigeons, and no money to repay
investors, Pigeon King declared bankruptcy in 2008.
Galbraith was later convicted of fraud in 2012.

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LESSONS FOR INVESTORS

By the time Pigeon King International collapsed, it had

obligations of more than C$356m (£205m at current
exchange rates) to buy back baby birds, with most
investors receiving little or nothing in return. Even if
you just count the money paid in, investors suffered
net losses amounting to around C$20m (£11.5m).
When investing in exotic assets, it’s a good idea to
check whether there is enough demand to sustain
prices. It’s also a good idea to be sceptical of anyone
who insists on unconditional trust, as Galbraith
reportedly did, as that usually means that they have
something to hide.

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Great Frauds In History

Dr Matthew Partridge

Matthew graduated from the University

of Durham in 2004; he then gained an
MSc, followed by a PhD at the London
School of Economics.
He has previously written for a wide
range of publications, including the
Guardian and the Economist, and also
helped to run a newsletter on terrorism.
He has spent time at Lehman Brothers,
Citigroup and the consultancy Lombard
Street Research.
Matthew is the author of Superinvestors:
Lessons from the greatest investors in
history, published by Harriman House,
which has been translated into several
languages. His second book, Investing
Explained: The Accessible Guide to
Building an Investment Portfolio, is
published by Kogan Page.
As senior writer, he writes the shares
and politics & economics pages, as well
as weekly Blowing It and Great Frauds
in History columns He also writes a
fortnightly reviews page and trading tips,
as well as regular cover stories and
multi-page investment focus features.
Follow Matthew on
Twitter: @DrMatthewPartri

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