Tino De Angelis

From Academic Kids

Tino De Angelis was a New York-based commodities trader who bought and sold vegetable oil futures around the world. In 1962 he started a huge scam, attempting to corner the market for soybean oil, used in salad dressing. In the aftermath of the Great Salad Oil Swindle, investors (51 banks) learned that he had bilked them out of about $175 million in total ($1.2 billion in year 2000 dollars). The scam is named after Angelis company Allied Crude Vegetable Oil Refining Corporation.

Tino De Angelis grew up in the Bronx, the son of Italian immigrants. He worked in a meat and fish market, and while still a teenager was soon managing some 200 employees. Bitten by greed, he soon found that the new school lunch program would buy practically anything, and started a business selling spoiled meat to them at fixed prices. Next he started another business shipping massive quantities of substandard shortening and other vegetable oil products to Europe, whose infrastructure was still struggling in the aftermath of World War II. De Angelis slowly became a major player in the commodities markets, both in what was then a brisk trade in vegetable oil and vegetable oil futures, as well as cotton and soybeans.

Starting in 1962, De Angelis decided that his network was strong enough that he could make a serious attempt to corner the market on soybean oil. He rented a huge tank farm in New Jersey, and started to buy oil to store in the tanks. On the basis of this huge value of stored oil, he took out massive loans from various Wall Street banks, and used the cash to buy all of the futures on the oil. This way he would not only own a large quantity of soon-to-be expensive oil, but also cheap futures that would soon be worth a considerable value when the prices went up.

In fact, he wasn't actually buying any oil at all. The tanks were increasingly filled with water, with a small, and constant, amount of oil floating on top. When inspectors visited and dipped the tanks, they found the oil and everything seemed fine. The loans, or warehouse receipts, were mostly acquired from a subsidiary of American Express. Amex, in turn, sold the warehouse receipts, thus "guaranteeing" that the oil was really in the tankers. Eventually something tipped off the inspectors, likely his massive buying of futures in the product he was preparing to sell, and they returned and found the water.

The result was a massive crash of the futures market, wiping out in minutes the entire value of the loans. On November 19, 1963, De Angelis's Allied Crude Vegetable Oil Refining Corp. filed for bankruptcy, at which point investors learned hundreds of millions were unaccounted for. The brokerages who handled De Angelis's futures trades were now tainted, and the next day the NYSE, worried about potential SEC involvement, suspended Williston and Beane and Ira Haupt and Co. from trading. Word started spreading as traders investigated the suspension, and desperately tried to get their holdings out of the companies. The entire debacle was overshadowed by the assassination of U.S. President John F. Kennedy on the 22nd.

Eventually the problem worked itself out, and Amex was forced to take a massive loss when they made good on their warehouse contracts. The two trading firms were eventually snapped up by larger players, and De Angelis ended up with a seven year jail term.

De Angelis was released and soon involved in another scam in order to rise back to the top, this time a Ponzi scheme involving Midwest cattle. This attempt collapsed before it really got started.

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