South Sea Company chartered
The company was granted a monopoly on trade with Spanish America in exchange for assuming £10 million of British government debt. The trade was almost entirely theoretical. The real business was converting government debt into company shares at prices the directors could influence. The fraud was architecturally built in nine years before it collapsed.
The South Sea Company's charter is an early case of a public-private financial engineering deal. The government got debt relief. The company got monopoly rights. Neither party faced scrutiny, because Parliament members were themselves invested. The collapse in 1720 produced a pattern that has recurred in smaller form many times since, usually around special-purpose vehicles and off-balance-sheet debt.
02 · The South Sea Bubble
The South Sea Company was granted a monopoly on trade with Spanish America — a business that turned out to be almost entirely theoretical. To mask the lack of actual revenue, the company proposed converting British government debt into its own shares. Insiders pumped the price with orchestrated rumors, sold into the retail mania they had manufactured, and walked away with fortunes before the inevitable collapse.
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