Most people would consider Bernie Madoff to be the biggest scam artist of all time. After all, his investment Ponzi scheme ran for decades, and sucked in billions, without, apparently, ever even making any actual trades for investors. Bernie’s victims are embarrassed, saddened, and shocked.

However, their embarrassment must pale in comparison to another scammer, a Mr. MacGregor. The Economist Magazine recently highlighted the mis-adventures of MacGregor. It is a fascinating story, and deserves a re-cap. At the very least, reading MacGregor’s exploits will make you feel better the next time one of your investments goes horrible awry. Sure, you lost money—but look at what those fools did! What’s more, there is a lesson to be learned: Maybe the next time you are about to invest in a ‘sure thing’ you might want to pause and think twice, because surely MacGregor’s victims thought the same thing too, before losing it all.

According to the Economist, Macgregor’s bond swindles in the 1800s would equate to about $7 billion in today’s dollars. But he did more than take cash—he ‘invented’ an entire country. MacGregor claimed he was a Prince of a country called Poyais, in what is today Hondurus. The country, he claimed, had abundant natural resources, and only needed money and manpower to develop them, and reap untold riches. His plan worked so well that, incredibly, he managed to (a) raise a lot of money and (b) convince people to immigrate to a non-existent country. In the 1820s—warning! Like today!— the British Government was borrowing a lot of money. Because of low interest rates—another similarity to today—investors began looking elsewhere to raise their investment returns. British bond investors would go to Russia and Denmark, to get 5% returns rather than the paltry returns in London. Mining companies started to do well also, enticing investors to go into that sector. As rates stayed low, investors strayed further from home and started to invest in Brazil, Columbia and Mexico. Investors were hunting for returns. “MacGregor rode this wave of Latin American optimism. In October 1822 he offered up a fake £200,000 Poyais bond at 6%, a similar rate to that paid by the governments of Peru, Chile and Colombia. Unlike these countries, Poyais had no record of collecting taxes or system for doing so. But MacGregor argued that Poyais was so abundant in natural resources that export-tax revenue would easily cover the interest payments on the debt”.

Further, he convinced many that Poyais was a nice, friendly farmable land in need of settlers. He convinced them it was an even better place to emigrate than the United States. Not sure how he did this, but he told investors and settlers, that the water supply was not just clean, clear and abundant, but in the streams of Poyais there were chunks of gold (really!). Bizarrely, he was able to raise more and more money. All in, Macgregor convinced seven ships of investors and settlers to set sail for a fake country. After the first two ships reached shore, and realized over time that they had been had, the British Navy had to intercept the other five ships at Sea to get them to turn back.

How does this relate to today’s investors?: There are so many lessons here. First, maybe you should stop “reaching for yield”. Many investors are getting burned these days on dividend-paying resource stocks, that are being forced to cut dividends. Guess what? When you get a higher yield you need to ask yourself why. Usually—it is because there is way more risk. Second, do your homework.

Sure, information was harder to obtain in MacGregor’s days. But, seriously, a fake country? Third, don’t get greedy. MacGregor’s victims would not have fallen for the plan if they could accept lower returns. Finally, like streams filled with gold, if it sounds too good to be true, then it usually is. This rule of thumb has of course been around for centuries, but, for some reason, investors constantly—and we mean constantly—ignore it. Pay attention. Don’t find yourself the victim of the next fraudster that shows up in our capital markets.