The Weird Case Of The Electric Sugar Fraud

“Lord, Lord, how subject we old men are to the vice of lying!” —William Shakespeare, Henry IV

In A Nutshell

The late 1800s were a time of industrial innovation, so we can almost understand why investors would be eager to believe that one man had come up with a way to revolutionize sugar refining. They invested hundreds of thousands of dollars, and the whole thing went on for years before they finally realized it was all a massive hoax, and the owners of the company were simply swapping out refined sugar for raw, with no machinery or technology whatsoever.

The Whole Bushel

Admittedly, hindsight is 20/20. But still, there was enough that was suspicious about the sales pitch of Henry Freund and his wife, Olive, that would make you think investors would have seen through the ruse well before they invested hundreds of thousands of dollars into a company that was built on a too-good-to-be-true sort of premise.

Freund (sometimes spelled Friend) and his wife set up shop in New York City in 1883. When they came to town from a rather mysterious history (no one knew anything about his previous life, or even his age or nationality), they brought with them a miraculous machine that they said was going to revolutionize the sugar industry. At the time, it cost about $10 to refine one ton of raw sugar into the useable crystals that are in our kitchens. Freund said he had a machine that would do it for $.80 a ton, but he needed investors to construct a full-size sugar refinery.

Not surprisingly, the first sugar refinery he approached turned him down when he wouldn’t reveal anything about his miraculous technology or even show them the machine he claimed to use.

It wasn’t long before he found investors that would bite, though, which is pretty surprising considering that he stuck to his decision that absolutely no one could see how he was doing it.

Investors were shown a mysterious contraption, covered by a blanket. They were forbidden to look underneath and were asked to leave the room while it was running. While they were waiting outside, they heard all the zings and zaps and clanks that would go along with running machinery and the only part of the process that Freund had revealed—electricity. When they went back into the room, there sat refined sugar of a higher quality than most had ever seen; gone was the raw sugar he’d started with.

Bizarrely, it was enough to get investors and start a company. The Electric Sugar Refining Company started selling shares in 1883, at a cost of $100 each (that’s about $2,550 in today’s money). They were sold in America and England, and the money was supposedly being funneled into the construction of a machine that would do the refining on a massive scale.

All the while, Freund was still keeping everything about the process a secret, swearing that he would reveal it once the machine was built. Eventually, shares in his company reached a value of $625 each (around $15,000 today).

In 1888, Freund died from a combination of chronic poor health and chronic drinking. His wife and her parents stepped in to continue running the company, and when they began asking investors for more money, those investors finally started to get suspicious. She called on her legal aid to help keep investors out of the secret rooms where the refineries of the Electric Sugar Refining Company were supposedly built, but the investors had other ideas.

They broke into the rooms, and found tons and tons of raw sugar. The refined sugar that was supposedly being created in the factory was really being smuggling in, packaged as the machinery that was being built. The raw stuff was being stockpiled, and there was absolutely no “miracle refining method.”

The company went bankrupt, and charges were brought against Olive Freund and her parents. It also got out that they had tried the trick before, forming the Grape and Cane Sugar Refining Company in Chicago. Bizarrely, Olive and her mother got off with time served, while her stepfather was sentenced to almost 10 years hard labor in Sing Sing.

Show Me The Proof

Museum of Hoaxes: Freund’s Electric Sugar Fraud, 1889
Daily Alta California: The “Electric Sugar” Hoax
The Brisbane Courier: Electric Sugar-Refining Company