Cry me a river
/
Somehow I’ve ended up on the mailing list of the History Channel, and interesting articles keep popping up in my in-box — this one mentions “the Chicago Onion Scam of 1955”. Wall Street frauds comprised my favorite area of legal practice — in fact, it was the only part of my law career I enjoyed — but I’d never heard of this one. I don’t want to give any ideas to my financial industry readers, but if you’ve decided to give widows and pensioners a break from your defrauding schemes this Christmas season, and find yourself with idle hands, looking around for a new venture to supplement your bio-tech and crypto-currency trading, well, apparently there was nothing per se illegal about this scheme: Sam Siegal seems to have just faded into obscurity, no harm, no foul, and his partner Vince Kosuga retired back to his NY onion farm untouched, taking his millions with him, and dying in 20001 still a rich man.*
It’s true that then-Congressman Gerald Ford got a law enacted banning onion trading (wtf?), but there are plenty of other fertile fields to plow: rutabagas, for instance, or next year’s parsley crop, or how about persimmons? Go for it, big guy.
AI Overview
The "onion stock market scam" of 1955 was a successful market manipulation scheme by two traders,
Vincent Kosuga and Sam Siegel, who cornered the US onion futures market and then intentionally crashed the price to make millions. The resulting outcry from bankrupt farmers led to the 1958 Onion Futures Act, which banned the trading of onion futures in the US.
The Scheme
In 1955, onion futures were one of the most traded commodities on the Chicago Mercantile Exchange (CME). Kosuga, an onion farmer, and Siegel, a futures trader, orchestrated a two-part plan:
Cornering the market (late 1955): The pair bought up massive amounts of physical onions (around 30 million pounds, or 98% of the available supply in Chicago) and simultaneously purchased a large number of long futures contracts. This gave them control over the supply, driving up the price per 50-pound bag to a peak of $2.75.
Flooding the market (early 1956): After accumulating significant short positions (betting prices would fall), they flooded the Chicago market with their massive hoard of onions. They even engaged in deceptive practices, such as shipping onions out of Chicago to be cleaned and repackaged, then shipping them back as "new" supply to give the illusion of an endless surplus.
The Aftermath
The sudden, artificial oversupply caused prices to plummet dramatically. A 50-pound bag of onions, once selling for over $2.75, dropped to a mere 10 cents by March 1956—less than the cost of the mesh bag it came in.
Bankruptcies: The crash devastated onion farmers and other traders who had bought futures at the inflated prices, forcing many into bankruptcy.
Profits: Kosuga and Siegel made millions in profit from their short positions as the price collapsed.
Legislation: Public outrage prompted congressional hearings. Then-Michigan Congressman Gerald Ford sponsored the Onion Futures Act, which President Dwight D. Eisenhower signed into law in August 1958.
To this day, onions are the only agricultural commodity for which futures trading is banned in the United States, a direct result of this market manipulation.
*Here’s what I found on Vince:
But, you may ask, whatever happened to the Onion King? Vince Kosuga stayed in New York and continued running his onion farm as a simple local farm. He opened a restaurant called “The Jolly Onion Inn’ where he was the full time chef. He became well known for philanthropy, giving large amounts of money to the church, but cynics might say this was because he had acquired the nickname of “the most evil businessman in history.” Because of his philanthropy, he was named citizen of the year by the Pine Island Chamber of Commerce in 1987. After his death in 2001, his wife Polly continued his philanthropy using the fortune he had amassed by becoming the Onion King.