SAN FRANCISCO — In the fall of 1872, some of the sharpest financial minds in California handed over fortunes for a hole in the ground. The hole contained diamonds, rubies and sapphires. It also contained nothing real at all.
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The scheme became known as the Great Diamond Hoax, and for a few frantic months it convinced bankers, mining engineers and even Tiffany & Co. that a vast gem field sat waiting in the remote West, ripe for the taking. The men who exposed it saved San Francisco investors from catastrophic losses, though not before a smaller circle of insiders had already kissed small fortunes goodbye and larger ones had been narrowly avoided.
It started with two prospectors, Philip Arnold and John Slack, who showed up in San Francisco carrying a sack of uncut diamonds and other precious stones. The men claimed to have stumbled onto a diamond field somewhere in the Rocky Mountain West, though they stayed cagey about the exact location, citing fear that others would rush in and stake claims before they could.
San Francisco in the early 1870s was primed for exactly this kind of story. The Comstock Lode had already turned obscure prospectors into millionaires and convinced the city's financial class that the ground beneath the American West was lined with wealth waiting to be discovered. Fortunes had been made on silver. Why not gems?
Arnold and Slack found eager backers fast. Among them was William Ralston, founder of the Bank of California and one of the most powerful men on the Pacific Coast, and Asbury Harpending, a businessman with his own history of speculative ventures. Ralston and his associates formed the San Francisco and New York Mining and Commercial Company, and investors, including prominent Californians and East Coast financiers, poured in capital on the promise of the diamond field.
To bolster the claim, samples of the stones were shipped to Tiffany & Co. in New York, where Charles Lewis Tiffany himself examined them and reportedly pronounced them genuine and valuable. That endorsement, from the most trusted name in American jewelry, did more than anything else to quiet the skeptics. If Tiffany said the stones were real, who was going to argue?
Investors and a mining engineer were eventually taken to a remote site in what is now northwestern Colorado, near the Wyoming border, to see the diamond field for themselves. Their guides blindfolded them for parts of the journey. They found gems scattered across the ground and embedded in anthills, exactly as promised. Digging turned up more. The site appeared to be everything Arnold and Slack had claimed.
What the investors didn't know was that the field had been salted. Arnold and Slack had traveled to London, bought a large quantity of low-grade uncut diamonds, rubies, sapphires and other stones, then scattered them across the site before bringing prospective backers out to marvel at the "discovery." It was a simple con dressed up in geological language and propped up further by the credibility of men like Ralston, who lent it their names.
The hoax began to unravel through the work of Clarence King, a government geologist who had led the U.S. Geological Survey of the Fortieth Parallel and knew the region's rock formations better than almost anyone alive. King had surveyed much of the same territory and grew suspicious that a genuine diamond field could exist where the company claimed. He tracked down the site in November 1872 and examined it closely. What he found convinced him instantly that something was wrong. Diamonds do not occur naturally alongside rubies and sapphires in the geological conditions present at the site, and stones were found in patterns suggesting they had been placed by hand rather than deposited by nature. In one frequently cited detail from accounts of the investigation, a stone was found that appeared to bear cut facets: evidence it had been worked by a jeweler and could not have come from the ground unaltered.
King raced to San Francisco to warn Ralston and the other investors before more money changed hands. His report landed like a thunderclap.