Two prospectors salted a hillside with gems and fooled Tiffany's own jeweler, a Civil War general, and a Rothschild out of $660,000.
In 1871, prospectors Philip Arnold and John Slack traveled through the American Southwest collecting chromium diopside, garnets, and other semi-precious stones. They mixed them with flawed industrial diamonds, then showed the collection to jewelers and bankers as proof of a massive diamond strike.
Investor Asbury Harpending arranged for Charles Lewis Tiffany himself — of Tiffany & Co. — to appraise a sample of the stones. Tiffany valued them at $150,000, and investors immediately formed the Golconda Mining Company around the supposed discovery.
Arnold then bought more low-grade gems from London and Paris dealers, mixed them with Southwestern spinels and sapphires, and personally planted the entire haul on a remote sandstone outcrop in Colorado, essentially seeding a fake diamond field by hand.
In June 1872, a mining consultant inspected the salted site and declared it 'wonderfully rich.' That endorsement was enough to pull in some of the era's most prominent men, including Civil War general George B. McClellan and financier Nathan Rothschild.
The investor group paid Arnold and Slack $660,000 for their stake — over $17 million today — and formed a mining company around the site. They even had a sitting U.S. Congressman quietly paid in shares to help rewrite federal mining law in the company's favor.
The scheme unraveled only because a government geologist, Clarence King, was alarmed that a major diamond field had somehow gone undetected by the survey his own team had just finished nearby. He sent men to investigate, who immediately noticed the site's gem types could never occur together in nature — proof the whole field had been planted.
Arnold escaped prosecution by settling privately with the furious investors and retired comfortably to Kentucky, where he was later killed in a shootout with a business rival. Slack quietly vanished into obscurity and spent his final years working as a coffin maker in New Mexico.