Phillip Arnold was a poorly educated Kentuckian who’d gone West to find his fortune in the California Gold Rush. In 1870, he and some of friends managed to convince captains of industry and banking that they’d discovered a new source of precious gems, especially diamonds, in Wyoming. Several of those men invested heavily in the project. They didn’t realize that they’d been taken.
The federal government uncovered the hoax in October 1872. Some of the investors sued Arnold, who settled out of court—after he got away with about $500,000.