Image source, Paul Harris/Getty Images
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- author, Cecilia Barea
- Author title, BBC World News
They now have almost all the money in the world in their hands.
The Hunt brothers, members of a millionaire family thanks to their oil wealth, became famous for carrying out one of the largest price gouging operations in US history.
His father, Haroldson Lafayette Hunt, got his start running a cotton farm in Arkansas, although accounts from the time indicate that the betting business was one of the engines that helped him get off the ground.
He quickly entered the oil business and ended up becoming one of the richest people in the country. After being criticized for unscrupulous business operations, the mogul – who had inspired the creation of a character in the TV series Dallas – supported white supremacist ideas and used the media to promote far-right ideas.
Hunt had 14 children, three of whom were involved in a financial scandal linked to speculation in the price of silver, a metal they hoarded to the point that their reserves in their vaults were larger than those of many countries.
Nelson Bunker, William Herbert, and Lamar were the three brothers involved in the metals scandal, dubbed the “Silver Gangsters” by their critics.
The most prominent among them was Nelson Bunker, who became one of the richest men in the world thanks to his operations in the giant oil fields in Libya, which ended up being nationalized by ruler Muammar Gaddafi in 1973.
According to William L. Silber, author of “The Story of Silver,” says Pinker’s obsession with silver was born in 1973 precisely, when Gaddafi seized his oil wells.
An owner and breeder of thoroughbred racehorses and a staunch anti-communist, Bunker was concerned about the spiral of inflation in the United States and to prevent his money from losing purchasing value, he decided to look for other ways to store his wealth.
The trio, along with his brothers William and Lamar, began accumulating the metal to protect themselves from market fluctuations and amass a huge fortune from assets that they would try to control.
They bought tens of millions of ounces of the metal, transporting some of it to Switzerland on purpose-built planes guarded by armed workers from their farms in Texas, according to Global Bullion Providers (GBS).
By accumulating bullion and purchasing “futures” based on the price of the metal, the demand for silver led to a massive increase in price.
They didn’t just use their own wealth to get more silver. The brothers fell into significant debt in order to continue growing their business.
Silver rush
It was at the end of 1973, when the price of the metal was around $3 an ounce, that the Hunts started buying the metal.
Many transactions are made through these futures contracts which act as a legal agreement between two parties who commit, on a specific future date and at a specific price, to exchange an asset (called the underlying asset) which can be physical (such as silver or agricultural products) or financial.
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“Silver seemed safer than offshore oil concessions,” Pinker told Time magazine in January 1980, at the height of the precious metal’s peak. “Precious metals were a good hedge against paper money.”
It is not known exactly how many millions of ounces the Hunt family accumulated, although some reports from the time indicate that their assets exceeded the annual production of the metal.
By the end of 1979, one estimate says, the Hunt family had about 40 million ounces of physical silver and more than 60 million in silver futures. Of the three brothers, the youngest, Lamar, seems to have been in the most humble position.
They are believed to control two-thirds of all silver contracts traded on the New York Mercantile Exchange (COMEX) and one-third of all non-government silver reserves. In one year, the value of the metal rose by almost 700%.
The Hunts has secured international partners to further expand its operations, including members of the Saudi elite.
In the midst of excitement, even the grandmothers sold their silverware and jewelry.
As news spread about the Hunts’ dealings, other investors tried to ride the wave by buying the metal.
It was the silver rush of 1979.
Its price rose so much that on January 17, 1980, it reached the historic record of US$50 per ounce.
At that time it was said that poachers had “hijacked” the silver market.
The price of an ounce of the precious metal rose from US$11 in September 1979 to US$50 in January.
However, just as some won, others lost.
The situation became so complicated for the Tiffany jewelry store that the company published an advertisement in New York Times Indirectly attacking the Hunt brothers as being responsible for the high price of the metal.
Kodak, which relied on silver in the production of photographic films, was also greatly affected.
The success of Hunt’s business raised suspicions of US authorities over alleged monopolistic practices and market manipulation.
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The COMEX announced “emergency rules” in January to regulate the buying and selling of the metal, while the Chicago Board of Trade (CBO) suspended the issuance of new contracts.
The new rules increased so-called “margin requirements”, that is, collateral funds required from investors to support their operations.
Silver prices began to decline.
Banks and stockbrokers, who loaned huge sums of money to the brothers, asked for cash to protect themselves, but did not get it.
The Hunt family initially refused to sell their silver for fear of causing panic, and were unable to respond to new requirements set by silver market regulators and pressure from their creditors.
On March 25 of that year, Bash Group, the brokerage firm that was the brothers’ main financier, began disposing of its silver holdings to recoup some of its losses.
Finally, panic took over the markets.
On March 27, 1980, an ounce of the metal fell to 10 US dollars, a day remembered in history as “Silver Thursday.”
Thus, the Hunts went from being among the richest men in the world to being among the most indebted.
Hunt’s trial
After the disaster came the trial. Eight years passed until the Hunt brothers were convicted in August 1988 on charges of conspiracy, manipulation, monopoly, extortion and fraud, according to a study entitled “The Silver Crisis Revisited” published in the Economic Journal. Commodity Markets Journal.
The press at the time provided details about the trial.
“The Hunt brothers from Texas, whose combined fortune reached $6 billion, were convicted,” the newspaper reported. Los Angeles Times On August 21, 1988.
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The newspaper explains that not all members of the Hunt family were convicted of the same crimes.
Although the ruling noted that the three brothers violated fraud, commodity and antitrust laws, Nelson Bunker and William were found guilty of racketeering. Although this is a civil ruling, it does not carry criminal penalties, the article notes.
Only Lamar, owner of the Kansas City Chiefs football team, has been found not guilty of organized crime.
The jury also found that the International Mineral Investments Company and Mahmoud Fustaq, a prominent racehorse owner, participated in the conspiracy.
The newspaper added that the metals investment company was owned by two Arab sheikhs and two Hunt brothers, while Festock was the son-in-law of the Crown Prince of Saudi Arabia.
The Hunts denied these accusations, saying that global political events led to a rise in silver prices.
The plaintiff in the suit was the Peruvian state mining company Minpeco.
The company sued the Hunts for monetary damages, and after six days of deliberations, a New York jury ordered the defendants to pay more than $130 million to the Latin American company.
However, the brothers did not go bankrupt because their investment funds, which controlled the family’s oil companies, were not affected by the lawsuit.
The Commodity Futures Trading Commission (CFTC) fined both brothers US$10 million and banned them from operating in US commodity markets.
Regarding the issue of tax debt, they reached an agreement to pay taxes, penalties and interest to the Internal Revenue Service.
While this was happening in the silver market, the brothers’ oil investments collapsed when the price of crude oil fell in the 1980s.
Amid all their financial troubles, the Hunts filed for corporate bankruptcy in 1986 and personal bankruptcy in 1988.
Despite all the scandals, the Hunt family has maintained its investments in many industries. The heirs remain involved in the energy sector, own an extensive real estate portfolio, and retain interests in NFL teams.
Image source, Getty Images
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