Agribusiness and Crop Scams

Agribusiness and crop scams tend to pool funds.

Agribusiness and crop scams are often a subset of real estate scams. In this case, the scammer tries to convince unsuspecting investors to purchase agricultural or crop land that is overvalued. Or will be when push comes to shove.

The operators of agribusiness and crop scams tend to pool funds from several separate investors in order to purchase the land. The investors themselves will not manage the property. Nor will they exercise any day-to-day control over it. After all, that requires a physical presence and constant supervision. The pool of investors, many of whom might even reside outside the country, would not be able to do that either. So the responsibility falls on handlers. Or the handlers assign the responsibility to the farmers who already grow crops on the land. In the meanwhile, the investors stay put and wait for the land to appreciate in value. At that time the pool members will sell it and divide the profit between themselves. Or at least that’s what they think.

Legitimate Investments Can Become Agribusiness and Crop Scams

No investment is without its risks. But the risks involved in agriculture-related investments are substantial. Crops can fail due to poor soil management, which can quickly reduce the value of the land on the open market. There are cases of scams involving lands that are completely inaccessible, lacking access roads or infrastructure. How can land possibly appreciate under such conditions? Worst of all, the entire scheme can go bust. Especially when a financial adviser has no direct experience in agribusiness and resides overseas.

No, not all pooled agribusiness and crop investments are scams. Far from it. But market prices do inevitably fluctuate over time. The going rate can even diminish over the long-term. In addition, partners in legitimate collective investments will find it virtually impossible to sell their shares off. So even when everything is above board when you sign on the dotted line, it may not be later on.

The Worm Scam: A Case Study

Not all agribusiness and crop scams involve real estate. They can also involve living creatures. Even worms.

Believe it or not, vermiculture is the breeding of worms for their waste material. Manufacturers of compost use that organic byproduct as a high-quality soil additive. Beginning in 1998, a fraudster by the name of Greg Bradley embarked on a worm scam. It eventually cost approximately 2,400 growers of worms in 40 U.S. states a total of $25 million.

Bradley began by opening a front in rural Oklahoma that he called B&B Worm Farm. He then proceeded to offer contracts to worm growers. The contracts specified that B&B would supply the grower breeding worms upon payment of $15,000 for 100,000 of the little critters or $60,000 for 1.5 million of them. In addition, B&B would provide them with a manual, worm harvesting equipment and a toll-free customer assistance number. And a one-year, money-back guarantee on top of that. B&B also committed itself to purchase all the worms each grower would breed. The price they promised to pay was between $7 and $10 per pound. But Bradley did not sell the worms those growers brought back to vermiculture compost producers. There are actually very few of them around. Instead, B&B shipped them to new growers for breeding. In other words, it was an agribusiness Ponzi scheme.

As long as the amount of money that flowed in with new contracts was greater than the money Bradley had to pay out to buy worms from his growers, the scam succeeded. Indeed, within three years, the scam was so successful that it outgrew his Oklahoma facility. Bradley expanded operations by opening new distribution centers in 12 more states.

The Worm Scam: Decomposition

Ultimately, law enforcement authorities grew suspicious of B&B’s rapid expansion. What caught their attention was the seemingly high demand for a product aimed at an exceptionally small market.

On August 13, 2002, after discovering that B&B was $23 million in debt, the Oklahoma Department of Securities prohibited the company from signing any new contracts. B&B quickly declared bankruptcy as a result. The saga finally ended when Bradley died unexpectedly on January 26, 2003 at the age of 40. His victims were left holding their bags full of worms, literally.

Agribusiness Insurance Scams

On occasion, agribusiness operators have also been found to scam insurance companies, as well as government agencies.

For a number of years, for example, Robert Stokes, for example, who ran a North Carolina insurance agency catering to tobacco growers, filed millions of dollars in false or exaggerated claims on behalf of his clients while enabling them to illicitly sell crops they reported as having failed to mature. In October 2009 he admitted his guilt, was sentenced to 30 months in prison followed by 18 months under house arrest, and ordered to pay $16, 582,215 in restitution. A number of his associates were indicted and sentenced as well for their parts in the scam. It is said to have been the largest crop insurance scam in U.S. history.

But these sorts of scams continue. In 2020, a Missouri farmer named Randy Constant was arrested for passing off conventionally grown crops as organic for almost a decade, if not longer. His scam was uncovered after it became clear that he simply did not have access to enough organic crops to account for all his sales. And then laboratory tests confirmed that the grain he was selling as organic was genetically modified. Crops advertised and sold as organic cannot be.

Constant committed suicide a few days after being sentenced to 10 years in prison on one count of wire fraud and ordered to forfeit $128 million in compensation for the profit he had illicitly made.

If you think you’ve been the victim of an agribusiness or crop scam, contact the fund recovery experts at MyChargeBack.