The Great Salad Oil Scandal

Oil, Water and Wall Street Tears

Alexandra Gadiac

In 1963, Wall Street discovered a lesson as old as physics: oil floats on water. Unfortunately for some of America’s largest banks, that lesson arrived hundreds of millions of dollars too late.

The so-called “Great Salad Oil Scandal” remains one of the most bizarre and instructive frauds in financial history. At its center stood Anthony “Tino” De Angelis, a commodities trader who built an empire not on soybeans — but on illusion.

During the early 1960s, De Angelis positioned his company, Allied Crude Vegetable Oil Refining Corp., as a dominant force in the soybean oil market. Soybean oil was a major commodity at the time, used in food production and industrial goods. Prices were volatile, and speculation was profitable.

De Angelis exploited this volatility through aggressive trading and even more aggressive borrowing. Banks, trusting warehouse receipts that supposedly represented vast quantities of soybean oil stored in tanks across New Jersey, extended loans worth over $150 million (equivalent to over $1 billion today).

The tanks that were pledged as collateral were, in many cases, filled largely with water. Because oil floats, inspectors performing routine checks would dip measuring rods into the tanks and find soybean oil at the top. The visual confirmation appeared legitimate. On paper, inventory levels matched financing statements.

In reality, the oil layer was thin — sometimes only a few feet deep — sitting atop vast quantities of water.

The fraud worked because verification procedures were superficial. Banks relied on warehouse receipts and limited sampling methods rather than full volumetric testing. No one drained the tanks. No one calculated density discrepancies.

There was just one problem. Most of the oil did not exist.

In November 1963, discrepancies in inventory records exposed the fraud. When lenders moved to seize the collateral, they discovered the tanks held far less oil than reported. Losses spread quickly, with American Express suffering heavy damage through its subsidiary’s guarantees. De Angelis was convicted of fraud, and the scandal reshaped commodity financing practices nationwide.