Financial Fraud

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The mid-1850s were a time of great confusion and consternation for Indiana’s free banks. These banks were organized under the state’s Free Banking Act of 1852, which took effect on July 1 of that year. Loosely based on earlier New York banking legislation, the law allowed anyone to organize a bank. Those with enough capital could purchase state bonds, deposit them with the state auditor, and issue bank notes that would be secured by those bonds. Any bank that refused to redeem its notes would be subject to closure and their deposited bonds would be sold by the state, with the proceeds used to redeem their outstanding notes. The trial by fire for the so-called free banks was the Panic of 1854, which proved to be too much for many of the state’s  undercapitalized institutions. They were often headed by inexperienced or even larcenous bankers, and failures were widespread in late 1854 and 1855. 

Indiana Bank at Fort Wayne

Fort Wayne, Indiana, saw the establishment of one such bank. The city had been established in 1794 as a military fort and quickly became an important commercial center of northeastern Indiana. By the 1830s, it boasted a branch of the very successful State Bank of Indiana and sat astride the Wabash and Erie Canal. By the 1850s, promoters acted to organize one of the new free banks to take advantage of the city’s commercial activity. The February 20, 1854, edition of the Lafayette Journal and Courier reported on new free banks that had been “recently organized” across the state. William C. Hedges’s Indiana Bank at Fort Wayne was reported to have a nominal capital of $1 million. Curiously, neither the bank nor Hedges were ever mentioned again in contemporary sources. Apparently, as was sometimes the case, vision and intentions did not come to fruition. However, the story does not end here.

Bank of Fort Wayne 

Subsequent 1854 news reports and state records indicate that a Bank of Fort Wayne was, in fact, organized and opened in the city. It is unclear whether this was a new bank or the renamed Indiana Bank at Fort Wayne. In any case, by May 1854, it was one of the state-chartered free banks in operation across the state. However, its happy days did not last for long. 

By December 1854, the bank had earned the dubious distinction of having its notes deemed so questionable that they were refused by a large free bank at the opposite end of the state: the Indiana Bank located in Madison, a bustling Ohio River town. In 1855 the Bank of Fort Wayne was slowly relegated to a lower classification of bankability by a state
bankers’ convention held to sort out the status of the state’s free banks. 

By December the bank had closed its doors (either voluntarily or involuntarily). The December 15, 1855, edition of the Princeton Clarion Leader listed it among the banks whose notes were being redeemed at various rates by either the state or at other banks. In the case of the Bank of Fort Wayne, the notes were being redeemed at par at the “branch, State Bank, Indianapolis.” The State Bank of Indiana had branches in both Fort Wayne and Indianapolis, where the state bank was also headquartered. It is therefore unclear whether this reference means that the bank’s notes were redeemed in Indianapolis, some 120 miles south of Fort Wayne, or in Fort Wayne (which would make more sense logistically). On that basis, it is assumed they were redeemed at the state bank branch in Fort Wayne.

Illegitimate Issues

State records tell us that the bank only issued $5s and $10s printed by Toppan, Carpenter, Casilear & Co. A report dated January 25, 1857, recorded that 9,999 $5 and $10 notes were issued, while 10,000 $5s and $10s were burned. No examples have been seen in modern times. There is a discrepancy of one sheet between the number of sheets printed (20,000) and the combined total of sheets either issued or burned, perhaps due to spoilage, damage, or expropriation for some other use. Importantly, elsewhere in the report the bank is listed as suspended, indicating it had failed and been shut down by state authorities rather than closed voluntarily. 

It is against this backdrop that two curious notes make their appearance. At first blush, they appear to be $1 and $3 Bank of Fort Wayne notes printed by W.L. Ormsby and dated December 1, 1856. However, state records indicate the Bank of Fort Wayne had issued only $5s and $10s printed by an entirely different firm. Another problem is that the notes are dated around a year after the Bank of Fort Wayne was suspended. The designs are also missing several key features required to appear on all Indiana free bank issues. There is no text indicating that the notes were secured by public stocks, nor is there any space for  countersignatures by state authorities registering the notes. Additionally, the state banking department/state auditor die is not incorporated. In short, these could not have been legitimate issues of the Bank of Fort Wayne.

Fraudulent Notes

So, what are they? Two possibilities exist. The notes could have been printed for a second Bank of Fort Wayne put together by promoters who intended it to be a private, unregulated institution. The second case, which I think is more likely, is that the notes were designed to appear as if they were legitimate bank issues intended for  circulation in some distant part of the country where the victims would not know the bank had failed. Both the $1 and $3 are known in both proof and issued/remainder form. At least one alteration is known for a New Jersey bank. All examples are very scarce to rare, with the $3 note in remainder form being the most commonly encountered note today. In the realm of obsolete paper money, things are often not what they seem, and that is certainly the case here.

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A version of this article appears in the December 2026 issue of The Numismatist (money.org)

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