American Express was in the business of verifying soybean oil inventory, a little-known service that nearly bankrupted them during a massive fraud.
The hosts describe the "Salad Oil Scam" where a fraudster filled tanks with water, tricked AmEx into verifying them, and left AmEx on the hook for hundreds of millions. ✦ AI generated
Host · My First Million · 2026-08-12 · original ↗
starts at this moment · 11:17
“Did you another thing that I've noticed is that there's companies that do things that I had no idea that they that they still did it and it potentially makes a lot of money.”
I find you had referenced this, but I didn't quite know what you were talking about and I didn't want to ask cuz I didn't want to look stupid, but it's the soybean oil shortage and basically the idea here is that one of Warren Buffett's best trades ever was American Express because at the time there was this whole scheme where basically there was a a scam artist and he realized that he could get loans against his soybean oil inventory... And because American Express was the guarantor, they were the company that promised that the amount of soybean oil promised to the lenders was there, they were the ones who had to pay this massive fine.
verbatim transcript · starts at 11:17
11:17I didn't quite know what you were talking about and I didn't want to ask cuz I didn't want to look stupid, but it's the soybean oil shortage and basically the idea here is that one of Warren Buffett's best trades ever was American Express because at the time there was this whole scheme where basically there was a a scam artist and he realized that he could get loans
11:44against his soybean oil inventory. And so basically what this guy did was he had I don't know if it was hundreds or dozens of massive tanks where he would store that oil. And let's say that oil was worth $5 million in aggregate. He could get a $4 million loan against that oil. And he actually went to I think 50 different banks and got a bunch of different
12:11loans, which is fraudulent. But then he did double whammy fraud because he got in order to get the loans, he hired American Express to verify that the oil that he said was in the tank was in fact in the tank. But what he noticed was that when they checked, there was a way that you could kind of like scam them and eventually he filled these huge tanks with seawater, salt water.
12:35>> Right. >> And it was fake. The oil didn't exist. And for a variety of political reasons, a deal fell through with Russia where they were going to import or sell them a bunch of oil. America said, "Nope, we're not going to do business with the USSR." Therefore, the price of soybean oil went down and it crashed and all these lenders said, "Hey, soybean guy, you you
12:58owe us our money." And he was like, "Well, the thing is is that none of this soybean oil actually exists. Therefore, I can't pay you." And because American Express was the guarantor, they were the company that promised that the amount of soybean oil promised to the lenders was there, they were the ones who had to pay this massive fine. And Warren Buffett goes around and he was like, "You know,
13:20American Express stock is down right now and a lot of people have no idea that they even like were We're the soybean oil checking business. right? I have a feeling based off of going to restaurants and I'm talking to waiters, I have a feeling that the people who are using American Express, they don't [clears throat] really give a [ __ ] about this. They still trust that American
13:38Express is good for, you know, credit cards. And I was reading about this and I was like, oh, that's a crazy story, but B, American Express is in the soybean oil checking business. And you'd have no idea how many strange variety businesses exist. And by the way, it was like a multi-hundred-million-dollar-year business to like be in this soybean checking oil business. And it was one of those moments where
14:00I'm like, I can't believe this is a thing. I never And I think that crisis was so big that I don't think it brought down the economy, but I think it like um I think it hurt a lot of companies to the tune of like many tens or hundreds of billions of dollars. >> Yeah, it's all hidden in plain sight. And the more of those you sort of