The Wind Trade

In March 1602 the States General of the Dutch Republic chartered the Vereenigde Oostindische Compagnie, and a new kind of object entered the world. Six squabbling trading houses were merged into a single concern with 6.4 million guilders of capital, divided among six chambers and governed by seventeen directors. Anyone could buy in, and the subscription register of the Amsterdam chamber shows who did: merchants beside maidservants, one of whom, Dignum Jans, put down fifty guilders. What these people bought was not a share of a ship or a cargo, the way earlier voyages had been financed, but a share of the company itself: a permanent and transferable claim on profits that existed, for the moment, only as intention. The VOC invented the modern share. Within seven years the modern share had invented the modern fraud.

The mechanism was simple, and it has not changed. A voyage to the East Indies took the better part of two years. During that time the claim on the voyage could change hands a hundred times in Amsterdam, where trading gathered first on the New Bridge and then, from 1611, in the world's first purpose built exchange. The price moved on rumour, weather and gossip from the docks. The cargo moved at six knots. Between the speed of the claim and the speed of the truth a habitat opened up, and the first predator to move into it was Isaac Le Maire.

Le Maire was the largest single subscriber to the Amsterdam chamber and one of the company's first directors, until 1605, when he was forced out on a charge of embezzling from a directors' venture. The evidence was murky, and he maintained his innocence to the end of his life, but he departed an embittered man with capital, connections and a grievance. In February 1609 he assembled a secret syndicate of nine traders around an instrument the market had only just devised: the blank sale, a forward contract to deliver shares the seller did not own. The play was to sell at today's price, drive the price down with manufactured bad news, and buy back cheap when delivery came due. Through the spring of 1609 VOC shares fell steeply, and the syndicate fed the decline with false reports. It was the first organised bear raid in financial history, run against the first listed company, by one of its own founders.

The directors understood what was happening and petitioned the States General about a "dirty scheme", complaining that the conspirators sold far more than they owned, that they spread lies to frighten ordinary people out of their shares, and that the casualties included widows and orphans. The petition is worth reading carefully, because it contains the whole future of securities law in embryo. It is also worth reading Le Maire's side. In May 1609 he told the Grand Pensionary, Johan van Oldenbarnevelt, that the company's refusal to liquidate after its promised ten years was illegal, and that without dividends, full accounts and a liquidation no investor would subscribe to a successor. He had a point, and the directors knew it; they began posting dividends shortly afterwards. The first bear raider in history was simultaneously producing the first coherent argument for shareholder rights. Historians still argue over which motive drove him, profit or his campaign to break the VOC monopoly. The honest answer appears to be both, and the mixture is precisely what makes the episode a template rather than a curiosity.

The state's answer came on 27 February 1610: an ordinance banning the sale of shares one does not own, generally reckoned the first piece of securities regulation ever issued. It failed on contact. Traders wrote renunciation clauses into their contracts explicitly waiving the prohibition; the courts, unwilling to void the forward trade itself, simply declined to enforce proven short sales; and the government was driven to reissue the ban in 1623, 1624, 1630, 1636 and 1677. Regulation arrived eight years after the instrument it regulated, and it has been running late ever since.

The company, for its part, was playing games with the same gap. When the VOC finally paid dividends, it paid them in kind: in April 1610, seventy five per cent of the nominal value of each share in mace; that November, fifty per cent in pepper with a little cash; in March 1612, thirty per cent in nutmeg. On paper, shareholders received 162.5 per cent of their capital within two years. They complained, correctly, that the actual value was nearer 125 per cent, because dumping that much spice onto the Amsterdam market crushed the price. The issuer was marking its dividend at a valuation only it believed, an accounting fiction of the kind that would later enrich Enron's auditors. Meanwhile, shareholders who never collected their mace held shares that were legally different from shares that had, so the first listed market briefly traded the same security in several states of spice encumbrance.

The raid itself ended not by regulation but by counter raid. An opposing syndicate bought up shares, squeezed the shorts, bankrupted several of the forward traders and broke Le Maire's plan. His revenge took a stranger form. In 1614 he founded the Australische Compagnie to do by exploration what his syndicate had failed to do by force: break the VOC monopoly. His son Jacob, sailing with Willem Schouten in 1615, found the passage around Cape Horn, outside the two routes the VOC's charter covered, and rounded into the Pacific. The VOC confiscated the ships anyway; Jacob died on the voyage home; Isaac won in court in 1619 and died in 1624. His tombstone in the village church at Egmond-Binnen records that in thirty years of trade he lost, "save his honour", a million and a half guilders.

The Dutch eventually found the right word for all of it: windhandel, the wind trade, defined in the national dictionary by its effect, prices disconnecting from the real value of the thing traded. The term caught fire around 1720, when the South Sea and Mississippi bubbles made it unavoidable, but the thing it names was born in 1609, in the gap between a claim and a cargo. That is the lesson that survives. Fraud does not attack financial markets from outside. It is native to any instrument whose price can travel faster than the truth about what stands behind it. The South Sea Company, Enron, Wirecard, Theranos: each was a claim sold into a verification lag, and each collapsed the moment the cargo, or the absence of it, finally arrived.

So if you want to find the next one, do not read the story the company tells. Measure the lag. Ask how far the claim can travel before anyone can inspect the cargo, and who profits from the distance. The cargo still moves at the speed of physics. The claim moves at the speed of appetite. Four centuries of regulation have not closed that gap by a single knot.

Sources and further reading

• Lodewijk Petram, The World's First Stock Exchange: How the Amsterdam Market for Dutch East India Company Shares Became a Modern Securities Market, 1602-1700 (University of Amsterdam, 2011). (https://pure.uva.nl/ws/files/1427397/85964_03.pdf)

• Oscar Gelderblom, Abe de Jong and Joost Jonker, "The Formative Years of the Modern Corporation: The Dutch East India Company VOC, 1602-1623". (https://pure.rug.nl/ws/portalfiles/portal/632748164/the_formative_years_of_the_modern_corporation_the_dutch_east_india_company_voc_1602_1623.pdf)

• "The First Bear Raid and Squeeze: Isaac Le Maire and the Dutch East India Company", Economic History Review (2026). (https://doi.org/10.1111/ehr.70142)

• Geoffrey Poitras, "Isaac Le Maire and the Early Trading in Dutch East India Company Shares", Pioneers of Financial Economics, vol. 1. (https://www.sfu.ca/~poitras/ch2_lemaire.pdf)

• Petram, "First Dividend Distributions, 1609-18", in the dissertation above. (https://pure.uva.nl/ws/files/1427403/85967_06.pdf)

• Nationaal Archief, the 1602 Amsterdam subscription register. (https://www.nationaalarchief.nl/beleven/onderwijs/bronnenbox/aandelen-voc-1602)