Ivar Kreuger - The Kreuger Crash

The Kreuger Crash

Kreuger's death precipitated the Kreuger Crash which hit investors and companies worldwide, but particularly hard in the USA and Sweden. In 1933 and 1934, the U.S. Congress passed several security reform legislations that were meant to prevent a repeat of the Kreuger Crash. These bills were largely successful in their mission and the American financial industry did not witness frauds of the same magnitude until the Enron scandal and Bernard Madoff's Ponzi scheme.

A Foreign Affairs report from 1930 had judged that of the $630m worth of assets the company claimed to have, $200m came from the match business, $30m were in the bank, and the other $400m were merely categorized as "other investments." When the company finally went bankrupt at the end of March 1932, claimed assets of $250m turned out to be non-existent.

Prior to the crash, Kreuger had issued thousands of participating debentures. These were very popular, and a firm public belief in the rising Kreuger empire convinced contemporary Swedes to invest in these "Kreuger papers". Following the Kreuger crash, both the debentures and shares became worthless, and several thousand Swedes and small banks lost their savings and investments as a result. Large investors and suppliers apart from share holders, received a total of 43% back. The banks related to the Wallenberg family company group, Stenbeck company group, and Handelsbanken took over most of the companies in the Kreuger empire. Swedish Match recovered shortly after the crash as did most of the industrial companies within the Kreuger empire. Swedish Match received a large government guaranteed loan that was fully repaid after several years. IMCO in USA however did not survive. The liquidation took nine years and was eventually finished in 1941.