Arnold ran a diamond mine scam that netted him more than half a million dollars in 1872. He and his cousin John Slack purchased industrial-grade diamonds, and took them to businessmen in San Francisco, claiming they came from an undiscovered deposit. The businessmen were hooked, and offered to buy out Arnold, giving him $50,000 as a down payment. Phil and John used $20,000 to buy more uncut stones — some were shown to the investors, and some were planted at the phony mine. As luck would have it, these stones were mistakenly over-valued by Tiffany’s, leading the investors to cough up another $100,000. Arnold went and bought $8,000 more uncut gems.
The investors were taken to the mine and told to begin digging. As they kept uncovering gems, they decided to buy out Arnold’s remaining rights to the mine for $450,000. The hoax wasn’t uncovered until later on in the year, but by that time Arnold and Slack were gone. Arnold was eventually tracked down and indicted for fraud, but the whole thing was covered up because the investors, all prominent businessman, didn’t want the publicity. He didn’t get off completely — he settled out of court and gave back some of the money — $150,000, but was able to keep the rest. Not a bad year’s salary in 1872.