[590] To encourage investment, Ward paid investors abnormally high interest, by pledging the company's securities on multiple loans in a process called rehypothecation,[591] which would now be understood as a Ponzi scheme. Ward, in collusion with banker James D. Fish and kept secret from bank examiners, retrieved the firm's securities from the company's bank vault.[592] When the trades went bad, multiple loans came due, all backed up by the same collateral.
Historians agree that The elder Grant was likely unaware of Ward's intentions, but it is unclear how much Buck Grant knew. In May 1884, enough investments went bad to convince Ward that the firm would soon be bankrupt. Ward, who assumed Grant was "a child in business matters,"[593] told him of the impending failure, but assured Grant that this was a temporary shortfall.[594] Grant approached businessman William Henry Vanderbilt, who gave him a personal loan of $150,000.[595] Grant invested the money in the firm, but it was not enough to save it from failure. The fall of Grant & Ward set off the Panic of 1884.
Vanderbilt offered to forgive Grant's debt entirely, an offer Grant refused.