BENTON, Ky. – Ghost cattle may have cost investors millions of dollars. It is believed to be one of the largest scandals in cattle industry history.

 “Drovers,” a cattle magazine, reported that Brian McClain, 52, a cattleman from Benton, Ky. had been recruiting investors for the past six years. He was guaranteeing a 30 percent return on investment. His cattle inventory grew very large, very quickly. Investors saw profits at the beginning, but it turns out the payments were all made with borrowed money.

 Investigators instead discovered the existence of 80,000 “ghost cattle” that were never actually raised or sold. McClain’s lender was Rabo AgriFinance, which sources claim became suspicious in April as the inventory of cattle on paper had reached 88,000 head. The scheme unraveled quickly when Rabo AgriFinance officials ordered an inventory check and found only about 10,000 head of live animals.

The scheme involved falsifying cattle ownership documents and inflating the value of the cattle. Some cattle producers sold loads of cattle and their checks bounced as the scheme unraveled.  

 McClain’s scheme allegedly dates back six years when he began seeking investors for his cattle operations with the “guarantee” of a 30 percent return on investment. Some investors did see hefty profits. But those investors were apparently paid with borrowed money.

 McClain committed suicide on April 18, leaving his family facing financial ruin. 

 Three entities (McClain Farms Inc., Benton, Kentucky; 7M Cattle Feeders Inc., Hereford, Texas; and McClain Feed Yard Inc., Friona, Texas) filed bankruptcy petitions with the U.S. Bankruptcy Court on April 28.

 Dozens of cattle producers and lenders are affected by this scheme but none more than Rabo AgriFinance, of St. Louis, Missouri, which says it is owed more than $509 million. At least 102 creditors from 14 states (including Kentucky and Iowa) are owed money by McClain’s companies.

 Rabo AgriFinance filed a lawsuit last month stating that in December 2022, McClain’s paper inventory listed 89,522 head of cattle with a borrowing base of $97.2 million as collateral. Two months later both numbers had declined very steeply, to 37,992 head of cattle with a borrowing base of $36.7 million.

 Then, in April the company performed a collateral inspection and revealed that there were only 7,481 head of cattle in Texas and 3,094 head of cattle in Kentucky. That was the “red flag” for Rabo AgriFinance after officials there saw the number of cattle pledged dwindle by nearly 79,000.

 The “ghost-cattle” scam occurs more frequently than many realize.

 In March of 2021, Cody Easterday, 51, of Mesa, Washington, pleaded guilty to using his company, Easterday Ranches, to defraud Tyson Foods Inc. and another company out of more than $244 million by charging them the under various agreements for the purported costs of purchasing and feeding hundreds of thousands of cattle that did not actually exist.

 Easterday entered an agreement with Tyson, stating that Tyson would pay the costs of obtaining and caring for between 145,000 and 180,500 cattle annually, and then pay Easterday the market value of the cattle, minus the amounts already paid plus four percent interest on those amounts, when they went to slaughter.

 Starting in 2011, Easterday began incurring financial losses from speculative trading on cattle futures, losses of $54.8 million by 2015. To offset his trading losses, Easterday began billing Tyson for the cost of feeding nonexistent cattle. In 2020, an internal review by Tyson discovered the deception.

 Easterday’s scam ran for four years. He is serving an 11-year sentence in prison.