In December 1869, Lay was hired as a foreign advisor by the Meiji government of the Empire of Japan to assist in raising its first foreign loan, for 1 million pound sterling which was needed to finance the construction of Japan's first railways and telegraph lines. Having led the Japanese government to believe that he would raise the money through private investors, Lay instead floated Japanese sovereign bonds on the London Stock Exchange, arranging to have the interest on the bonds credited to his private accounts. When the Japanese government discovered the fraud, they cancelled his contract and appointed the British Oriental Bank in his place.