How did the De Lacey family lose their money?

The cause of this unhappy upheaval was Safie's father, a wealthy Turkish merchant who had been unjustly imprisoned by the Parisian government. All of Paris knew that racism, and a hatred of the merchant's Islamic faith, were the true cause of his incarceration. Felix, appalled by this injustice, went to the merchant's cell and vowed to do everything in his power to liberate him. To encourage the young man, the merchant promised Felix the hand of his beautiful daughter in marriage. The two young people fell in love immediately upon seeing one another, and eagerly looked forward to their union.

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As Felix was conducting the two fugitives across the French countryside, the French government threw Agatha and the elder De Lacey into prison. Felix, hearing of this, immediately decided to return to France, and asked the merchant to lodge Safie in Italy until such time as he could meet her there.

In Paris, the De Laceys were stripped of their ancestral fortune and condemned to live in exile for the rest of their lives. The treacherous merchant did nothing to help them, and in this way did the De Laceys come to live in the miserable German cottage in which the creature had found them.