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What you are probably referring to happens in Chapter 8.
Frederick has been negotiating with Napoleon to buy the wood that Farmer Jones left behind. Napoleon finally agrees to sell it to him rather than to Pilkington.
Frederick is going to pay by check but Napoleon wants cash. Frederick pays in cash but we later find out that all the bills he used as payment were fake.
So the trick is that he uses fake money to buy the wood.
In addition to this, Frederick then attacks the farm and blows up the windmill that the animals had built.
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