Charles Ponzi - An International Con Man
WORLD HISTORY | February 26, 2019
BOSTON, MA – JUNE 22: Charles Ponzi sits at home reading, June 22, 1934, after learning he would be deported back to Italy, his native country. Source: (Photo by The Boston Globe via Getty Images)
There are many people in society who try to “get rich quick.” Taking shortcuts to fame and fortune rather than trying to build up their fortunes over time through hard work and achievement. They use various methods and schemes including what are called “Ponzi” schemes. The particular method known as “Ponzi” schemes actually originated from a con man named Charles Ponzi. He was from the early 1900s.
The Ponzi scheme is a method of fraud where investors are persuaded to invest in a product or service and are led to believe they will receive profits in the future. What they do not know is that their profits are coming from future investors.
This is the type of scheme that Charles Ponzi used back in 1918 when his previous scams had failed. He had received a letter from a company in Spain that included an international reply coupon (IRC). Back then there were coupons that could be exchanged for priority airmail postage stamps from another country. Ponzi figured out he could buy these IRCs (International Reply Coupons) in one country and exchange them for more expensive ones in another country, thereby obtaining a profit. He hired agents in other countries to buy the IRCs for him and send them to him, which he would, in turn, sell off.
Greed set in, and in an attempt to make more money, he started bringing in investors by promising them a 50% return on their investment in 45 days or 100% return in 90 days. He planned to pay them by using money collected from other investors, which worked really well for a while.
Ponzi was living it up on his newfound wealth, even buying a mansion in Lexington, Massachusetts. He was making as much as $250,000 a day, but before long his lavish lifestyle began to draw attention. When he went from being quite poor to extremely rich in such a short amount of time, many people started getting suspicious. An investigation began which threw up red flags to his investors when they heard about it. They started pulling out their money. Without their investments, his “Ponzi” scheme could not continue to work for him.
He was finally arrested on August 12, 1920, and was charged with 86 counts of mail fraud. It turned out that he owed out $7 million. After he pled guilty to the charges, he spent 14 years in prison.
Born in Italy in 1882, Charles Ponzi first came to America in 1903. When he arrived he was extremely poor, having only $2.50 on him. He made up all kinds of “stories” about his family and why he was so poor. He started off working odd jobs like dishwasher, gradually working his way to being a bank teller in a bank. Even before his “Ponzi” scheme, he was crooked. He spent three years in jail for forging a check. Ponzi went from one scam to another. Resulting in another two years in jail, he started smuggling Italian immigrants across the border to help them get into the United States.
In 1918, he met and married Rose Gnecco. He worked more odd jobs including in his father-in-law’s grocery store. After his Ponzi scheme was exposed and he was sentenced, his marriage to Rose was over as well.
Ironically, Charles Ponzi never even bought one of the International Reply Coupons (IRC) himself. Even more ironic is that when he died, he died in a charity hospital in Brazil with only $75 left to his name.
Tags: Charles Ponzi, ponzi schemes, get rich quick scheme, 1900s, scams, fraud, international con man
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