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| Charles Ponzi in 1920 |
Carlo Ponzi, (March 3, 1882- January 18, 1949), commonly known as Charles Ponzi, was a businessman and con artist in the U.S. and Canada. Born in Italy, he became known as a swindler in North America for his money making scheme.
Charles Ponzi promised clients a 50% (compared to the just 5% p.a. guaranteed by the banks at the time) profit within 45 days, or 100% profit within 90 days, by buying discounted postal reply coupons in other countries and redeeming them at face value in the United States as a form of arbitrage, however, he soon diverted investors' money to make payments to earlier investors and himself.
Ponzi opened for business in December 1919, and soon the first few customers began trickling in. There was no need for advertising; word of mouth sufficed, (as on the next posts will be demonstrated, is a typicall characteristic of these scheme). In February 1920, he took in $5,290; in April, more than $140,000; in May, more than $440,000; in June, more than $2.5 million; and in July, nearly $6.5 million -- this at a time when the president of Harvard earned $6,000 a year. In seven months, 30,000 people had entrusted Ponzi with almost $10 million of their money.
Only a year later, in 1920, his investors found themselves practically wiped out, receiving less than 30 cents on the dollar, loosing about 20 million in 1920 dollars (225 million in 2011 dollars); while ponzi was convicted of a variety of federal and state offenses. After several years in prison, he was deported to Italy in 1934.
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