And we are back! Thank you for your patience. Alan's new daughter is doing well, thanks for asking.
Nobody knows who did it first. Scammers have defended fraud for centuries and rewarded existing investors with new investor deposits to create the illusion of an incredibly profitable investment opportunity. Before 1920, it was considered "Peter to rob Paul" or as "Peter-to-Paul scheme". For example, in 1880, Sarah Howe, a fortune-teller and a frequent visitor to the Massachusetts State Mental Hospital, employed nearly $ 500,000 from her followers. In 1884, former President Ulysses S. Grant fell victim to such a scheme that left him destitute.
But it was Charles Ponzi who received a permanent naming right to the system in Boston in 1
920, blinding the investing public and the stunning authorities like no other. In this sultry summer, the Bostoners in every way asked the tiny investment banker to use their money for an unprecedented return: 100 percent in 90 days. In less than a year, Ponzi earned nearly $ 7 million in profits – more than $ 90 million today. His fall was as fast as his meteoric rise.
Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi was born on 3 March 1882 in Lugo, Italy. His father, a postal worker, died when Carlo was ten years old and left the family without breadwinner. His mother Imelde came from the Italian aristocracy. She sent Carlo with just enough money to graduate from the University of Rome, and he hoped he would use it to thrive on the family and restore her former social rank.
Carlo has destroyed such hopes. He loved college, 500 miles from home, but not for education. There he enjoyed the life of a connoisseur, skipped the lesson and made friends with students from privileged families. He spent much of his money on good food and equally good clothes and collected more tabs than books. He returned home destitute and without graduation. Determined to fix things with his unfortunate mother, Carlo vowed to sail to America, pick up some of the gold allegedly lining the streets, and become a very rich man. He left Naples on November 3, 1903 with $ 200 in his pocket. He arrived at $ 2.50 in Boston, the rest in the pockets of card players earning a living from unsuspecting immigrants on ships.
Ponzi found it harder to make money in America than he expected. For almost four years he worked as a grocer, factory worker, dishwasher, waiter and painter. He repaired, folded laundry and everything else to keep food in his stomach. He took the first name Charles and a number of other surnames, including Bianchi, Ponsi, Ponci and Ponce.
Ponzi did not limit his job search to Boston. In July 1907, he found employment in Montreal, straining his mind, not just his back. There, a man named Louis Zarossi hired him after a five-minute interview as a bank employee. He joined the Banco Zarossi, which was doing a booming business for the Italian immigrant community, paying 6 percent interest to depositors – three times the rate offered by other banks. And he did that in an unscrupulous way.
Zarossi's clients included not only depositors but also immigrants who gave him money to bring the family to Italy. He simply stole some of this money, paying his depositors the promised 6 percent. It could take months for wire customers to complain, and when they did, he pleaded ignorance and blamed the recipient. No one can say exactly how much Zarossi stole in this way, but in July 1908 he filled a suitcase with cash and fled to Mexico.
Unemployed and tired of earning money in the traditional way, Ponzi one day entered the office of the Canadian Warehousing Company, a former client of Banco Zarossi. The office staff knew and trusted Ponzi. While nobody was looking, he found the checkbook of his company, took out a check and put it in a bag. Later he wrote it down to the seemingly authentic amount of $ 423.58 and then carefully faked the signature.
After Ponzi had cashed the check and visited a number of clothiers to dress in style, his buying spree was short lived. Bank employees suspected the authenticity of the check signature. They contacted the police, who had little trouble finding and arresting him. He faked a mental illness by chewing a towel and then clambering wildly against a wall against a barred window. Convincingly reassured by a straitjacket, he earned an upgrade to the infirmary by convincing his epilepsy jailer. His insane act went only so far. Ponzi was eventually sentenced to a three-year prison sentence in the Saint-Vincent-de-Paul detention center. His prison guards chose the name Charles Ponsi.
In the prison, he crushed stone, slept on a bed of corncob shells, and shared a cell with a particularly evil convict named Louis Cassullo. Ponzi later described him as "one of those wandering, small, underhanded thieves whose counterparts in the animal kingdom are the hyenas and the jackals." After a ten-month tenure for good behavior, Ponzi was only too happy to say goodbye to his disagreeable cellmate ,
Not three weeks later, after living with friends and doing odd jobs to earn some money, Ponzi jumped on a train back to the US. With him sat five more Italians, all young immigrants who spoke no English and lacked proper papers. They appreciated his company, advice and interpreting skills, which he would soon regret. When a customs officer questioned the group, it was assumed that Ponzi was their leader, although he protested that he did not know the men. Prejudice against immigrants of Italian origin – also known as Anti-Italianism – was the discrimination du jour. Ponzi was arrested for smuggling foreigners. During the trial, the prosecutors received a conviction, supported by the testimony of the other Italians, each of whom testified in return for his release against Ponzi.
Ponzi was sentenced to two years in Atlanta Prison. After his release, he spent the next five years touring the southeastern United States, working in various professions – as an accountant, translator, painter, and librarian – before finding himself back in Boston.
There Ponzi received a promising job in 1917 as an employee at the J.R. Poole Company, an import / export company. His job was to keep an eye on foreign missions. The initial salary of $ 16 a week was not particularly high, but soon rose to $ 25 and then to $ 50.
• • •
In May 1917, Ponzi Rose met Gnecco, the daughter of a merchant, and married her. Rose enjoyed her humble, newly married lifestyle. But Ponzi was determined to make her the wife of a millionaire. "I want you to throw away a hundred dollars," he told her.
In September 1918, Ponzi resigned from J. R. Poole to run his father-in-law's business. Ponzi was confident he could turn things around and turn the store into a trading empire he led himself. Instead, the business went bankrupt quickly. Ponzi was out of work again, but had no ideas to get rich, this time as a commodity broker.
Unfortunately, the first item he tried to sell seemed to belong to someone else. In May 1919, the Ponzi authorities issued a warrant for stealing 5,387 pounds of cheese. It is not known if the arrest warrant was granted. When the investigation started, Ponzi feared that he could be deported as soon as the authorities learned of his two prison sentences. He also feared that Rose would learn of his criminal past, in the false belief she did not know yet. During her engagement, his mother Rose told her all about his imprisonment and both women decided not to tell him that Rose was privy to his past. But Ponzi had a happy break – a spelling of his name in the cheese court records, such as "Charles Pouzi," led to the dismissal of the prosecution.
Ponzi then decided to publish an international journal he named Traders Guide where advertisers would pay for advertisements anywhere in the world. Ponzi was so confident that he leased office space, bought $ 350 worth of furniture from the Daniels & Wilson Furniture Company, and hired a small staff.
Ponzi quickly exhausted his meager savings. To keep the business running, he applied for a loan from the Hanover Trust Company. Henry Chmielinski, the president of the bank, personally rejected him. Ponzi reminded him that he was already a loyal customer of the bank. Chmielinski added an insult that Ponzi would never forget: "Your account is a burden rather than an advantage for us. Good day sir. Ponzi returned to his office and dismissed his staff.
Not long after the end of the Traders Guide in August 1919, Ponzi received a letter from a trader in Spain asking him about it. The letter was accompanied by a curious, official-looking piece of paper. It was an International Reply Coupon or IRC. Created in 1906 by a multinational organization of postal services to facilitate international mail exchange, one could buy an IRC from a local post office and send it in a letter to one of the participating countries. There, the recipient could redeem it for local stamps required to send a return. Ponzi stared at the coupon and finally realized how he could make millions. And this time he was right.