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The eponymous Mr. Ponzi • Damn interesting



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.

  International Response Slip "title =" International Response Slip "style =" width: 476px; "/> </div><figcaption style= International Response Certificate

The strategy that Charles Ponzi now calls arbitrage was theoretically sound exchange rate and exchange rate fluctuations between countries, such as the United States and Italy, a dollar could be 20 IRC in Boston or more Buy as 60 in Rome, so Ponzi knew that someone could buy IRC in Italy for about 1.5 cents each, and send them back to the US, where he can sell them for 5 cents and a considerable profit of 233 percent more than enough to give investors a tempting 50 percent return in 45 days, or a 100 percent return in 90 days, and keep the rest for themselves. It just needed money to get things started.

When Ponzi started looking for investors, Daniels & Webster Furniture was looking for him – he had defaulted on his office furniture payments – and with unbridled confidence Ponzi was overdrawn Joseph Daniels condemned not only holding back the furniture, but essentially turning his commitment into a loan. Daniels even paid Ponzi a check for $ 20 as a further investment in the IRC operation.

Ponzi tried to convince other acquaintances, including the grocer Ettore Giberti, to entrust him with their money. Giberti went out after politely declining Ponzi's investment offer as Ponzi sweetened the offer: invest only $ 10 and become his first sales representative by retaining 10 percent of everything Giberti collected. That did the trick. By early January 1920, Giberti had raised $ 1,770 from 18 investors. Soon more agents came on board, as well as a modest stream of small investors.

While Ponzi's IRC idea was essentially legal, it was absurd in practice. Apart from the problem of how to compete with the US Postal Service for the sale of stamps, there simply were not enough international reply coupons to make any significant profit through arbitrage.

At the end of February 1920, Ponzi owed Giberti's first investors $ 2,655 – their capital of $ 1,770 plus interest of $ 885. Ponzi had no arbitrage profits to pay her. But he had money from newer investors, so he just used it to flow into Peter's funds, so to speak, to pay Paul. He claimed the profits were legitimate, a staff member named Lionello Sarti had traveled to Italy and returned with a large amount of coupons, along with the happy news that there was much more to be had. It is very likely that Sarti never existed – no one but Ponzi would ever report a meeting with the man. Ponzi's satisfied investors did not bother with it as long as they were paid.

Ponzi saw his February deception as a stopgap, which he needed only until he made the hefty profits so obvious to him through his IRC strategy. When it became known that Ponzi's word was good, that he actually paid 50 percent in 45 days, more people wanted to invest. When the next investors became interested, he again used the proceeds of the latest investors. And then again and again. The emergency solution did not stop. And Charles Ponzi would never again have to ask investors for money. From then on, they asked him to take it.

Bostonians literally lined up at the door of Ponzi's office on 27 School Street to entrust him with their money. In February 1920, Ponzi's Securities Exchange Company received $ 5,290 from new investors. In March, 110 investors generated sales of nearly $ 25,000.

Most of the people who gathered at his door only had a few dollars left. Ponzi has tailored his pitch directly to her. He climbed the stairs, which helped to increase his height to 5 feet 2 inches, and told of modest beginnings in Italy, how he went down the gangway in Boston with only 2.50 dollars in his pocket and tirelessly in recent years strained. He plans to build a financial operation that would not benefit the Wall Street bankers, he told the hypnotized crowd, but the honest and hard-working people they like.

His populist appeal, based on the fear that rich bankers might retain exorbitant profits, would remain the foundation of Ponzi's bad luck. Far from hiding his modest days, when he barely made ends meet, he was happy to talk to potential investors over the years, in which he had one simple job after another. It made a moving story. But he left out the part he had to jail for checking for counterfeiting, knowing that this would mean the end of his reputation as a legitimate financier.

So it was not without reason that one day he recognized the face of one of the many people who applied for a job in his office. It belonged to Lou Cassullo, his former cellmate from Montreal, who had tracked down Ponzi after learning of his success. The man Ponzi compared to a hyena knew very well that Ponzi could not afford anyone to know about his prison history, and Ponzi knew he knew it. Cassullo soon found himself on Ponzi's payroll, accepting a generous paycheck and helping out on some bonus bills whenever he wanted. Ponzi wanted to get him out. With Prohibition in full swing, he once tried to arrest his new job by sending him off to buy a few bottles of his favorite whiskey. But Cassullo has just returned with the alcohol.

Whether Cassullo shut up or not, Ponzi feared that prosecution would sooner or later show an interest in his operation. And one day, the Boston police actually sent two detectives to check it. Ponzi made a particularly convincing show for the two men, each of whom considered the plan legitimate, then pulled out their wallets and invested on the spot.

Five police inspectors and a lieutenant would eventually put their money into Ponzi's Securities Exchange Company, as hundreds of street policemen would do. Some of them became agents, earned 10% commission, and gave his business a legitimate image that could not buy money. By the spring of 1920, Ponzi raised $ 30,000 every week. In May alone, 1,525 investors contributed $ 440,000. In June, nearly 8,000 investors entrusted Ponzi $ 2.5 million, which is $ 32 million today.

  A photo from a Ponzi photo shoot "title =" A photo from a Ponzi photo shoot "style =" width: 476px; "/> </div><figcaption style= A photo of a Ponzi photo shoot

Ponzi paid all his debts, including $ 200, which he still owed on his loan from furniture retailer Joseph Daniels, and invested in the Splendor Macaroni Company and the Napoli Macaroni Company He bought real estate.

It had taken almost 17 years, but by June 1920 Charles Ponzi had finally fulfilled his promise to his mother, and now, as a very rich man, he sent her first-class tickets to sail to America Imelde came to join the Ponzis in her life of American aristocracy, in a newly decorated mansion in the affluent city of Lexington, Massachusetts, basking in prosperity that grew with each new investor.

Until the end of the Year In June, the sheer amount of money arriving at 27 School Street overcame Ponzi's growing staff and his accountant was supposed to pour cash into recycle bins until it could be counted, sorted and deposited on a bank – minus the bills Cassullo had left in his pocket.

Ponzi could have kept his money with every Boston bank. Oddly enough, his favorite was the Hanover Trust, whose president Henry Chmielinski had roughly refused him a loan a few months earlier. By June, Ponzi was the bank's largest depositor, which ensured that Chmielinski would never again do anything to insult him. With banks lending money from depositors as loans to other clients, a sudden payout by a major depositor would prove catastrophic. Ponzi was aware of this fact and enjoyed his position of power.

When summer was in full swing and so many Boston policemen were among his lucky investors, research into the legitimacy of Ponzi's operation was minimal. But there were some. In July, the US Postal authorities announced an official ban on people redeeming more than 50 cents of IRCs at the same time. This made it almost impossible to make a big profit from trading in IRCs. But this fact was now contentious. In mid-July, Ponzi borrowed $ 1 million a week from investors, which equates to approximately $ 13 million. He kept his promise of exorbitant returns, and for them that was all that mattered.

The same day that the US Postal Offices issued a ban, a lawyer from furniture retailer Joseph Daniels filed a lawsuit against Charles Ponzi. The lawsuit alleged that Daniels had half ownership of the Securities Exchange Company in return for loaning office furniture to Ponzi and issuing a $ 20 check in December. He wanted a million dollars.

Complaints about seven-digit amounts were still relevant at this time. When the Boston Post put it on the front page of their Sunday issue, July 4, one reader was particularly interested: the state banking commissioner Joseph C. Allen, a quiet but industrious official, Governor Calvin Coolidge had recently called to office. Allen read about Ponzi's lawsuit and went to Massachusetts Attorney General J. Weston Allen (unrelated) to recommend an investigation. Something about Ponzi did not seem right, the newly-appointed Allen told veteran Allen. The attorney general felt a freshman on his lawn and urged the political freshman to retire. Commissioner Allen relaxed as ordered – but his distrust of Ponzi did not diminish.

The Daniels trial had also aroused the curiosity of Robert Grozier, who had recently become editor of The Boston Post when his father Edwin Grozier became ill. The younger grozier never sought and wanted his father's position, and the son of privilege had shown no talent for this or any other job that required intellectual reason. He flew out of Harvard three times – the composition of newcomers was particularly challenging, which is never a good sign for a journalist. Grozier was the first to realize his own limits. For family reasons, he felt he had no choice but to oversee the revered Boston Post for his father. Ponzi's relationship with Hanover Trust continued to increase. He not only kept most of his money in the vaults, but also bought the shares of the bank and made friends with other shareholders. When the bank announced plans to issue a new block of 2,000 shares, Ponzi visited Mr. Chmielinksi and offered to buy them all. Chmielinksi politely declined, on the grounds that this would give Ponzi control of the bank. That's what Ponzi had in mind. When Chmielinski casually asked for his current, very large balance, he gave way a lot. He told Ponzi he could buy 1,500 shares. Ponzi accepted. Charles Ponzi effectively controlled Hanover Trust Bank through his links with other shareholders who would soon make him director and then member of the executive board. He would soon make plans to use this new power.

When the news of the purchase of shares with Commissar Allen arrived, he again decided to investigate Ponzi, with or without someone else's permission. This time, the other Allen went with them and sent two deputy attorney general to a meeting with Ponzi at the Boston State House.

Ponzi had no legal obligation to comply with the invitation, but nevertheless was eagerly present. Ponzi handled every question confidently and felt intellectually superior to government officials. "I was almost ashamed to have understanding with them. It was like stealing sweets from a baby, "he later said. After Ponzi left the meeting, officials agreed that his strategy seemed plausible and had no reason to stop him.

Given that investors could only be paid while new ones emerged, Charles Ponzi was aware that no Peter-to-Paul scheme could last forever. As the IRC strategy was no longer an option and the authorities began to show interest, he drew up a series of plans to become legitimate. One of the greatest was the plan to buy manned naval vessels since the end of the First World War, turning them into huge floating showrooms where American manufacturers could take samples of their goods to foreign ports.

Ponzi did not believe that he was doing something fundamentally wrong by paying off investors with the capital of other investors. He was convinced that he would eventually fulfill his obligations in completely legitimate ways. He wanted to make sure that the public knew of his legitimate business plans, and to help in that, he hired William McMasters, a straightforward publicist with an exceptionally bright future. McMasters had earned the reputation of bringing numerous officials to the polls, including political figures such as John F. "Honey Fitz" Fitzgerald – the future grandfather of President John F. Kennedy. McMasters began work on July 23, 1920.

  Charles Ponzi on the way to a court date "title =" Charles Ponzi on his way to a court date "style =" width: 476px; "/> </div><figcaption>  Charles Ponzi Towards a Judicial Appointment </figcaption></figure>
<p>  On 24 and 25 July <i>the Boston Post </i> published several articles on Ponzi and his activity that were generally optimistic and positive Www.mjfriendship.de/de/index.php?op…95&Itemid=55 However, on 26 July, the Post reported on the more threatening news that the tax authority Clarence Walker Barron respected, whose name is still available on the website of PONZI has been preserved The plan was considered implausible by Barron's, and in the following days, the number of new investors rose to only $ 6.5 million from nearly 20,000 investors this month, with almost 30,000 so far Men, women, and even a number of children were entrusted with a total of $ 9.6 million. </p>
<p>  While the stories delighted investors, Ponzi knew they would also attract additional authorities who would soon knock Instead of waiting, he decided to go to them. With McMasters at his side, Ponzi hastily arranged meetings with US District Attorney Dan Gallagher, District Attorney Joseph Pelletier, and Attorney General J. Weston Allen. He did not arrange a meeting with Commissioner Allen, who was convinced that his previous meeting had satisfied his concerns. </p><div><script async src=

While McMasters was taking notes, Ponzi made an astonishing offer to each agency: he opened his books to an accountant of his choice to prove that he had sufficient assets to meet his obligations. That was impossible, of course-but only if he limited the assets to his own.

Ponzi calculated that he had to expose $ 15 million in cash and other cash to prove his solvency. But he had at most half of it. Incidentally, he planned to simply go to the Hanover Trust on the day of the settlement and, as bank manager, to grant him a very unusual loan for himself. Then he entered the vault, dropped several million dollars from other depositors, brought it to the accountant to prove his liquidity, and returned it the same day.

While the trial began in the coming days, the Boston Post reinforced its criticism of Charles Ponzi. An editorial flatly argued that Ponzi's plan could not last. One day, the New York Postmaster reported that there were not enough international coupons around the world to make a fortune like Ponzi's. Then they published another, more detailed analysis of Barron. Why would Ponzi put his own money into investments to achieve single-digit returns, Barron argued, if he could achieve a 100 percent return in 90 days? The clear accusation used a logic that anyone could understand and that was more than enough to make Ponzi's investors flee. That did not do it. Almost all of them stayed.

Ponzi may have thanked Barron for the unintentional forgery, but instead sued him for $ 5 million and even made claims to Barrons huge farm if Barron did not have the money. To Robert Grozier's relief, Ponzi did not sue the Boston Post . But he had fired a shot over her bow and threatened to "own her presses" if they were not careful.

While the accountant, a diligent accountant named Edwin Pride, was attempting to explain the random keeping of records at the Securities Exchange Company, William McMasters was struggling with a personal dilemma. At the meetings Ponzi held the exam, McMasters found disagreement as his boss moved from meeting to meeting. So in the next few days he took a closer look at Ponzi's operation. He did not need time to conclude that it was a massive fraud. Knowing that his own career was in danger, he turned his discovery to Robert Grozier of The Boston Post and offered to write a full synopsis. Grozier refused. He had gone as far as he could without risking a devastating lament.

McMasters, der für seine straffe Gesetzestreue bekannt ist, machte eine Ausnahme, indem er sich an den Bezirksstaatsanwalt Nathan Tufts wandte, der garantierte, dass die Post vor Klagen gefeit ist, “falls sich herausstellen sollte, dass die Geschichte ausfällt falsch und verleumderisch zu sein. “Als Robert Grozier von diesem Versprechen erfuhr, erlaubte er McMasters, ein erstaunliches Exposé zu veröffentlichen. "DECLARES PONZI IST JETZT HOFFNUNGSLOS INSOLVENT", lautete die Schlagzeile. Die Geschichte fuhr fort, um alles, was McMasters gesehen und abgeschlossen hatte, im Detail zu beschreiben.

Am nächsten Tag verlangte eine kleine Anzahl von Ponzi-Anlegern ihr Geld zurück. Aber das Exposé hat das Vertrauen der Öffentlichkeit nicht wesentlich beeinträchtigt. Ponzi behauptete, McMasters habe keinen Zugang zu Einzelheiten der Operation und erzählte diese Lüge, um die Aufmerksamkeit von dem wahren Verbrechen abzulenken: McMasters habe nicht 2.000 Dollar veranschlagt, die ihm für die Platzierung von Anzeigen anvertraut worden waren. Um die Behauptung zu untermauern, dass McMasters Louis ein Dieb war, verklagte ihn Ponzi wegen dieses Betrags. McMasters verklagte ihn sofort wegen 5.000 Dollar. Die Öffentlichkeit war auf der Seite von Ponzi. Innerhalb weniger Tage war seine Operation mehr oder weniger wieder normal.

Ponzis Plan, vorübergehend Geld aus den Tresoren des Hanover Trust zu leihen, hätte möglicherweise funktioniert, wenn es nicht eine Fehleinschätzung gegeben hätte. Bankkommissar Joseph Allen hatte das Interesse an Ponzi überhaupt nicht verloren. Tatsächlich nutzte Allen seine Befugnis, um den Hanover Trust anzurufen und ihn anzuweisen, jeden Dollar, der in ihre Tresore fließt und aus ihnen fließt, zu überwachen und ihm detaillierte Berichte zu übermitteln. Ponzi war dies nicht bekannt. Als diese Berichte seinen Verdacht noch verstärkten, entsandte er zwei Prüfer in die Bank. Als weitere Ermittlungen ergaben, dass Ponzi sein Girokonto eindeutig überzogen hatte und dass Bankangestellte illegale Operationen durchgeführt hatten, die nichts mit Ponzi zu tun hatten, hängte Allen ein Schild an die Tür der Bank: Er nahm den Hanover Trust in Besitz und schloss dessen Türen bis auf Weiteres.

Als Ponzi es herausfand, wusste er, dass er seine eigene Bank nicht ausrauben konnte. Er konnte nur hoffen, dass Auditor Pride sich verrechnete oder ein anderer Glücksfall auf ihn zukam. Aber was als nächstes geschah, war alles andere als glücklich.

Ein Reporter der Boston Post hatte einen äußerst interessanten Tipp erhalten: Einem "Charles Ponsi" wurde nachgesagt, er habe Zeit im Gefängnis in Montreal verbracht, um Schecks zu fälschen. Grozier war sich des anonymen Trinkgeldes zweifelnd bewusst und schickte einen Reporter nach Montreal, um ihn sich anzusehen. Mit Fotos von Charles Ponzi in der Hand hatte der Reporter kaum Probleme, mehrere Personen zu finden, darunter den Aufseher der Strafanstalt Saint-Vincent-de-Paul, um den Mann auf den Fotos als denselben Charles Ponsi zu identifizieren, der Zeit in seinem Gefängnis verbracht hatte 12 Jahre zuvor.

Am 11. August 1920 um 13:00 Uhr morgens konfrontierte ein Post-Reporter Ponzi in seinem Haus in Lexington mit dem Artikel, der für die Ausgabe dieses Tages vorbereitet wurde. Als Ponzi die Behauptung hörte, bestritt er, Ponsi zu sein und sagte, er solle die Geschichte nicht erzählen, sonst würden Sie die Pressen aus Ihrem Gebäude herausreißen. Die Geschichte lief trotzdem, eingekapselt in die Überschrift: „Montreal Police, Jail Warden and Andere erklären, dass Charles Ponzi aus Boston und Charles Ponsi aus Montreal, die wegen Fälschung an der italienischen Bank zu zweieinhalb Jahren Gefängnis verurteilt wurden, ein und dieselben Männer sind. “Bei einem Interview mit Reportern an diesem Nachmittag änderte Ponzi seine Antwort. Ja, er war der Mann, der für dieses Verbrechen verurteilt wurde. Aber er hatte es nicht begangen. He claimed to have taken blame out of mercy, for a crime actually committed by his boss Louis Zarossi, who was struggling to support his wife and children. The impromptu story was so far-fetched that even Ponzi’s own lawyer, standing at his side, resigned on the spot.

The next day, authorities informed Ponzi that Edwin Pride had calculated his liabilities at about $7 million. The official tally would be announced the next day. Ponzi did not wait, and instead turned himself in to the authorities. He was placed under arrest on charges of using the U.S. mail to commit fraud. In public statements, Ponzi continued to portray himself as doing the work of the people, this time by admitting that he did indeed lie about relying on the postal coupon scheme, but only to keep Wall Street bankers from discovering his true operation, which would earn not tens of millions of dollars but more than $100 million. He offered no details. But now it made no difference. A stream of additional indictments soon followed.

A run on a Ponzi bank" title="A run on a Ponzi bank" style="width:476px;"/></div><figcaption style=A run on a Ponzi bank

In the days that followed, hundreds of investors registered their names as victims, hoping to recover some of their losses. They were aided by numerous more fortunate investors, ones who had received payouts from Ponzi and kindly returned their ill-gotten gains. In the end, roughly 20,000 victims were awarded refunds of just under 40 percent of their investments. Thousands more got nothing but a costly lesson in naïveté.

Charles Ponzi was convicted on federal mail fraud charges and sentenced to five years of prison. In May 1921, while Ponzi enjoyed the nice view of Cape Cod Bay from the Plymouth County Jail, The Boston Post’s publisher Robert Grozier won a Pulitzer Prize, the first awarded outside of New York, for his “courage and fine sense of newspaper honor” in exposing Pon zi. There was no mention that his courage was bolstered by a secret and legally dubious promise of immunity from prosecution. That fact would remain hidden until 2009, when the unpublished memoirs of William McMasters were unearthed in a book shop in New Jersey.

Charles Ponzi’s mail fraud sentence was reduced by one year for good behavior. Upon his release in 1925, state prosecutors took their turn and secured another conviction and prison sentence of seven to nine years. While on bail awaiting his return to jail, and confident he would win an appeal, Ponzi went to Florida and hatched a brand new investment scheme, this time in real estate, and this time offering investors a 200 percent return in 60 days. Florida officials quickly shut it down and arrested him. He was sentenced to one year in prison for violating state securities laws.

Out on appeal for this latest charge, Ponzi decided he could not bear the thought of returning to prison. So he disappeared. With a nationwide manhunt underway, he used his fluent Italian and years of experience as a manual laborer to secure a job as a waiter and dishwasher aboard an Italian freighter. Disguised by a moustache and shaved head, he decided to end the manhunt by faking suicide, asking friends to put some of his clothes and a suicide note on a Florida beach. The ship set sail from Tampa and Charles Ponzi, now using the alias Andrea Luciana, was again a free man.

It was a perfect escape. Almost. After revealing his true identity to a shipmate, Ponzi was in time met by authorities in New Orleans who placed him under arrest. Taken back to Massachusetts, Ponzi served seven years in prison and then, having never obtained U.S. citizenship, was promptly deported.

Back home in Italy, Ponzi struggled to make ends meet doing odd jobs. He spent two years writing his autobiography but failed to find an American publisher. He moved to Brazil in 1939 to take a job for the Italian state airline. When that job fizzled, he operated a small rooming house and taught English in Rio de Janeiro, where, following a steep decline in health, he died in 1949 with a net worth of $75.

Charles Ponzi delivered to the SS Vulcania for Deportation, 1934" title="Charles Ponzi delivered to the SS Vulcania for Deportation, 1934" style="width:476px;"/></div><figcaption style=Charles Ponzi delivered to the SS Vulcania for Deportation, 1934

Charles Ponzi’s Ponzi scheme was not history’s first. But its ingenuity, audacity, and unlikely success was such that the Encyclopedia Britannica, in 1957, lent Ponzi’s name permanently to the scheme. The Oxford English Dictionary would later cement the term “Ponzi scheme” into the lexicon with its definition: “A form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.“

Ponzi’s scheme was also not the largest in history. That honor (so far) goes to Bernie Madoff, famously arrested in 2008 for defrauding investors of an estimated $65 billion over the course of 16 years, using the same ba sic ruse of paying off earlier investors using proceeds from new ones. And in the time since the Madoff conviction, the U.S. Securities and Exchange Commission has enforced actions against more than 50 similar schemes.

And those are just the ones authorities have managed to find.


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