Noted Italian immigrant to the United States. In 1920, he claimed he had found a new and novel way to make money, somehow related to buying stamps in one country and selling them in another. He promised investors a 50% profit on investment in 40 days, and to early investors, he did indeed deliver on this promise. But what he was really doing was keeping the money for himself, and paying back his original investors with money given to him by new investors. In other words, for every 10 investors who gave him $100 on January 1, he had to find 15 new investors to give him $100 before Feburary 14.

Any idiot can see that this strategy is bound to fail, since he would be bound to run out of either investors or new money within a year. However, it was tough to catch him, because while the money was coming in, no one wanted to turn him in. In promoting himself, Ponzi played on the idea that what he was doing was good for his Italian friends (a few were indeed getting rich), and claimed that government investigation of his operation was a plot to keep Italian immigrants down (the US did indeed have a spotty track record in its treatment towards its new citizens).

Today, implementations of Ponzi's ideas are also known as pyramid schemes.

More on the late history of Mr. Ponzi -- the collapse began on July 26, 1920, when The Boston Post ran a story on the front page questioning the legitimacy of Ponzi's scheme. Crowds massed outside his corporate offices, but he was able to quell them by returning people's money. The crowds died down, and people cheered him in the streets for his continuing honesty and business acumen.

On August 10, his company was declared bankrupt. On August 12, he confessed that he had a criminal record dating back to 1908. In that year, he had served twenty months in a Canadian prison on forgery charges related to a similar high-interest scheme. This was followed in 1910 by an two-year sentence in Atlanta, Georgia for smuggling five Italians over the Canadian border into the United States.

He was busted on August 13, by which point investors had already put $15,000,000 into the scam. Those who had not pulled out before the arrest got back only $0.12 for each dollar invested. Half a dozen banks crashed in the aftermath of Ponzi's fall.

Jail term #3

Ponzi served 3 1/2 years in jail, and then the story gets interesting. The Commonwealth of Massachusetts decided to tack an additional 7 to 9 years to Ponzi's sentence, then they released him on $14,000 bond pending an appeal. He disappeared about one month later.

Florida

With his new-found freedom, Ponzi moved to Florida. There, under the name of 'Charles Borelli', he was involved in another pyramid scheme. He purchased land for $16 an acre, subdivided it into twenty-three lots, then sold each lot for $10. He promised investors that their initial $10 investment would translate into $5,300,000 in just two years. Given the insanity of this promise, it seems redundant to point out that much of the land was underwater and absolutely worthless.

Jail term #4

Ponzi was indicted for fraud and sentenced to one year in a Florida prison. He jumped bail (again) on June 3, 1926 and ran off to Texas. He was captured on June 30 and sent a telegram to Calvin Coolidge asking to be deported back to Italy. His request was denied and he was sent back to Boston to complete his jail term. After seven years, Ponzi was released on good behavior and deported to Italy on October 7, 1934.

Italy, then Brazil

Back in Rome, Ponzi became an English translator. Mussolini then offered him a position with Italy’s new airline and he served as the Rio de Janeiro branch manager from 1939-1942. Ponzi discovered that several airline officials were using the carrier to smuggle currency and Ponzi wanted a cut. When they refused to include him, he tipped off the Brazilian government. The airline failed after World War II, and Ponzi was left without work.

He then alternated between providing English lessons and drawing from the Brazilian unemployment fund. He died nearly penniless in 1949 in Rio de Janeiro. The last picture of Ponzi, taken in the hospital, shows him with a big smile on his face.

Sources:
U.S. News and World Report, August 21, 2002
Boston Globe, November 22, 1999
Smithsonian Magazine, December 1998
http://www.ianxxi.ezbytes.co.uk/useless/ponzi.htm

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