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Ponzi’s Scheme: The True Story of a Financial Legend

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Before Charles Ponzi sailed from Italy to the United States with big dreams but no money, his father assured him that the streets were really paved with gold, and that Ponzi would be able to get a piece.

Ponzi came to the United States in 1903. After drifting around he found a job in an Italian bank in Montreal as a clerk. There he first saw the fraud operation known as “robbing Peter to pay Paul”.

While in Montreal, he landed in prison, for check forgery. When released he found himself back in a US prison for smuggling illegal aliens. He drifted again for some time and ended up in Boston in 1916. There he met his wife Rose and came upon the scam that today still bears his name.

The scam was based upon the international reply coupon (IRC), a financial instrument that the United States and 62 other countries had devised to make it possible “for a person in one country to essentially send a stamped, self-addressed envelope to someone in another”.

Ponzi planned on buying coupons in countries with weak currencies and cashing them in other countries with strong currencies. It would not work, but this was the basis of the scam that would allow him to offer a return of 50 percent in 45 days.

Ponzi raised the “robbing Peter to pay Paul” scam to an art form and raked in millions At the peak of his success, Ponzi was taking in more than $2 million a week. While it lasted, Ponzi’s scheme made some people rich beyond their wildest dreams. When it ended, it rocked the nation.

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  • http://www.diablog.us Dave Nalle

    How appropriate to see this in view of the Democrats resurgent effort to keep his work alive in the form of Social Security.

    Dave

  • http://www.kalyr.com/weblog Tim Hall

    I actually got a pyramid scheme chain letter in snail mail a few weeks ago. Used to get a lot in email, but that’s the first snailmail one I’ve ever seen. Are there really enough suckers who will fall for this?

    BTW, I call bullshit on the “Social Security is a Ponzi scheme” meme being spread by the libertoid right.

  • http://www.kolehardfacts.blogspot.com Mike Kole

    BS? A Ponzi scheme requires an ongoing influx of people paying in to payoff the ones at the top of the pyramid.

    Today’s workers are at the bottom of the pyramid, while those workers now retired are at the top.

    What’s to miss about Social Security being a Ponzi scheme?

  • http://www.elitistpig.com Dave Nalle

    SS is actually worse than a ponzi scheme because the structure is such that no one ever gets rich. Everyone pays in and everyone loses money.

    Dave

  • http://paperfrigate.blogspot.com DrPat

    First-in folks garnered a dramatically greater benefit from SS (also typical of the Ponzi scheme).

    If Democrats do not want to have SS labeled (correctly) as a pyramid scam, they need to accept some real lock-box method for protecting the funds – and I don’t mean IOUs from Congress to pay money back on the never-never.

  • http://www.templestark.com Temple Stark

    um, regardless of all this politics polluting the books area – I never knew that story about Ponzi. Sounds like a good read.

    What else is there in the book? Is it just a tale of the guy’s life?

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