Getting to know Charles Ponzi

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Charles Ponzi (1882-1949) was a US immigrant from Lugo, Italy who swindled thousands of New Englanders in a postage-stamp scam in the 1920s. He popularized an investment which paid returns to investors out of the money paid by those who followed them rather than from profit. This illegal money operation was named after him. The Ponzi scheme as it is known today, evolved with many variations. Disregarding some differences in the swindling method, Ponzi had been sometimes referred to as the “pyramid scam.”

Promising 40% investment return against that which was offered by savings banks with only 5% yield, Ponzi convinced thousands of investors that he could make astounding profits on a buy and sell of international mail coupons. His scheme worked for sometime on the principle of “rob Peter to pay Paul.” Basically, it was a set-up of cash pay-off and distribution without real investment—http://www.sec.gov/answers/ponzi.htm

Ponzi’s fast money and high rate of return was too good to resist and many were snared into the fake investment operation. He became an instant millionaire who diverted the money of new investor-recruits to pay for those who invested earlier until the operation collapsed.

At the end of his financial fraud, only a third of the duped investors’ money was returned. Investors’ losses amounted to about $3 million to $7 million (about $75 million today)in those days. Ponzi was convicted for mail fraud and embezzlement, put to jail, and later deported. (Photo Credit: Wikipedia) =0=

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