In Corrupt America: An Abbreviated History of Charles Ponzi

In Corrupt America: An Abbreviated History of Charles Ponzi

I imagine it this way:

A plume of industrial steam and smoke parted by the silhouette of a man, stepping off the planks of the SS Vancouver. It is 1903, and the man has arrived in Boston harbor with two bucks and change in his pocket. The boat has come from Europe, carrying a load of hopefuls to the American shore in search of the iron-clad turn-of-the-century dream "” one of money and power and fame.

The man is an Italian immigrant from a well-to-do family in Parma "“ or at least that is what he tells people. Truth is, this man is not to be trusted. He, like many others, has crossed the Atlantic poor and hopeful, but his path is unlike any other theirs. In 46 years time, this man will have served four prison stints, experienced a meteoric rise in wealth and fame at the expense of thousands of unsuspecting Americans and die partially paralyzed and pitilessly poor in a charity hospital in Rio de Janeiro. This man is Charles Ponzi.

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A Ponzi Scheme, also called a Pyramid Scheme, is something we've become startlingly familiar with in America since the arrival of said Italian immigrant. The premise is simple: "Borrow from Peter to pay Paul." The first investors fork over large amounts of cash to the schemer, who then tells the oblivious investors to spread the word on the plan. When the next level of investors provides their cash, the level before them gets paid "“ and so on down. It is a structure built to reward the early, and built to ravage the late. There is no way around it: Someone, and mostly everyone, will suffer.

This is the scheme our hero brought back to Boston in the late 1910s, after spending three years in jail for forging checks in Montreal and two years in jail in Atlanta for smuggling in illegal Italian immigrants.

His front wasn't all that elaborate. He claimed to be reaping the hefty profits in redeeming international reply coupons from countries with weaker economies in countries with stronger economies. "Fifty percent profits in ninety days!" Ponzi began advertising (later he'd cut it down to 45 days). And people flocked to him. Ponzi's plan began half-honestly when he sent money to Italian relatives asking them to buy up postal coupons in their country, but when he ran into a slew of red-tape, the schemer decided to forge onward in promotion. In a short amount of time, Ponzi was pulling in massive amounts of cash without doing anything related to postal coupons. The pyramid was in construction.

In the 1920s, the fame came. Delivering on his promises to early investors, Ponzi was handing out huge earnings, and the press noticed. "DOUBLES THE MONEY WITHIN THREE MONTHS; 50 Per Cent Interest Paid in 45 Days by Ponzi"”Has Thousands of Investors," ran a headline in the Boston Post. The article estimated his wealth around $8.5 million and rising, as more and more people were handing him their money.

The end, however, would come quickly. Postal and legal authorities dove into the case, with the U.S. Post Office even announcing that Ponzi's business couldn't work"”there were, and still are, regulations that make speculation in international postal coupons impossible. The Boston Post also began investigating (some say that this was probably because they felt partially responsible for promoting Ponzi).

Ponzi cooperated, in a way. He opened his books to the U.S. District Attorney's office, but refused to give full insight into his business, saying "My secret is how to cash the coupons"¦Let the United States find it out, if it can.” He also shut down any new investments, prompting a huge influx of investors trying to redeem their vouchers.

The ensuing weeks were near-mayhem. Huge lines of people stood outside of Ponzi's office in the sweltering sun, some fainting from the heat. Our hero, benevolent as he was, invited all the women to the front of the line and passed out sandwiches to all those waiting. The crowd was torn, as it simultaneously booed and cheered for him.

But when the Post finally made the realization of Ponzi's past jail time, the jig was up. The following day, the government finished its audit of Ponzi, revealing him to be $7 million in debt, and he was placed under arrest shortly after.

Ponzi spent the next fourteen years in and out of jail, including an attempt to escape the country while on a brief parole. When he was finally released in 1934, immigration authorities were there waiting to deport him.

What happens to Ponzi next is unclear, but most believe he ended up working for an airline company doing business between Brazil and Italy. When the U.S. entered WWII in 1941, Brazil cut off supplies to the airline company, which had been providing supplies to the Italian government.

A few years later, his eyesight failing him, Ponzi suffered a stroke. He finished up his last days in Rio, leaving only $75 behind for his burial.