Italian swindler and con artist in the USA and Canada in the early 1920s whose fraudulent money-making scheme is nowadays referred to as a “Ponzi scheme.” He promised clients a 50% profit within 45 days or 100% profit within 90 days, by buying discounted postal reply coupons in other countries and redeeming them at face value in the USA as a form of arbitrage. In reality, Ponzi was paying earlier investors using the investments of later investors. His scheme ran for over a year before it collapsed, costing his “investors” $20 million (inflation adjusted to $250 million as of 2020). His aliases included Charles Ponci, Carlo, and Charles P. Bianchi.
On 15 November 1903, Ponzi arrived in Boston, Massachusetts aboard the S.S. Vancouver. By his own account, Ponzi had $2.50 in his pocket, having gambled away the rest of his life savings during the voyage. “I landed in this country with $2.50 in cash and $1 million in hopes, and those hopes never left me,” he later told The New York Times.
In 1907, after some years of failing to do well in the USA, Ponzi moved to Montreal, Quebec, Canada and became an assistant teller in the newly opened Banco Zarossi, a bank located on Saint Jacques Street started by Luigi “Louis” Zarossi to service the influx of Italian immigrants arriving in the city. By this time, Ponzi had a winning personality and spoke English, Italian, and French. It was at Banco Zarossi that Ponzi first saw the scheme of “robbing Peter to pay Paul” (which subsequently would be called a Ponzi scheme).
After Zarossi went bankrupt, the penniless Ponzi stayed in Montreal, wrote himself a forged cheque, and ended up spending three years at St. Vincent-de-Paul Federal Penitentiary, a bleak facility located on the outskirts of Montreal.
After his release in 1911, Ponzi decided to return to the USA, but got involved in a scheme to smuggle Italian illegal immigrants across the border. He was caught and spent two years in Atlanta Prison, Georgia.
He married Rose Maria Gnecco, a stenographer, in Boston in 1918. In the summer of 1919, Ponzi set up a small office in Boston, coming up with ideas and writing to people he knew in Europe trying to sell them as opportunities.
In January 1920, Ponzi started his own firm, the “Securities Exchange Company,” to promote the scheme of trading in postal reply coupons. His investors were being paid impressive rates, which subsequently encouraged others to invest. People were mortgaging their homes and investing their life savings. Most did not take their profits, but reinvested. By the end of July 1920, he was approaching a million dollars per day.
Ponzi lived luxuriously: he bought a mansion in Lexington, Massachusetts, and a Locomobile, the finest car of that time.
On 11 August 1920, it all came crashing down for Ponzi. First, the Post newspaper came out with a front-page story about his criminal activities in Montreal 13 years earlier, including his forgery conviction and his role at Zarossi’s scandal-ridden bank. That afternoon, Bank Commissioner Allen seized Ponzi’s Trust account due to numerous irregularities. The commissioner thus inadvertently foiled Ponzi’s plan to “borrow” funds from the bank vaults as a last resort in the event all other efforts to obtain funds failed.
Ponzi was charged with mail fraud for sending letters to his marks telling them their notes had matured. He was originally released on $25,000 bail and was immediately re-arrested on state charges of larceny, for which he posted an additional $10,000 bond. The bail was then withdrawn for the federal charges.
The news brought down six banks. Ponzi’s investors were practically wiped out, receiving less than 30 cents to the dollar. They lost about $20 million in 1920 dollars (approximately $196 million in 2020 dollars).
In two federal indictments, Ponzi was charged with 86 counts of mail fraud. At the urging of his wife, Ponzi pleaded guilty on 1 November 1920 to a single count. Ponzi was sentenced to five years in federal prison.
Ponzi was released after three-and-a-half years and was almost immediately indicted on 22 state charges of larceny in Massachusetts. Ponzi was found guilty and sentenced to seven to nine years in prison as “a common and notorious thief”.
Ponzi was released in 1934 and deported to Italy on 7 October. Rose stayed in the USA and divorced Ponzi in 1937. He wrote his autobiography. Ponzi died in a charity hospital in Rio de Janeiro, Brazil, on 18 January 1949 at age 66.
Link to Wikipedia biography