Charles Ponzi popularised the practice of borrowing money from one person to use it to pay another, known as the “Peter to pay Paul” scam. We need to know more about the crook whose name appears on this con.
The Biographical Almanac describes Charles Ponzi as a “swindler.” The ingenuity with which Ponzi transformed a perfectly legal corporation into a massively profitable criminal enterprise ensured that his name would live on forever.
Who is Charles Ponzi?
Italian-born Charles Ponzi started his career in crime by stealing from his family and the local priests. He first moved to Canada, and then the United States, where more minor offences resulted in brief prison terms. In 1919, he uncovered the concept of “arbitrage,” or the practise of profiting by simultaneously purchasing and selling the same item in different markets at different prices. Stamps were the asset in question.
Certificates issued by the International Postal Union may be used at post offices in different countries to buy enough postage for international mail delivery. Certificates of this kind only cost one cent in Spain. The stamp on the certificate was valid for 5 cents of U.S. postage. In the same way as “arbitrageurs” acquire grain, money, or other resources in one market and sell them in another market where prices are greater, this is a kind of transaction. It is perfectly legal to engage in transactions that have the effect of increasing prices in the low-price market and decreasing them in the high-price market.
What is the Ponzi Scheme?
Charles Ponzi did something new and different: he lied or popularly known as the Ponzi Scheme. After convincing his naive investors, he failed to mention that he couldn’t really turn the U.S. stamps back into cash. What’s more, he didn’t disclose that he wasn’t really purchasing pasta gift vouchers. Instead, he retained the money from the first round of investors and paid them back when new money came in, never failing to take a cut for himself. With “investments” totaling $154 million in 1996 currency, Charles Ponzi fared rather well. He acquired a home with twenty rooms, and a bank, and generally led a lavish lifestyle. In the end, he made a catastrophic mistake.
To assist him in preserving his reputation, he retained the services of a public relations professional who, being both knowledgeable and trustworthy, immediately identified Fraud and notified the proper authorities. In jail, Ponzi addressed letters to his victims, apologizing for his inability to assist and vowing to make amends as soon as he was released. But immigration officials had different ideas, and they sent Ponzi back to Italy.
Did you know that Frank Abagnale pulled the biggest con in the history of banks?
What happened later?
Despite his little means, he joined Mussolini’s fascist organisation and rose through the ranks of the Treasury Department to become a senior official—a position he held until his ineptitude became apparent. To oversee operations at Brazil’s brand-new national airline, Alltalia, he had been sent there at the time. Due to the conflict and Mussolini’s death, Ponzi was forced to give up his post and his fortune. A nun was the only one there at his unattended death.
Legacy of the Ponzi Scam
Numerous frauds exist that are almost carbon copies of Ponzi’s scam. Almost everyone may be easily influenced. In 1993, a Ponzi scam fooled one-sixth of Romania’s population. A lot closer to home, William Simon, a former Treasury Department secretary, John Whitehead, a former managing partner at the investment firm Goldman, Sachs, and I.aurence Rockefeller, a financier, were all taken in by the lauded Foundation for New Era Philanthropy, a scheme that promised to double and triple the gifts wealthy donors wanted to give to charity.