During the time when everyone was financially devastated by the first-world-war that rages from

1914 to 1918, a man with the name Charles Ponzi had brought a shed of hope to the darkest of
times. In the eyes of the people, he was an outstanding investor, a financier who brought profits
upon profits to people who were willing to give him their money. As more people knew of his
existence, they were lining up, holding their life savings with the hope of getting richer, begging
Charles Ponzi to take their money.

But little do they know, Charles Ponzi’s genius financial scheme that helped many investors to
become richer was built on top of a sea of lies. Destroying at least 15 thousand people’s life savings
and bringing down 5 other banks as the house of cards tumbles down. This is the story of Charles
Ponzi, the fool that tricked the world, and even a hundred years later, his name still reigns in our
modern society as the ‘Ponzi Scheme’.

Charles Ponzi was born at the northern part of Italy on 3 rd March 1882. His father, Oreste Ponzi is a
hard-working postman, and his mother was a loving housewife. Overall, his family was financially
comfortable.

After his father death and inherited a modest sum of fortune, he was sent to a prestigious college in
Italy by his mother with the hope of seeing his son becoming successful through higher education.
But Charles Ponzi had other plans. Instead of attending classes, he decided to burn through all the
leftover fortune by covering himself with the latest fashions and eating at the fanciest restaurants.
Occasionally, he would gamble at casinos with his rich friends while pretending he had an endless
amount of money to be spent.

Until one fateful day, the consequences of his spending habits came crashing down as the before
mentioned inheritance money finally ran out. With no chance of graduating due to his lack of
attention to his studies, he had no choice but to work. Even with his caring and generous uncle
offering him a job position as a clerk, he felt repulsive about having a 9 to 5 job, mainly because of
his wealth driven egoistic mindset.

He felt like he had only one choice left, which is to America, and strike it rich there. After arriving at
Boston in 1903, he made a promise that he would redeem himself by returning to Italy as a rich man
after a few years, instead of letting his mother down again.

Ponzi spent the next few years up and down the east coast, from New York to Florida. Throughout
those years, he worked as a waiter, sign painter, clerk for a grocery store, a dishwasher, factory
worker, an insurance salesman and a sewing machine repairman. And none of them lasted long.
Ponzi either quit because he hated the work, or he was fired because he tried to cheat his
customers.

When he manages to get some income with all the labor work, he would just blow it all away on a
weekend vacation or fancy meal, to remind himself of the good old days.

After a few years on the streets, his perspective of working had changed for the better. Because
when he arrived at Montreal, Canada in 1907, he found a decent job as a clerk at a bank called
Banco Zarossi that mainly served Italian immigrants. Unfortunately for Ponzi, his new job at the bank
didn’t last long either as his boss was a con man. Zarossi, the boss, was using money from his newest
clients to pay off his older ones. Because of this leverage, Zarossi was able to offer up to 6% interest
rate which is double the average amount on all deposits by his clients.

As time passed, his clients started getting suspicious when their relatives back home kept
complaining about not receiving the money the bank was supposed to send. Just after 1 year Ponzi
had gotten his job, the authorities began investigating the bank for embezzlement. Zarossi wasted
no time, filled a suitcase with cash and fled to Mexico, leaving his employees and his family to deal
with the fallout from his scam.

Not wanting to take the fall, Ponzi had decided to move back to the States while trying to forge a
check from one of his bank’s clients. As soon as Ponzi tried to cash out the fraudulent check, the
bank teller easily spotted the fake signature and quickly alerted the police. Just like that, Ponzi spent
3 years in a prison located in Quebec.

After 2 years, he was released on parole and immediately made his way to the States after being
approached for a smuggling job. While heading there, he took 5 Italian immigrants with him, all fresh
off the boat without any proper papers, as he had been paid to get the job done. Instead of getting a
quick buck after being a free man again, he got caught, and was arrested once again.

During his time in prison, he had thought of all kinds of ways to become rich, but all of them
required a substantial amount of capital, and he was penniless. After 2 years, he was released from
jail at a prison in Atlanta and began wandering from state to state again, working whatever odd jobs
that came to his way. He finally settled at a decent job as a clerk for import-export businesses at a
company called J.R. Poole in Boston, back to the same place where he first step foot on America’s
soil.

For the second time around, life in Boston was better for Ponzi. He was good at his job and was even
promoted for it. Not long after, he met 21-year-old Rose Gnecco and fell in love with her.
Fortunately for him, the feeling was mutual, and they were happily married in 1918. Although life
has seemed to be settled for Ponzi, and his beloved wife was content with a simple life, but Ponzi
has greater ambition. Knowing that the salary of a clerk would never reach that dream, he decided
to quit his job and started off joining his father-in-law’s wholesale fruit selling business.

However, the business was not sustainable and went bankrupt by the end of the year. Without
giving up, Ponzi quickly made his next move, which was renting a small office to start off his own
import and export business. With the lack of experience and capital to advertise his service, Ponzi’s
import and export business became another failure venture. Same goes for the next company that
he started called Trader’s Guide, which involves in issuing trade magazines and charging companies
a certain fee if they want to advertise on it.

When Ponzi approached the bank for loans since his money had run out, his application was rejected
on the spot as the president of the bank had given Ponzi a harsh reality check where he would never
loan him a single dollar ever again.

With little choice left, he fired his staff and sublet his office space to earn some money. One fateful
day in August 1919, Ponzi was going through his mail and came across a letter from Spain, when he
had thought no one was interested in paying the advertisement fee for his Trader’s Guide magazine.
The Spanish author of the letter requested a copy of the magazine and offered to pay for the
postage. He included something that Ponzi had never seen before, an international reply coupon, or
IRC.

IRCs were prepaid coupons that are commonly used by people who send letters internationally to
cover the costs of a return letter in any country that was a member of the Universal Postal Union.
And this was a bolt of inspiration for Ponzi, and was about to change his life forever.

So in January 1920, Ponzi started another new company called Securities Exchange Company.
Unfortunately for Ponzi, his hopes and dreams for this new company were to no avail. His original
plan of buying IRC in Italy where the nation’s currency Lira, had taken a serious hit after world war 1,
and redeem it in the States to sell those stamps in a currency stronger nation for a tiny profit.

The truth was that the arbitrage of IRCs was so small and would just get wiped out by the cost of
shipping them from one country to another. But Ponzi refused to let go of this idea, further
convincing himself this was the one-way ticket to the life of wealth and luxury that he always felt he
deserved. So when a failed but legitimate business proved unsustainable, he turned the business
idea into the infamous Ponzi Scheme that shares his name.

Taking inspiration from his decent job as a clerk at Banco Zarossi, his new idea involves convincing
people to invest in a business opportunity by promising them huge returns. But in reality, Ponzi
would keep most of the money to himself while giving some of the profits to earlier investors using
the money given by new investors.

It is a very simple but effective system that preys on people’s greed and financial naivety, but it
requires a constant flow of new funds in order to keep the scam going.  Even though the scheme was
named after Ponzi, he was not the first one to do it. If you are interested to know who were the first
few people to have implemented financial frauds similar to Ponzi, you can check the reference links
in the video description for more info.

Using his system, Ponzi offered investors a staggering 50% return in 45 days, or 100% in 90 days. He
convinced people by claiming he has a vast network of agents around the world buying IRCs in bulk
and shipping them to America. When asked about the details of his operation, Ponzi would refuse to
disclose any further information.

Ponzi started out with the people in his own neighborhood with 18 of them willing to invest in the
first month. Once they were all paid for their first round of profits, words spread and soon thousands
of people began begging Ponzi to take their money while crowding outside of his office.

Month after month, Ponzi was ranking in over 250 thousand US-Dollar a day at the peak of his
operation. The Boston Post hailed him as a financial genius, which gave him yet more perceived
credibility and thus money keeps pouring in.

As Ponzi use most of the money to buy expensive clothes, ate at the fanciest restaurants and even
went for luxurious vacations, those lifestyles did not last long. Less than 6 months after Ponzi
launched his new venture, there were lots of doubt about his business. But since early investors had
already been paid, which Ponzi said was proof everything was legitimate, people kept quiet.

One day, Clarence Barron, the President of Dow Jones and manager of the Wall Street Journal
spotted the obvious scheme. Barron calculated that Ponzi would need to purchase 160 million IRCs
for that kind of profit return, but there are only 27,000 in circulation in the whole world.

So in July 1920, Barron started to investigate into Ponzi’s company. Unlike Ponzi, a newly hired
publicist at Ponzi’s company, William McMasters is an honest man and found out his client was a
fraud. With access to Ponzi’s records, McMasters collected the evidence he needed and went to the
Boston Post, where he wrote a Pulitzer Prize-winning expose detailing all of Ponzi’s secrets.

Ponzi’s scheme soon collapsed alongside with several banks. Decimating fifteen thousand people’s
life savings that was worth $20 million dollars in 1920, which is approximately $297 million in 2022
dollars, and Ponzi himself was indicted on 86 counts of mail frauds. However, the conman was able
to strike a deal in court and only ended up serving 5 years in jail.
He was released from prison on parole after three-and-a-half years, and finally decided to do some
good to the world. I’m just kidding, he went on scamming with another of his new schemes and was
being pursued by the authorities. Ponzi fled from Boston to Florida where he planned to essentially
repeat the Ponzi scam again.

He started a new company called Charpon Land Syndicate which involves looking for people to
invest into the property sector around Jacksonville and offered people ridiculous gains of 200% in
just 60 days. However, there were no takers for this time around as the properties were just
swamplands.

When Ponzi’s fraud was exposed once again, he changed his appearance and attempted to travel
back to his country Italy, as a sailor onboard a cargo ship. However, he was recognized and arrested
for the fourth time in New Orleans. Ponzi was desperate and wrote a letter to President Calvin
Coolidge, the 30th President of the United States asking for mercy, and even appealed to Prime
Minister of Italy, Benito Musolini to intervene on his behalf. But of course, no one gives a shit, and
he ended up spending another 7 years in prison.

After 7 long years, he was never the same again. By that time, Ponzi was 52 years old. Ponzi was a
broken mess who had lost all the charm and confidence that he once had. As he faced deportation
to Italy, his wife chose to stay behind in America and divorced him 3 years later in 1937.

However, when it comes to the amount of money Ponzi conned people out of, he’s actually not one
of the biggest financial fraudsters. Because that crown goes to Bernie Madoff in the year 2008. If you
want to know how Madoff managed to pull off one of the biggest financial scamsever, you can check
our video link in the description down below.

Charles Ponzi, the infamous fraudster who spent a total of 15 years in prison throughout his lifetime
spent the rest of his years in poverty, with only memories of the times when he had it all to comfort
him. He ended up in Rio de Janeiro, where he died in 1949 at the age of 66 in a charity hospital, and
was buried in a pauper’s grave. Thus, bringing to an end to the story of Charles Ponzi and one of the
most notorious financial frauds in history.