PONZI
pieces of history
WHEN PONZI's
BUBBLE BURST
“G et rich quick” schemes never go out of style.
Throughout our history, those looking for easy
money have pinned their hopes on “too good to be true”
deals. Ninety years ago this summer, the original Ponzi
scheme unraveled. Charles Ponzi, once hailed as a fi-
nancial wizard, was unmasked as a fraud, and his name
became a synonym for scams and swindles.
In late 1919, Ponzi began to cultivate possible investors, telling
them that he had found a way to make huge profits by buying
international postal reply coupons in
bulk in foreign countries with
weak currencies and re-
deeming them at higher
values in the United
States. He promised
a staggering return
of 50 percent interest
in 90 days. By early
1920, thousands
turned over their
money to Ponzi in
hopes of fast and
easy payback.
Over eight months,
Ponzi took in roughly
$15 million. Those who came
in at the start did receive
their promised re-
turns, but Ponzi
was able
Among the documents in Charles Ponzi’s Inmate Case File are his
mug shot from 1910 and a 1920 telegram from the Boston Post city
editor to the warden of the Atlanta Federal Penitentiary.
to make these huge payoffs only by using the money coming in
from later investors.
The Post Office Department began investigating Ponzi’s
claims to make millions through exchanging international
postal reply coupons. In late July 1920, in an effort to quell
the doubts among his investors, Ponzi announced he would
allow a government auditor to examine his books.
The bubble burst when the Boston Post revealed that
Ponzi had served two terms in prison between 1908 and
1912. The pyramid, held up only by confidence in its
builder, crashed.
In the course of its investigation, the city editor of the
Boston Post sent a telegram to the warden of the Atlanta
Federal Penitentiary asking for verification of Ponzi’s incar-
ceration. Ponzi had been imprisoned from 1910 to 1912
for bringing five Italians illegally into the United States
from Canada. Immediately before that, he had been im-
prisoned in Canada in 1908–1910 for forging checks.
The telegram joined other documents in Charles Ponzi’s Inmate
Case File, including his mug shot and personal description. P
Summer 2010