Charles Ponzi
Italian con artist whose name became synonymous with a fraudulent investment scheme.
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Charles Ponzi, born Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi in Lugo, Italy, in 1882, became infamous in the early 1920s for a fraudulent investment scheme that ultimately bore his name. He promised extraordinary returns—a 50% profit within 45 days or a 100% profit within 90 days—claiming to achieve this through arbitrage involving international postal reply coupons. He said he would buy these coupons cheaply abroad and redeem them at full face value in the United States.
In truth, he paid earlier investors with the money contributed by later ones, a method that had been used before, most notably by William W. Miller in 1899. Ponzi’s scheme lasted over a year before collapsing, costing investors about $20 million. His early life included a failed university stint in Rome, followed by emigration to Boston in 1903 with little money. After menial jobs, he moved to Montreal, where he worked at a bank run by Luigi Zarossi, who paid high interest using new depositors’ funds—a model Ponzi later replicated.
When that bank failed, Ponzi forged a check, served three years in a Canadian prison, then returned to the U.S. only to be caught smuggling Italian immigrants, leading to two more years in an Atlanta prison. There, he befriended mobster Ignazio Lupo and admired fellow inmate Charles W. Morse. After release, he worked in a mining camp before devising his infamous scheme in Boston.
Background
He told The New York Times he had come from a family in Parma. His ancestors had been well-to-do, but the family had fallen upon difficult times. Ponzi took a job as a postal worker early on, then attended the University of Rome La Sapienza, but spent four years following richer friends to bars, cafés, and the opera, leaving him broke and without a degree. Vancouver with $2.50 in his pocket, having gambled away the rest of his savings.
He worked odd jobs along the East Coast, eventually becoming a dishwasher and then a waiter, but was fired for theft and shortchanging customers. There he first saw the scheme of 'robbing Peter to pay Paul,' later called a Ponzi scheme. The bank failed, and its owner fled to Mexico. but was caught smuggling Italian illegal immigrants and spent two years in Atlanta Prison.
Morse, a Wall Street speculator who faked illness to gain release. He tried several businesses, including his father-in-law's grocery and an import-export company, but all failed. This gave him the idea to exploit differences in postal rates: buying IRCs cheaply in Italy and redeeming them for higher-value U.S. stamps, a form of arbitrage. To raise capital, he set up a stock company and sought investors, promising huge returns.
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Compiled from Wikipedia and the sources listed below. Text from Wikipedia is available under CC BY-SA 4.0; this entry is adapted from it.
- Wikipedia: Charles Ponzi (CC BY-SA 4.0).
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