If you’re Nigerian you would probably be very familiar with the term ‘Ponzi Schemes’. In the recession periods of early 2017, these get-rich-quick schemes took us by storm. Sometimes they promised 200% return on investment sometimes more, at the end they left most people very unhappy. Let’s see how the business really began.

Coming To America

It is a fact that Mr. Charles Ponzi had the wisdom of those way beyond his time. I mean he was one of the greatest con-artists in the history of the United States – and you don’t get there by just pick-pocketing.

“I landed in this country with $2.50 in cash and $1 million in hopes, and those hopes never left me…”

-Charles Ponzi

Born in Lugo, Italy in 1882,  Charles Ponzi also known as Carlo, Charles P. Bianchi and Charles Pionci was a native of Parma. His predecessors were actually very wealthy but his current family had seen some bad times and had very little money.

via Forbes

Charles spent his earlier years gambling and squandered the little money he had. He was discouraged to go to the university as his richer friends saw it as a ‘four-year vacation experience’. He ended up without a degree and very very broke.

About that same time he heard about a group of Italian boys going to the United States and returning as very rich people. His family urged him to go. And that ladies and gentlemen, was where it all began.

He arrived the US in November, 1903 with only about $2.50, but this man was going to change his life. He quickly learnt how to speak English, did some odd jobs and worked as a dishwasher, he was later fired for shortchanging customers and cheating them. He failed to do well for a while, that was when he moved to Canada.

The Trying Times

In Canada he was an even more cheerful lively person (which con-artist isn’t?). He quickly learnt French and got a job in a bank and in no time rose to bank manager. But the bank then failed and he lost everything, but his dreams. He found a cheque in an empty ware-house and wrote himself about $424, forged a signature and cashed it. That got him some jail time, 3 years actually.

But that’s not the end. What do you think happened next? Well, he moved back to the U.S. Yes! But this time he started smuggling Italians into America illegally, he got into prison, again! For two years this time – I mean look at the dedication!

But this is where it begins to get interesting; Mr Charles discovered the IRC stamps. A form of stamps paid for by the sender of  a letter, the receiver could decide to exchange the stamps for cash. Ponzi came up with a genius plan; he was going to tell people that he would buy the stamps cheap from Italy and sell them in the U.S. to make profit of 400%. But he needed capital to start the scheme. He went over to HTC bank and some other banks to apply for a loan but was consistently turned down.

Charles was undaunted, he started talking to his friends and people he knew, being a sweet-talker, he promised them 50% increase in 90 days and later shortened it to 45 days. Banks at that time were giving only 5% interest. It was a hit!

via Wikimedia Commons

People started trying it with some money. They put in $1250, they got $750 interest! It was too good to be true. More people kept investing.

Making It

Charles was a genius undeniably, and in January 1920 he set up Securities Exchange Company in Boston to promote his scheme. More people joined with about $1800 and he paid them after the first month. He hired agents and paid them very well, this made him get new investors daily. He used the money from new investors to pay older ones, that kept the business rolling.

“I have been called an optimist, a dreamer, a visionary and everything else, including a crook, probably on the account of the fact that I didn’t get away with it, like many of the bankers I know of and some of the big corporations I know of.

If I had, they would have called me a genius; a wizard, without the quotation marks”

-Charles Ponzi

Some people sold off their properties and houses, some even invested all their lives savings just to invest in his business. He didn’t disappoint, he kept paying on time. It got a point where people even started choosing to re-invest their profits. They trusted this man like a messiah. Business was so good that even over 70% of policemen/policewomen in Boston invested with him and he was receiving $1 million everyday, IN CASH! That’s about $12 million dollars in today’s terms.

Later on a writer suggested his business was a lie. Charles sued for libel and won, he also got $500,000 dollars for damages. He got to the office after that, and guess what? He gained thousands of new investors.

Mr Charles was making personal profits of $250,000 per day ($3 million today) He bought HTC bank (one of the banks that refused his idea at first) he bought mansions, flashy cars, the finest things – he had clout.

After a while, news broke that he could go prison for robbing the government of “stamp revenue”. Many of his investors attempted to pull out, Charles quickly paid out $2 million. He soft-soaped the crowd and told them that their money was still very safe and that there was nothing to worry about. And of course, they trusted him and re-invested like sheep. Business and life kept going on and on as people kept re-investing into Mr. Charles’ business.


The Inevitable Fall

The time for reckoning came; the government audited his accounts and the frauds were detected. Charles pleaded guilty to 86 counts of fraud and spent 3 years in prison.

The investors however lost $20 million in total, that’s $240 MILLION TODAY! He was deported shortly after his prison sentence and lived a miserable life.

He died afterwards in Brazil of a heart attack.

Apart from the fraud and cons, Charles Ponzi was a very successful business man because he understood that real profit comes from people that was why he tried as much as he could to reach people and individuals alike. He always knew what his consumers wanted and he gave it to them.




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