The Silver-Tongued Swindler: Charles Ponzi’s Legacy of Deception

The money flowed in, first in drops, then in buckets… At first the money was stuffed into desk drawers in Ponzi’s little Boston office, but then it started coming in at a rate of over $1 million per week! Bills flowed from the tops of wastepaper baskets, then covered the floor ankle-deep! There was an endless flow of cash – plenty with which to pay off eager investors

Ken Fisher on Ponzi in 100 Minds That Made the Market

The incredible sums of money made by speculators in Florida during the roaring 20s attracted more than its fair share of crooks and scoundrels.

Their ranks included the already infamous Charles Ponzi in Boston.

Over a century after Ponzi's arrest, "Ponzi scheme" remains synonymous with financial swindles.

The Colorful Life of Charles Ponzi

Born in Italy, Ponzi was as far from a Yale-educated Wall Street blue blood as possible.

Ponzi worked as a laborer, clerk, fruit peddler, smuggler, and waiter until the age of 42.

Those who knew him described a smug little man barely over 5 feet tall.

He was slim, self-assured, and quick-witted. Above all, he had a silver tongue.

Ponzi began his infamous scam in early 1920. His timing was impeccable. It was the start of the Roaring ’20s, and money flowed easily.

Ponzi started by setting up the Securities Exchange Company as an investment vehicle.

The company invested in obscure coupons that made money in an exchange transaction conducted with the U.S. Postal Service.

Ponzi offered to pay investors 50% interest in 45 days and 100% in 90 days.

He made the scheme sound risk-free.

Investors cared little – and understood even less – about the details.

They cared only about the promise of quick riches.

Ponzi talked up a storm.

Stockbrokers, widows, and businessmen all clamored to send Ponzi money.

This “endless flow of cash” is precisely what Ponzi needed to pull off his scheme.

He kept paying what he'd promised as long as the money kept coming.

Ponzi was robbing Peter to pay Paul.

Then Ponzi started planning for branch offices. He spoke of creating a string of banks and brokerage houses.

He even bought a controlling interest in Hanover Trust Company and made himself president.

Ponzi moved into a large house with servants. Crowds followed him in the streets, chanting, “You are the greatest Italian of them all.”

But it was all too good to be true.

The Boston district attorney’s office began to investigate Ponzi. The Boston Post revealed that Ponzi had been involved in a remittance racket in Montreal 13 years earlier.

All this could have sparked panic among his investors.

But like all good promoters, Ponzi upped the ante.

He promised to double investors’ interest payments.

Money continued to flow in. Finally, on August 12, 1920, Ponzi was arrested by federal authorities and charged with 86 counts of mail fraud.

Ponzi and the Florida Land Boom.

Out on bail while he appealed the state conviction, Ponzi launched the Charpon Land Syndicate scam in Florida.

The plan offered to sell ten million small building lots at a development near Jacksonville.

In reality, the lots were worthless swampland sixty-five miles inland.

Ponzi offered twenty-tree tiny lots per acre at $10 apiece ($230 for an entire acre) through the mail and partial interests in the parent company via a “unit certificate of indebtedness.”

To sweeten the offer, he promised investors a 200 percent return in just sixty days. Then he sat back and waited to collect the money, which soon began to flow in.

In only eight months, Ponzi had taken in $10 million and issued notes for more than $14 million.

That’s the equivalent of $180 million today.

In April, he was convicted for a handful of violations of Florida land statutes.

Authorities recovered less than $200,000 from his accounts.

An Ignoble End

At this point, he faked suicide, shaved his head, grew a mustache, and donned a sailor’s cap.

Using an alias, he signed on to a Tampa freighter bound for Houston and worked as a waiter and dishwasher.

Ponzi managed to elude a multistate manhunt until he boastfully revealed his identity to a shipmate. His boasting led to his arrest on board the ship in New Orleans.

Ponzi spent the next seven years in a Massachusetts prison sewing underwear. Upon his release in 1934, he was deported to Italy.

He joined the fascist government and later became the business manager of an airline in Rio de Janeiro.

Ponzi ended up making a meager living teaching English. He died at 66 in 1949 in the charity Ward of a rear Rio de Janeiro hospital with just $75 to his name.