I landed in this country with $2.5 dollars in cash and $1 million dollars in hopes, and those hopes never left me - Cesare Ponzi after arriving in America.
He is the creator of the first giant pyramid scheme in the world , not in Italy, but in America, as Cesare immigrated there at the dawn of his youth. Our story is about him.
Cesare Ponzi was born in Italy in 1882 in the small town of Lugo in the Emilia-Romagna region to a privileged wealthy family. Unfortunately, the family quickly went bankrupt, and Cesare's obsession was the desire to get rich at any cost. Actually, nothing else in his life did not interest him. The teenager managed to enter the University of Rome, but he was expelled from there for organizing an underground gambling business. Left without education and means of subsistence, in 1903 Ponzi goes to the United States and becomes Charles Ponzi.
He worked in the United States as a loader, delivery boy, pizza man, waiter. He was kicked out of all his jobs for cheating customers and hiding the proceeds. Then Charles decides with two other like-minded people to move to Canada, where people are simpler and more trustworthy - a kind of village chumps, and the police are not so strict. In Canada they found an illegal bank office, engaged in fraud, for which Charles Ponzi gets 3 years in prison. One of his buddies goes on the run, and another commits suicide.... Ponzi served 1, 5 years and was released early for good behavior. However, on the 10th day after his release he received a new sentence - 2 years - for illegal smuggling of a group of Italians to America. This term he had to serve from call to call.
It was as if fate was warning him against more serious crimes, but Ponzi did not see it. After moving to Boston, he was arrested a few more times for minor financial crimes. But overall he still became more cautious and, most importantly, more experienced.
And now the long-awaited rush hour has come....
Charles was planning an international magazine and wrote to his friend in Spain. He agreed and sent coupons to be exchanged for stamps to send the magazine to Spain. And that's when the long-awaited revolution took place. A one-cent coupon was exchanged for a stamp that cost 6 cents in the United States. A six-fold profit on nothing. Every investor's dream!
Restless Ponzi began to zealously study the exchange rates of coupons in other countries. As a result, with 1500 dollars in a month Charles Ponzi had already 15 000 dollars.
This was made possible by the Universal Postal Convention, signed in Rome in 1906, which included the United States and a number of other countries. The convention facilitated the exchange of postal messages between participating countries. But inflation occurred after World War I, and no adjustments were made to the exchange rate between coupons and stamps. It simply never occurred to anyone before Charles Ponzi that there was any way to make money from these transactions and the paltry sums involved.
In 1919, Ponzi formed the Old Colonial Foreign Exchange Company.
Meanwhile, Ponzi had enlisted all his buddies and friends to invest. But this was not enough for him. Charles does the following: he gives interviews to several leading publications, including the New York Times, where he honestly talks about the scheme, the percentage of profit and invites everyone who wants to bring him their savings for quick enrichment.
And people came to him in droves, bringing everything they had, mortgaging their homes, selling their valuables. Charles Ponzi was for them a hero of his time, a celestial. They were ready to carry him in their arms. Ponzi took deposits from the public against a promissory note and promised to pay $100 of every $150 in 90 days. And he fulfilled his promises at first not even in 90 days, but in 45 days.
The entrepreneur himself earned $250,000 a day (!), but he paid the investors not from the actual profits, but at the expense of other investors. It was simply a redistribution of capital. This is how a huge financial bubble was created. The Ponzi scheme was of the nature of "robbing Peter to pay Paul." That is, depositors received dividends at the expense of the money of those who followed.
About a year later, the "miracle business" collapsed, not because of the police or the tax inspection, but thanks to one of the investors who, out of jealousy, filed a lawsuit in court demanding 50% of the profits from the Ponzi business. This was the reason for the freezing of accounts and suspension of deposits. Needless to say, there was panic among depositors and money was taken away. The bubble burst. An audit revealed debts of about 7 million dollars, and the Ponzi company was declared bankrupt.
It should be said that Charles Ponzi was threatened with a life sentence, but he got off with only five years in prison. After leaving prison, he again began to engage in financial scams, for which he was deported to his native Italy. From there he moved to Rio de Janeiro, where he worked for Italian Airlines and died at the age of 67. His fortune was $75 at the time and went to funeral expenses.
Charles Ponzi scheme was on a huge scale for the time and has gone down in history as one of the grandest fraudulent enterprises. And as the writer Arthur Reeve said:
Ponzi's success is the result of his extraordinary personality. Not everyone can go out on the street and persuade thousands of random passers-by to give their salary, even at a probable 400% interest rate.
But you can never build happiness on the misfortune of others.
