A criminal so legendary that he has become a verb, a synonym for fraud. It’s about Charles Ponzi – in truth his full name at birth was Carlo Pietro Giovanni Guglielmo Tebaldo – but during his life he used various pseudonyms, such as Charles Ponci and Charles P. Bianchi. But who Ponzi really was – an elegant man, 1.67 meters tall, who in just 8 months in 1920, as reported by the SmithsonianMag, managed to get 15 million dollars from his fellow citizens – and what does the scheme still consist of today? used by many scammers all over the world? “He was a charming con man, the ultimate con man”, biographer Donald Dunn wrote about him. Sure, but not only that.
Before the big scam
Born in 1882, Ponzi was born in Italy to a prominent family even if, as they said at the time, “decayed”. He worked as a postal worker and spent 4 years at university Wisdom of Rome thinking of it as “a 4 year vacation”, but in the end, advised by his family, who hoped to revive their finances, he emigrated to Boston in 1903: he arrived there with two and a half dollars, given that during the ship voyage he had squandered everything on bets. “I came to this country with $2.50 in cash and $1 million of hope, and those hopes have never left me”, he would later say in an interview.
Initially Ponzi did some odd jobs in the United States, by God move to MontrealCanada, in 1907, when he began working on the Zarossi Banka private bank founded by Luigi Zarossi, which promised double interest rates to Italian immigrants. However, the bank soon failed: Zarossi liquidated the interest on the old accounts by resorting to new customers – a mechanism that Ponzi made his own – and therefore the owner of the credit institution, undermined by problems with real estate mortgages, fled to Mexico with most of the remaining funds of the bank.
Immediately afterwards, Ponzi ended up in prison for having forged and cashed a check from a former client of Banco Zarossi: the bars of the bank were opened and then closed for him St. Vincent-de-Paul penitentiarywhere Ponzi became inmate 6660. During that time he lied to his family in Italy, writing to his mother that he had become “special assistant” of the director of a prison. In 1911 he actually became an assistant to a prison warden, that is, when he was an interpreter for the director of the Atlanta prison, after being arrested following a plot linked toillegal immigration in which he had been involved.
Once free, Ponzi returned to Bostonwhere he began working as a nurse in a mine: he offered to donate large portions of his skin for a transplant to an unknown colleague, who had been burned in another mining camp, soon ending up unemployed due to the pleurisy caused by his particular donation . In 1918 he married Rose Maria Gneccoa second-generation Italian immigrant, and worked at various odd jobs to make ends meet, but always without success – and causing, among other things, the bankruptcy of his wife’s relatives’ family-run fruit shop.
The Ponzi scheme
“The Ponzi scheme can easily be defined as a chain letter, a fraudulent sales model, essentially based on the recruitment of new participants, with the main task of defrauding savers. It is a real economic model, with an architectural structure equipped with a precise strategy and at the basis of which there is no type of investment that generates value and profit”. The actor said it in an interview given to FEduF Massimo Giordanowho in recent years has played Charles Ponzi within an initiative Consob dedicated to financial education and entitled “Watch out for scams”.
In 1919 Ponzi opened an office in Boston and had the idea that would change his life: he discovered that postal vouchers (i.e. philatelic coupons for replies from one country to another in the world) despite having the same cost, they had different values. He thus understood that he could profit from the difference between cost and value, generated by a different cost of living in some European nations after the First World War and involve several investors, promising an immediate profit.
“The scaffolding on which the Ponzi scheme stands is a pyramid structure, where some victims are promised large profits in a short time, provided that they recruit new investors. The technique is this: the first savers are repaid with the investments of the subsequent ones; this generates a mechanism of unconditional trust which leads to more and more new victims falling into the scheme’s network. All this until the financial bubble explodes, due to the escape (with the loot) or the arrest of the pyramid managers”, explains Giordano again.
Substantially the method – of Ponzi, who over time had opened his own ad hoc company – was the same as that of Zarossi, whereby the profits of the old investors were liquidated using the investments of the new entrants. A system that enriched Ponzi and those directly under him, but not those at the base: for this reason it was and is defined as “pyramid scheme”. Italian migrants, workers, politicians, policemen and even a priest were involved: all these people trusted Ponzi and were defrauded.
The sentences and the end
With the arrival of his own success, to the detriment of the newly recruited investors, Ponzi kept anything but a low profile, including expensive cars, real estate investments but also charity. This attracted the attention of a Boston journalist, who however was reported and convicted for defamation. For a while things calmed down, but it wasn’t forever and the journalists went back to covering him. As well as the State of Massachusetts. And it emerged that the postal vouchers issued were only those issued at the beginning, but Ponzi, through a complex scam, had given many the prospect of future wealth based on a kind of illusionist’s trick.
In 1920, overwhelmed by all this, Ponzi turned himself in and was accused of postal fraud by federal authorities. His scam had caused not only losses by private citizens, but also the collapse of some banks: despite the 86 charges and a request for life imprisonment, Ponzi was sentenced to just 5 years in federal prison, because, on advice from his wife, he pleaded guilty to only one of many charges.
After serving 3 and a half years, the man was free, but he also had to face other cases, first in Massachusetts and then in Florida and they did not always go in his favor, so much so that someone even filed repatriation request in Italy. The repatriation finally came in 1934, after a sentence of additional years in prison and a failed attempt by Ponzi to escape to his homeland by ship, where he was actually deported. He finally died in Brazil in 1949, after ups and downs and simple attempts to make ends meet through simple jobs – although in reality he tried to cut corners until the end, but his fame always preceded him and he was inevitably discovered.
During his life, Ponzi had first fascinated and then infuriated many people – upon discovering the deception, there were various attempts to mob violence to his
damages – he had developed a scam so complicated that not even the investigators could get to the bottom of his accounts, but above all he remained in history, creating a system that is still used today all over the world.