Roaring: Ponzi’s Schemes

The Birth Of “The Ponzi Scheme” From 1920s America

In 1918, an Italian immigrant arrived in Boston. He came penniless, just out of back-to-back stints in prison, each in two separate countries. He soon met and married his wife, Rose, herself an Italian immigrant. After some odd jobs, he took up work with an importing and exporting company to pay the bills. Then, he was a nobody to many, just another face in the crowd struggling to make means from day-to-day work in the big city. Within two years however, Charles Ponzi would be one of the richest men in the city and be so popular within his community that someone would proclaim he had “invented money.” Then would come the collapse, the ugly truths revealed and a scheme so infamous we still refer to it a century later.

Charles Ponzi is known for one “get rich quick” scheme gone wrong, but in reality Ponzi’s life was filled with all types of these sort of schemes. He was plainly and simply a thief, and a thief that always got caught. This endless cycle of trickery, discovery and public shaming would define his existence on this planet, even going all the way back to his days growing up in Italy.


Born in 1882 in Italy, Ponzi made a personal vow to himself he would amount to a mass fortune in his life. He started by doing small robberies — at church, school, his postage job or elsewhere in his community. He typically got caught and obviously none of these petty crimes led to him to his goal. By the time he was to go to university, he figured he’d rather party it up with his rich schoolmates instead of taking advantage of the education. Thus four years later, he had found himself without money to his name and worse — no degree to show for his time there.

In desperation and fed up with his personal failings, his family urged him to make something of himself in the United States. He thus set off for Boston in 1903 via the S.S Vancouver, with $200 given to him by family — a nice little chunk for the day. His scheming got the best of him though, as he gambled all but a little more than $2 away during the voyage. Thus he found himself effectively broke by the time he arrived stateside.

Learning English, Ponzi traveled throughout the East Coast while sacrificing by sleeping on a floor and doing odd jobs, before finally landing stable work with a restaurant as a dishwasher. He worked himself up to waiter and seemed destined for perhaps greater personal success in the near future with his employer. However, Ponzi was discovered to have been running a scheme in which he would steal and shortchange customers and his employer. Once found out, he was fired.

Ponzi traveled up to Canada of all places in 1907. There he somehow convinced a bank to allow him to help them with their books for work. Once he discovered that the bank was in dire straits due to some shady dealings, he concocted a scheme to buy out the bank. That failed as the bank’s owner eventually ran away with the money to Mexico. Ponzi stayed in Canada and attempted a scheme in which he would forge bank signatures. He was caught and arrested.

Ponzi spent three years in prison in Canada. Always lying, he wrote letters to his family that he was working for the prison during his time there, never letting his mother ever find out it was the other way around. After being released in 1911, Ponzi headed back to the States.

Ponzi very quickly got involved in a scheme to smuggle Italian immigrants across the border. Predictably, he was caught and spent two more years in prison, this time down south in Atlanta. He traveled back north once released where he found work in a mining camp.

Ponzi’s new scheme involved setting up utilities at the camp to make a profit off of. However, while there, a nurse suffered serious burns. In a rare act of selflessness, Ponzi donated skin from his own back and legs to her. The kind deed had cost him, as it lead to his suffering skin conditions and losing work at the camp.

He was now off to Boston, where we began our story.


After nearly two decades of odd jobs, failed schemes and stints in prison, Ponzi looked as if he was finally settling down in Boston — now a married man with a steady and legitimate job. Like he had done with the restaurant job, he climbed the corporate ladder at his new place of employment. And yet the call to quick wealth would come again: in a huge gamble, Ponzi then decided to create his own business venture — an advertising listing to sell to businesses. It was an utter failure, and closed down just as quick as it started.

Ponzi then opened up his own small office and made a deal for rented furniture. There he desperately wrote to acquaintances all over the world about being in business together. Soon after, he had gotten the light bulb idea he was chasing in the form of discovering the existence of an International Reply Coupon. In short, an internationally recognized coupon used to exchange for local postage stamps to help with the cost of international communication. Because the U.S dollar remained healthy compared to the rest of the world’s currencies following World War I, these coupons could be used for profit when properly exchanged in the states.

Now, up until this point all of Ponzi’s schemes for wealth were perfectly legitimate. He had not broken the law since he had ended his second stint in prison; and his discovery of these coupons was a perfectly legal way to find profit. But Ponzi figured that if he bought additional coupons, he could get more profit by convincing others to invest with the idea the postage stamps exchanged would give back the money with interest at that. So he quickly got to work in November 1919 convincing anyone to give him money in this business venture.

He started the “Securities Exchange Company” and got a few investors. He was able to eventually pay them back more than they had put in, showing he did indeed have profits to share. This led to more investors, and those who had gotten their money back re-invested expecting an even larger return on their money later. Soon enough, everyday people on the street, men with businesses of their own, and even what is estimated to be 75 percent of the entire Boston police force was getting in on this action. Ponzi’s scheme was working better than he could have dreamed of.


By the turn of 1920, Ponzi had gone from a failed businessman with a rap sheet to the owner of the fastest growing business in downtown Boston. He was eventually getting hundreds of thousands of dollars invested into the postage coupons, and even had enough money to employ sales agents and offered them commission to boot. He became a local celebrity and to the immigrants a hero of sorts. In the middle of a depression, he was giving Bostonians hope.

In reality, Ponzi was the only one making money. The investors had invested money in exchange for a check promising a return, and whenever the check’s deadline had come up, the investors only kept the money with Ponzi thinking the eventual profit could grow. Whenever anyone did try to get their money back, Ponzi found the way to get the money. In other words it wasn’t so much that he had the whole community living in wealth as it was they all were living with hope that one day they’d all take the money they had invested out, the coupons had done their thing, and suddenly they would amass a good amount of profit.

Ponzi started to get some skeptical inquiries however. Then-Gov. (and eventual vice presidential nominee later that year) Calvin Coolidge had his attorney general start keeping an eye on Ponzi’s company. At times, the police were asked to go and investigate, and Ponzi would charm them so effectively so that there were stories of the investigating cops leaving money for Ponzi to invest for them.

Of course, the truth was the money had not been the investment Ponzi had thought it could be. The coupons could give you higher return on postage investment in theory, but at the rates Ponzi was getting money and buying coupons, he simply was not ever going to give these people back the profits he promised they would have. He had trouble turning the coupons into cash and it became a real problem to even get the postage to sell in the first place.

He didn’t care though, as long as he could pay off those who wanted to redeem their checks, keep people investing and hiring sales agents, he thought he could live with himself as the money rolled in. From here on out, the venture had become yet another illegal scheme. The difference was this time it seemed to be working and Ponzi was now living a luxurious life of wealth he had always wanted.

At the height of his wealth and popularity a fan told him he thought he was the greatest and most important man in the world as he had been the one who invented money. But Ponzi’s schemes always ended the same, with his trickery being found out. This would be no different.


Through the summer of 1920, as the presidential contest began to take up headlines, the investigations into Charles Ponzi’s company began to accelerate as well. A fellow businessman accused him of fraud and a business partner of his tried to sue him for money. This led to court battles that only arose suspicion.

The Boston Post made a decision to investigate Ponzi soon after. This was ironic, given that the Post had once recently given him a glowing article, helping Ponzi sucker in more investors. Soon enough, state officials were in contact. The increasing and sudden bad PR led to many demanding their return on investment. Someway, somehow, Ponzi returned the money and avoided discovery…for now.

Realizing the jig was up, Ponzi came up with the idea of forcing a bank into making him part owner. He’d stuff the bank with enough of his money to make him the majority account holder, and then threaten the bank that he’d pull it all out if they didn’t allow him to join as owner. This would give him enough access to money to buy him time and keep living the lie.

But it was too little, too late. Come July 1920, the state officials were getting closer and closer to finding Ponzi out. In response, he hired an agent to represent him in William McMasters to help him with publicity so as to keep another panic from happening with investors. But McMasters figured out something was amiss, and in a shocking turn of events went to the press with the revelation that Ponzi was “robbing Peter to pay Paul” and financially insolvent.

By August 1920, Ponzi could not stop the full force of the state officials and national media exposing him. The state’s attorney general found through investigation that he had been millions in debt. The Post had a full blown cover story exposing his hidden criminal past. Ponzi was arrested for crimes such as fraud and larceny and refused bail. In a few months, he had gone from a wealthy beloved local celebrity to a broke national scheming villain.

On November 1920, as the governor of the state he had called home was about to be elected vice president, Ponzi pleaded guilty and made a deal to reduce a potential lifetime in prison to just five years. Ponzi would be released in just three and half years — but to his shock, he was indicted on new state larceny charges involving the scheme. Ponzi tried to fight these new charges, even ending up in the Supreme Court. But it didn’t work, and Ponzi was convicted and sent to prison for up to nine years.

Ponzi would eventually be released on bail as he fought these charges, and he used that as his chance to escape down south to Florida. In 1925, a year after now-President Coolidge had won his own elected term, Ponzi had the temerity and courage to try yet another scheme while on the run with the idea he would raise just enough money to flee the country. He would sell real estate this time, offering returns on investment for what was actually useless swamp land — extremely common in Florida at the time. Ponzi, as always, was caught and convicted in 1926 and sentenced to a year for this scheme. But while fighting the charge with an appeal, he used bail to once again escape.

Changing his identity, Ponzi tried to stowaway in a ship headed out of the country. However, during a stop in New Orleans he was found out. He was sent back to Massachusetts and asked to live out the rest of his term. Ponzi never had another day after that in the Roaring Twenties as a free man again.


Now our story with Ponzi doesn’t end here. By the time he was released in 1934, it had been a decade and a half since his grand and infamous scheme. Coolidge had since passed and Democrat Franklin Roosevelt was in the White House. During his 14 years of court trials, convictions, prison stints and failed escapes, he actually still had a fanbase. Some poor investors still believed he could get them their money back, and would keep their checks from the coupons.

In time, that fanbase dwindled as they realized that in fact they had been duped. In total, $20 million or so had been lost, and many had seen their personal financial futures ruined. So as he finally became a free man, the Roaring Twenties now the Great Depression ‘30s, he was met by an angry mob of victims he had to escape from.

Later that year in October, Ponzi was deported back to Italy. He and his wife divorced soon after. Ponzi as expected tried new schemes in Europe, none of them getting him anywhere. Finally he tried some legitimate work in Brazil for Italy’s state airline as an agent. However once World War II broke out, Ponzi was stuck in the country for good as his country abandoned him there once the airline was shutdown thanks to Brazil siding with the Allied Powers. Ponzi then wrote an autobiography while in his 60s— but that too failed to make money.

Ponzi spent the final years of his life poor and in and out of the hospital with various life threatening ailments. In 1949, at the age of 66, Ponzi died in a charity hospital with little money, no family and few if any friends.


Ponzi’s infamous 1920 scheme has lasted in our conscience for a century later. Every time someone is caught defrauding and bilking investors, “Ponzi Scheme” is uttered in the media.

Ponzi always wanted great wealth and fame. He enjoyed it but for a couple months in his earthly life. In the afterlife, he enjoys it as an infamous cautionary tale. As Ponzi himself admitted once about his entire life and legacy, “I went looking for trouble, and I found it.”