Charles Ponzi

Charles Ponzi: The Boston Swindler Who Gave Fraud His Name

Few men see their surname become a crime. Charles Ponzi managed it in less than a year. From a small office on School Street in Boston, the Italian immigrant promised investors 50 percent in 45 days, backed, he said, by a clever trade in international postal coupons. By the summer of 1920 some 30,000 people had believed him. He paid the early ones with the money of the later ones, and for a few weeks he was the most famous financier in America. Then a newspaper did the arithmetic. By mid-August he was in federal custody, a bank had been seized, and his name had begun its long life as the world's word for fraud.

A Dreamer From Lugo

He was born Carlo Ponzi on March 3, 1882, in Lugo, in Italy's Emilia-Romagna region; some accounts give Parma. He attended the University of Rome without taking a degree, and in November 1903 he stepped off a ship in Boston nearly broke, having lost most of his money on the crossing. He later told *The New York Times* he had landed with "$2.50 in cash and $1 million in hopes." The hopes lasted longer than the cash.

Fifteen Years of Small Failures

For the next decade and a half he drifted through low-wage jobs: dishwasher, waiter, clerk. In Montreal he worked at Banco Zarossi, a small bank serving Italian immigrants that soon failed. In 1908 he was convicted there of forging a check and sent to a Quebec penitentiary. Back in the United States he served two more years, in the federal prison in Atlanta, for smuggling Italian immigrants across the border. There was another side to him. In one episode he volunteered skin from his own back for grafts on a badly burned nurse and spent months recovering. By 1918 he was in Boston, working as a clerk and married to Rose Gnecco.

The Coupon From Spain

In August 1919 a letter from Spain reached him with an international reply coupon inside, a slip that could be swapped for return postage in another country. After the First World War, currency values had shifted sharply, so a coupon bought cheaply abroad could, on paper, be exchanged for more postage in the United States. The gap was real. The business was not. Redeeming coupons in bulk was slow and costly, and there were nowhere near enough of them in circulation to carry the returns he would advertise. At the end of 1919 he began taking money through a firm he called the Securities Exchange Company.

Fifty Percent in Forty-Five Days

The promise was 50 percent in 45 days, or double your money in 90. In the first months a few dozen investors trickled in. Then the payouts, made with newer investors' money, became their own advertisement. In June 1920 alone, more than 7,800 people paid in about $2.5 million. Agents opened branch offices from Maine to New Jersey, and flyers went out in English, Italian and Portuguese. By late July about 30,000 people had handed over close to $10 million, most of it in sums averaging around $300. Ponzi bought a mansion in Lexington, became a director of the Hanover Trust Company and moved money through it. He was the toast of Boston.

The Newspaper That Did the Math

*The Boston Post* broke the spell. On July 26, 1920, it published the doubts of Clarence W. Barron, the financial publisher, who judged the scheme implausible. A run began, and Ponzi paid out for days to calm the crowds outside his office. On August 2 his own former publicist, William McMasters, wrote in the *Post* that Ponzi was insolvent beyond hope. On August 11 the paper revealed his Montreal prison record, and the state bank commissioner seized Hanover Trust. Within days Ponzi was under arrest. The *Post* won the 1921 Pulitzer Prize for Public Service for the series. Audits found liabilities far beyond his assets. Several banks failed in the wreckage, and noteholders recovered only a fraction of their money.

Prison, Florida, Exile

In late 1920 he pleaded guilty to federal mail fraud and was sentenced to five years, of which he served about three and a half. Massachusetts then tried him for larceny. After an acquittal and a deadlocked jury, a third trial convicted him, and he was sentenced to seven to nine years in state prison. Out on bail pending appeal, he slipped away to Florida and, under the name Charpon, sold land through a syndicate; a Jacksonville court convicted him of fraud. He jumped bail again, was arrested in New Orleans in June 1926 and was returned to Massachusetts. He was never a citizen. Released in 1934, he was deported to Italy on October 7 of that year. Rose divorced him a few years later.

Last Act in Rio

In 1939 he went to Brazil as Rio de Janeiro manager for Ala Littoria, the Italian state airline, a job that ended during the Second World War. He taught English, worked on a memoir and slid into poverty. By the end he was blind in one eye and partly paralyzed after a stroke in 1948. He died in a charity ward in Rio de Janeiro on January 18, 1949, aged 66. In a final interview he insisted that what his investors lost had been "cheap at that price" for the show he gave them.

On Screen and in Print

• Ponzi's Scheme: The True Story of a Financial Legend (2005), Random House, by Mitchell Zuckoff. The standard modern biography.
• The Rise of Mr. Ponzi, Ponzi's own self-serving autobiography, reissued in 2009 by Despair, Inc.
• ***Murdoch Mysteries*: Home for the Holidays** (2017), CBC television special. Jake Epstein plays Charles Ponzi.

Why Charles Ponzi Is Called a Genius

Because the eye was real. He spotted a genuine pricing gap in the postwar postal system that bankers had walked past, and he grasped, long before modern marketing, how a bold promise and a few early payouts could move an entire city. That flair for persuasion is why he appears on Geniuses.club. It is also why his name is a warning. His investors were mostly working people, many of them immigrants like himself, who handed over savings of a few hundred dollars each; some mortgaged their homes to buy in. When the money ran out, banks closed and families were ruined. Ponzi called it a show. It was theft, and his talent made it worse, not better.

Achievements

• His surname became the worldwide term for a fraud that pays early investors with money from later ones.
• Drew about 30,000 investors and close to $10 million in roughly seven months between late 1919 and July 1920.
• Spotted a real postwar price gap in international reply coupons that established financiers had overlooked.
• Rose from a nearly penniless 1903 immigrant to a Boston celebrity with a Lexington mansion by 1920.
• Took in about $2.5 million from more than 7,800 people in June 1920 alone, with branch offices from Maine to New Jersey.
• Pleaded guilty to federal mail fraud in 1920, was later convicted of larceny in Massachusetts, and was deported to Italy in 1934.
• The newspaper series that exposed him won the Boston Post the 1921 Pulitzer Prize for Public Service.
• Ran the Rio de Janeiro operation of the Italian state airline Ala Littoria from 1939.