Earning easy money and becoming a millionaire overnight is every mortal’s dream. But behind this promise always looms the shadow of financial scams. There are names that resonate with particular force in the history of major frauds. Among them, a man known for reaching a level that paradoxically never dreamed of a pyramid fraud scheme that he did not invent: Carlo Ponzi.

He founded his Ponzi empire in the United States in the 1920s, promising the impossible: extraordinary profits in a short time. It was just a house of cards that would collapse in a few months.

An immigrant with big dreams and only $2.50

Carlo ‘Charles’ Ponzi was born in Lugo (Italy) in 1882. Like many other Italians of his generation, Ponzi dreamed of a prosperous future away from Europe.

As published Smithsonian MagazinePonzi gave an interview in his heyday New York Times He claimed that he was born in Parma (Italy) and started his university education in Rome, although he was not very successful. “During my college days, I was what we call here a spender. That is, I had reached a precarious period in a young man’s life when spending money seemed the most attractive thing in the world,” Ponzi said. he said. report. .

In 1903, at just 21 years old, Ponzi packed his bag and emigrated to the United States aboard the SS Vancouver with little money and many hopes. His first years in Boston were not easy. Accordingly Biographyyoung Ponzi was shifting between precarious temporary jobs he hated: day laborer, dishwasher, waiter, and even nurse’s assistant. In the NYT interview, Ponzi claimed: “I came to this country with $2.50 in cash and hopes for a million dollars, and those hopes never left me.”

There is no pyramid scheme bearing Zarossi’s surname

Tired of low-paying jobs, Ponzi decided to try his luck a little further north and emigrated to Canada, where he started working at the Zarossi Bank of Montreal, also founded by the Italian Luigi Zarossi.

Zarossi Bank became extremely popular at the time, offering interest rates of 6%, twice what other competing institutions paid. high interest promises They pooled the savings of many of their citizens and hoped their meager savings would grow at high interest.

Carlo Ponzi discovered that bankers were using new deposits to pay interest on old depositors. Sound familiar to you? In fact, this is the basis of the Ponzi pyramid scheme.

As is usually the case with such structures, Zarossi Bank Its collapse did not last long due to lack of liquiditybut it lasted long enough for Luigi Zarossi to escape to Mexico with the money of unsuspecting citizens who had entrusted him with their savings.

After this, Carlo Ponzi became unemployed and while trying to get ahead, he was arrested for forging a $423 check. He was sentenced to three years in prison, which he served in Montreal. After paying his debt fairly, he decided to end his Canadian adventure and return to the United States.

This won’t be the first time Carlo Ponzi went to prison. After being involved in various petty crimes, he was finally arrested and again sentenced to two years in prison in 1911 for helping immigrants cross the border illegally.

Carlo Ponzi in his office

Accordingly Smithsonian MagazineCarlo Pozi returned to Boston in 1917, where he met his wife, Rose Maria Gnecco, and took the reins of the family grocery business, which had until then been run by his father-in-law. That’s when Carlo Ponzi came up with a great idea to get rich while looking at a newspaper: international response coupons (IRCs, for English abbreviation

The origins of the biggest scam ever seen

These coupons, printed by post offices in different countries, allowed recipients to exchange them for postage stamps from other countries. Taking advantage of the difference in exchange rates of different currencies, Ponzi thought he could make a large profit margin by purchasing these coupons with devalued currencies in European countries and selling them in the United States.

The idea was sound, at least in theory. Actually, His plan was logistically impossibleBut that wasn’t going to stop him.

Ponzi founded a company with a bombshell name: Stock Exchange Corporation and began offering investors the opportunity to make a 45% or 50% return in just 45 days, or triple it in 90 days.

Accordingly timeHis first victims were close friends and acquaintances who entrusted him with small sums of money. All they had to do was bring more investors with them and they would start to see their investments grow.

“My first seller was a snowball. By January 1, 1920, I had collected 18 investors. The snowball started to descend. It gained momentum in the second week of February when I paid $2,478 to my first investors. In his Ponzi bio, he explained that the “original investment” was $1,770.

Soon, his promises began to attract the attention of ordinary people. They came en masse to give him the money they had saved.. Ponzi used new investors’ money to pay off previous investors, creating a false sense of success and fueling the snowball.

National Geographic The newspaper claimed Evening Post In 1920, New York City published an article that read: “All Boston is rapidly growing rich with Carlo Ponzi, the fortune teller, the modern King Midas.” […] Lend him $50 to $50,000 and within ninety days he’ll give you back twice what you gave him. “He’s been doing this for eight months and he’s still doing it.”

The pyramid scheme grew exponentially and within a few months Ponzi was making more money than he ever imagined. As they point out ObserverHe was earning up to $250,000 a day and managing investments worth a million dollars a day. In just a few months, his fortune reached $20 million. 255 million dollars today.

Ponzi started living like the millionaire he always dreamed of. He lived with servants in a 12-room house and had several cars. He was also seen at Boston’s finest restaurants and rubbed shoulders with society’s elite.

But someone did the numbers

Accordingly National GeographicSuspicions about Carlo Ponzi began when newspapers and officials began to wonder how it was possible for someone to make so much profit in such a short time.

A report in 1920 Boston PostThe legitimacy of Ponzi’s business has been questioned. Journalists began to dig deeper, and it soon became clear that there were not enough coupons in circulation to support the enormous amount of money Ponzi claimed to have made.

article Boston Post He pointed out that there are only 27,000 international response coupons in the United States, and according to the article author’s calculations, approximately 160 million stamps would have to be made for the Ponzi Stock Exchange Company to meet the promised payments. The calculations did not work out.

Authorities decided to launch an investigation and Ponzi froze new investment inflows. However, like all pyramid schemes, the Ponzi scheme new investors keep coming Otherwise its structure will collapse.

The final blow came when a government auditor found that Ponzi owed far more than his assets. The collapse was rapid.

Only the most sophisticated investors managed to get their money back, but thousands of people lost their savings and were arrested and convicted of Ponzi mail fraud. His initial sentence was five years in prison, but his legal problems did not end there.

He was confronted after serving his sentence in 1924. various accusations of fraud and fraud and was sentenced to a further seven years in prison. Eventually, he was deported to Italy in 1934, where he tried unsuccessfully to rebuild his life. He spent his last years in poverty and died in Brazil in 1949. He was 66 years old and had an estate of only $75.

in Xataka | The extreme stinginess of the first woman to become a millionaire by investing: She was called the “Witch of Wall Street”

Image | Wikimedia Commons (Boston Public Library, British Post Office)