July 8, 2024 • 10 mins
On this episode of Our American Stories, Charles Ponzi may not have invented the Ponzi Scheme, but he certainly lent his name to it. Here to tell the story is Jonathan Small of the podcast Write About Now.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:10):
And we returned to our American stories. Up next, the
story of the man who lent his name to his scheme.
You may well know, but the man you don't. We're
talking about Charles Ponzi. Here to tell the story is
John Small, the man behind the podcast. Right about now,
(00:32):
take it away, John.
Speaker 2 (00:33):
A Ponzi scheme is an investment scheme where all the
returns are paid to earlier investors using the money that
was contributed by newer investors. So basically what you do
is you pay the investors of your Ponzi scheme with
the money from the new investors.
Speaker 3 (00:51):
So it's a constant cycle.
Speaker 2 (00:52):
You have to keep on getting new investors in and
the money that the new investors put in you use
to pay your old investors. Ponzi schemes have been around forever,
but they weren't really called Ponzi schemes until Charles Ponzi
came around, probably much to his disappointment.
Speaker 3 (01:14):
He was actually born Carlo. He was a poor.
Speaker 2 (01:19):
Italian immigrant and he came from like a working class family.
But he always had a chip on his shoulder about
being not as rich as he thought he should be,
and he always thought he was much richer than he
actually was. When he turned eighteen, he got in his
head that he wanted to go to America because at
that time Italians were hearing that America, like the streets
(01:39):
were paved with gold, this is a time of great
prosperity in America and not so much prosperity in Italy.
And so his parents raised enough money two hundred dollars
for him to take a boat to Boston. He was
supposed to have some spending cash, but being Charles Ponzi,
he basically gambled all that spending cash away on the
boat lost everything. So when he arrived he was a
(02:02):
penniless Italian immigrant. And he spent many years traveling up
and down the coast of America doing all sorts of
odd jobs, like he was a grocery clerk, he was
a factory hand, he was a dishwasher, he's painted signs,
he was a nurse. He did a million things, and
he always he was one of those guys that always
had like a get rich quick scheme that he would
(02:26):
try to do and then it would fail, like miserably
every single time. One of the most important events to
remember in the pre Ponzi scheme Charles Ponzi life is
when he went up to Montreal, because this would come
back to haunt him later. But he was working at
Montreal for a shopping company, just kind of a laborer
(02:47):
type job, and he walked into his boss's office and
he saw a checkbook, blank checks, and he decided to
write himself a check and he cashed it and he
went out and bought a nice new suit with his
stolen money, and the cops immediately nailed him and he
was arrested and thrown in jail. But in jail, he
met a bunch of other Italian immigrants and he developed
(03:09):
a scheme where he was going to sneak them into
America from Montreal. They paid him some money to do that,
and that did not go well. They were totally busted
at the border and Charles Ponzi again was arrested, and
this time he was thrown in jail and a penitentiary
in Atlanta, Georgia. So he spent all this time in
(03:31):
prison again, came out of prison penniless. You know, at
this point, he's really frustrated. He wants to make money.
He moves back up to Boston where he originally started
his American Adventure, and he meets this woman named Rose,
who becomes his wife. And Rose introduces him to some,
you know, members of the Boston community that help him
(03:52):
out a little bit, give him some money, lend him
some money. So suddenly he's got some money in his hands.
And it's during this period of his life that he
comes up with a scheme, the one scheme that actually
works for him. There used to be this thing called
international reply coupons, and this is because if you send
somebody a letter, a say, from Italy to America, and
(04:13):
you wanted them to return your letter, you would include
this international reply coupon in the letter, and that would
enable them to buy a stamp that would be accepted
in Italy, because at the time, you couldn't put a
stamp on a letter and have it go to Italy
without paying Italy some money. He felt like, because the
exchange rates were so different between what was happening in
(04:36):
Italy and other countries in Europe and America, that he
could buy these coupons and then kind of cash in
on the exchange rate. So that was basically the scheme, right,
That was the original scheme, And so he opened up
this thing that he called a Security Exchange Commission, and
he basically told people, hey, invest with me, and I'll
give you some really good return and he would pay
(04:58):
them back with some of the money he would make
through this coupon scheme that he had going on, right,
and he got some investors, and people kind of start
putting money in because they were interested and it sounded legit,
and he found that the more investors he had, the
more money he had to pay back the initial investors.
So without even really knowing it, he was starting what
(05:18):
would later be called the Ponzi scheme. It was actually
a really good deal for people at the time. If
you just like put one hundred dollars in a bank,
you might make like five dollars an interest by the
end of the year. But with Ponzi, he was giving
like fifty percent interest. So all of a sudden, there
were like lines outside of the Security Exchange Commission office
(05:41):
in Boston because he was able to give people such
incredible returns. In February of I think nineteen nineteen, he
recorded two hundred and ninety dollars from just seventeen investors.
In March he had one hundred and ten investors and
he was making twenty five thousand dollars. By May he
was earning thirty thousand dollars a week. To be adjusted
(06:03):
for inflation, he was baking about four hundred thousand dollars
a week, and people, you know, the investors, would just
hang in there. So the more investors he had, the
more money he had in the pot. And then when
people wanted to eventually take their money out, he had
enough to pay them back and to pay them this
incredible returns. Everybody was super suspicious of this, like how
could this possibly be? And at one point they sent
(06:24):
some cops over to figure out what was going on,
and the cops were so impressive they invested. They stopped
their investigation and started putting money in this thing. So
by the end of the year of him opening up
the Security and Exchange Commission, he had made like two
point five million. He had seventy eight hundred customers offices
in Boston, he had the New Hampshire and Vermont all
(06:45):
over New England. He was so rich at this point
that he was able to buy his own bank, which
was called Hanover Trust, and he moved into this mansion
and really became like a real kind of personality. Charles
Ponzi was only five foot three, think like one hundred
and thirty pounds, but huge personality, and he would kind
of walk around with these really fancy tailored suits.
Speaker 3 (07:08):
He had a.
Speaker 2 (07:09):
Cane with a gold top that he used. You know,
he wanted to be Pet Parnham, like the greatest showman
on Earth. You know, you can imagine this very poor
immigrant suddenly living the life that he always dreamed of living.
It was just very intoxicating for him. And the media
started paying attention. So the Boston Post, which was sort
(07:30):
of like one of the tabloids of the time, there
was a guy that was that was running it named
Richard Grosier, who was basically like the opposite of Charles Ponzi.
He was really like Boston Brahman. He went to Harvard
and his son decided that he was going to make
his name by bringing Charles Ponzi down. Ponzi sort of
(07:51):
kind of fell for this trap. He would agree to
do interviews because he was so outspoken and love to
like hear his name and see his name in Brandon,
love to give a good quote. And Grozier kept digging
and digging and digging into Ponzi's life, and eventually he
found out a bit about what happened up in Montreal
and that Ponzi was actually a criminal, and that's when
(08:12):
things started to unravel.
Speaker 3 (08:14):
The FEDS started.
Speaker 2 (08:16):
To investigate what he was doing, and they started looking
into his bank accounts and realizing that this was not
on the up and up. People started panicking because suddenly
they're worried that they're going to lose their.
Speaker 3 (08:26):
Money that they invested.
Speaker 2 (08:28):
And there starts to be a run on the Security
Exchange Commission and Ponzi, you know, eventually can't keep up
with the run.
Speaker 3 (08:36):
It puts him in a lot of trouble.
Speaker 2 (08:39):
Amazingly, he is able to pay back most of the
people that invested with him, and some people even gave
the money back, but he still went to prison. He
went to prison for four years for this investment fraud
and he got out on good behavior. The state charged
him with fraud, so he had to go back to prison,
but during his appeal for this case, he got out
(09:03):
on bail and he decided to go on the lamp
because Ponzi never did things the easy way, So while
he was on appeal, he went to Tampa Bay where
he hoped to escape back to Italy on a freighter,
and he shaved his head, and he grew a mustache,
and he wore the sailor's cap and he assumed this
completely different identity to escape America. He also faked a suicide.
(09:26):
He had some friends leave his clothes on a beach
with a suicide note.
Speaker 3 (09:29):
But none of this.
Speaker 2 (09:30):
Worked because being Charles Ponzi and being a big mouth.
While he was on the freighter going back to Italy,
he told someone who he really was, and eventually the
police found out and they entered the boat and they
arrested him, and they brought him back to Boston.
Speaker 3 (09:46):
Eventually he was deported.
Speaker 2 (09:49):
Rose divorced him and he moved to Brazil. In his
very later years, tried a bunch of different businesses, which
completely failed. On his deathbed, he ultimately confessed to a
reporter that the whole thing was a scheme, that his
security exchange commission was never a real.
Speaker 3 (10:07):
Business, and that it was all a lie.
Speaker 2 (10:10):
He came clean, and he actually wrote a confession letter
to Rose too. I guess it was very important to
him to tell the truth. He died of a brain
hemorrhage in nineteen forty nine in a poor charity hospital
in Brazil, and he had only seventy five dollars in
his pocket.
Speaker 1 (10:30):
And a special thanks to John Small, who's the man
behind the podcast Right About Now, which offers a glimpse
into the lives and stories of successful authors. A classic
story of an American get rich quick schemer.
Speaker 3 (10:44):
Here on our American Stories
And we returned to our American stories. Up next, the
story of the man who lent his name to his scheme.
You may well know, but the man you don't. We're
talking about Charles Ponzi. Here to tell the story is
John Small, the man behind the podcast. Right about now,
(00:32):
take it away, John.
Speaker 2 (00:33):
A Ponzi scheme is an investment scheme where all the
returns are paid to earlier investors using the money that
was contributed by newer investors. So basically what you do
is you pay the investors of your Ponzi scheme with
the money from the new investors.
Speaker 3 (00:51):
So it's a constant cycle.
Speaker 2 (00:52):
You have to keep on getting new investors in and
the money that the new investors put in you use
to pay your old investors. Ponzi schemes have been around forever,
but they weren't really called Ponzi schemes until Charles Ponzi
came around, probably much to his disappointment.
Speaker 3 (01:14):
He was actually born Carlo. He was a poor.
Speaker 2 (01:19):
Italian immigrant and he came from like a working class family.
But he always had a chip on his shoulder about
being not as rich as he thought he should be,
and he always thought he was much richer than he
actually was. When he turned eighteen, he got in his
head that he wanted to go to America because at
that time Italians were hearing that America, like the streets
(01:39):
were paved with gold, this is a time of great
prosperity in America and not so much prosperity in Italy.
And so his parents raised enough money two hundred dollars
for him to take a boat to Boston. He was
supposed to have some spending cash, but being Charles Ponzi,
he basically gambled all that spending cash away on the
boat lost everything. So when he arrived he was a
(02:02):
penniless Italian immigrant. And he spent many years traveling up
and down the coast of America doing all sorts of
odd jobs, like he was a grocery clerk, he was
a factory hand, he was a dishwasher, he's painted signs,
he was a nurse. He did a million things, and
he always he was one of those guys that always
had like a get rich quick scheme that he would
(02:26):
try to do and then it would fail, like miserably
every single time. One of the most important events to
remember in the pre Ponzi scheme Charles Ponzi life is
when he went up to Montreal, because this would come
back to haunt him later. But he was working at
Montreal for a shopping company, just kind of a laborer
(02:47):
type job, and he walked into his boss's office and
he saw a checkbook, blank checks, and he decided to
write himself a check and he cashed it and he
went out and bought a nice new suit with his
stolen money, and the cops immediately nailed him and he
was arrested and thrown in jail. But in jail, he
met a bunch of other Italian immigrants and he developed
(03:09):
a scheme where he was going to sneak them into
America from Montreal. They paid him some money to do that,
and that did not go well. They were totally busted
at the border and Charles Ponzi again was arrested, and
this time he was thrown in jail and a penitentiary
in Atlanta, Georgia. So he spent all this time in
(03:31):
prison again, came out of prison penniless. You know, at
this point, he's really frustrated. He wants to make money.
He moves back up to Boston where he originally started
his American Adventure, and he meets this woman named Rose,
who becomes his wife. And Rose introduces him to some,
you know, members of the Boston community that help him
(03:52):
out a little bit, give him some money, lend him
some money. So suddenly he's got some money in his hands.
And it's during this period of his life that he
comes up with a scheme, the one scheme that actually
works for him. There used to be this thing called
international reply coupons, and this is because if you send
somebody a letter, a say, from Italy to America, and
(04:13):
you wanted them to return your letter, you would include
this international reply coupon in the letter, and that would
enable them to buy a stamp that would be accepted
in Italy, because at the time, you couldn't put a
stamp on a letter and have it go to Italy
without paying Italy some money. He felt like, because the
exchange rates were so different between what was happening in
(04:36):
Italy and other countries in Europe and America, that he
could buy these coupons and then kind of cash in
on the exchange rate. So that was basically the scheme, right,
That was the original scheme, And so he opened up
this thing that he called a Security Exchange Commission, and
he basically told people, hey, invest with me, and I'll
give you some really good return and he would pay
(04:58):
them back with some of the money he would make
through this coupon scheme that he had going on, right,
and he got some investors, and people kind of start
putting money in because they were interested and it sounded legit,
and he found that the more investors he had, the
more money he had to pay back the initial investors.
So without even really knowing it, he was starting what
(05:18):
would later be called the Ponzi scheme. It was actually
a really good deal for people at the time. If
you just like put one hundred dollars in a bank,
you might make like five dollars an interest by the
end of the year. But with Ponzi, he was giving
like fifty percent interest. So all of a sudden, there
were like lines outside of the Security Exchange Commission office
(05:41):
in Boston because he was able to give people such
incredible returns. In February of I think nineteen nineteen, he
recorded two hundred and ninety dollars from just seventeen investors.
In March he had one hundred and ten investors and
he was making twenty five thousand dollars. By May he
was earning thirty thousand dollars a week. To be adjusted
(06:03):
for inflation, he was baking about four hundred thousand dollars
a week, and people, you know, the investors, would just
hang in there. So the more investors he had, the
more money he had in the pot. And then when
people wanted to eventually take their money out, he had
enough to pay them back and to pay them this
incredible returns. Everybody was super suspicious of this, like how
could this possibly be? And at one point they sent
(06:24):
some cops over to figure out what was going on,
and the cops were so impressive they invested. They stopped
their investigation and started putting money in this thing. So
by the end of the year of him opening up
the Security and Exchange Commission, he had made like two
point five million. He had seventy eight hundred customers offices
in Boston, he had the New Hampshire and Vermont all
(06:45):
over New England. He was so rich at this point
that he was able to buy his own bank, which
was called Hanover Trust, and he moved into this mansion
and really became like a real kind of personality. Charles
Ponzi was only five foot three, think like one hundred
and thirty pounds, but huge personality, and he would kind
of walk around with these really fancy tailored suits.
Speaker 3 (07:08):
He had a.
Speaker 2 (07:09):
Cane with a gold top that he used. You know,
he wanted to be Pet Parnham, like the greatest showman
on Earth. You know, you can imagine this very poor
immigrant suddenly living the life that he always dreamed of living.
It was just very intoxicating for him. And the media
started paying attention. So the Boston Post, which was sort
(07:30):
of like one of the tabloids of the time, there
was a guy that was that was running it named
Richard Grosier, who was basically like the opposite of Charles Ponzi.
He was really like Boston Brahman. He went to Harvard
and his son decided that he was going to make
his name by bringing Charles Ponzi down. Ponzi sort of
(07:51):
kind of fell for this trap. He would agree to
do interviews because he was so outspoken and love to
like hear his name and see his name in Brandon,
love to give a good quote. And Grozier kept digging
and digging and digging into Ponzi's life, and eventually he
found out a bit about what happened up in Montreal
and that Ponzi was actually a criminal, and that's when
(08:12):
things started to unravel.
Speaker 3 (08:14):
The FEDS started.
Speaker 2 (08:16):
To investigate what he was doing, and they started looking
into his bank accounts and realizing that this was not
on the up and up. People started panicking because suddenly
they're worried that they're going to lose their.
Speaker 3 (08:26):
Money that they invested.
Speaker 2 (08:28):
And there starts to be a run on the Security
Exchange Commission and Ponzi, you know, eventually can't keep up
with the run.
Speaker 3 (08:36):
It puts him in a lot of trouble.
Speaker 2 (08:39):
Amazingly, he is able to pay back most of the
people that invested with him, and some people even gave
the money back, but he still went to prison. He
went to prison for four years for this investment fraud
and he got out on good behavior. The state charged
him with fraud, so he had to go back to prison,
but during his appeal for this case, he got out
(09:03):
on bail and he decided to go on the lamp
because Ponzi never did things the easy way, So while
he was on appeal, he went to Tampa Bay where
he hoped to escape back to Italy on a freighter,
and he shaved his head, and he grew a mustache,
and he wore the sailor's cap and he assumed this
completely different identity to escape America. He also faked a suicide.
(09:26):
He had some friends leave his clothes on a beach
with a suicide note.
Speaker 3 (09:29):
But none of this.
Speaker 2 (09:30):
Worked because being Charles Ponzi and being a big mouth.
While he was on the freighter going back to Italy,
he told someone who he really was, and eventually the
police found out and they entered the boat and they
arrested him, and they brought him back to Boston.
Speaker 3 (09:46):
Eventually he was deported.
Speaker 2 (09:49):
Rose divorced him and he moved to Brazil. In his
very later years, tried a bunch of different businesses, which
completely failed. On his deathbed, he ultimately confessed to a
reporter that the whole thing was a scheme, that his
security exchange commission was never a real.
Speaker 3 (10:07):
Business, and that it was all a lie.
Speaker 2 (10:10):
He came clean, and he actually wrote a confession letter
to Rose too. I guess it was very important to
him to tell the truth. He died of a brain
hemorrhage in nineteen forty nine in a poor charity hospital
in Brazil, and he had only seventy five dollars in
his pocket.
Speaker 1 (10:30):
And a special thanks to John Small, who's the man
behind the podcast Right About Now, which offers a glimpse
into the lives and stories of successful authors. A classic
story of an American get rich quick schemer.
Speaker 3 (10:44):
Here on our American Stories
Host
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