December 3, 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
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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.
Speaker 3 (00:57):
You use to pay your old investors.
Speaker 2 (01:00):
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.
Speaker 3 (01:52):
He was supposed to have some.
Speaker 2 (01:53):
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 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
(02:15):
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 try to do and
then it would fail, like miserably every single time. One
of the most important events to remember in the pre
(02:36):
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 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
(02:58):
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 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
(03:20):
again was arrested, and this time he was thrown in
jail and a penitentiary in Atlanta, Georgia. So he spent
all this time in 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
(03:42):
woman named Rose, who becomes his wife. And Rose introduces
him to some, you know, members of the Boston community
that help him 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
(04:05):
this thing called international reply coupons, and this is because
if you send somebody a letter, a say, from Italy
to America, and 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
(04:27):
go to Italy without paying Italy some money. He felt like,
because the exchange rates were so different between what was
happening in 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
(04:47):
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 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,
(05:09):
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
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
(05:31):
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
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.
(05:55):
In March he had one hundred and ten investors and
he was making twenty five thousand dollars. By May he
would earning thirty thousand dollars a week. To be adjusted
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.
Speaker 3 (06:16):
This incredible returns.
Speaker 2 (06:20):
Everybody was super suspicious of this, like how could this
possibly be? And at one point they sent 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.
(06:40):
He had seventy eight hundred customers offices in Boston, he
had the New Hampshire and Vermont all 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, I think like one hundred and thirty pounds,
(07:01):
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 a 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. But none of this 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 business, and that
it was all a lie. He came clean, and he
(10:12):
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.
Speaker 3 (00:57):
You use to pay your old investors.
Speaker 2 (01:00):
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.
Speaker 3 (01:52):
He was supposed to have some.
Speaker 2 (01:53):
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 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
(02:15):
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 try to do and
then it would fail, like miserably every single time. One
of the most important events to remember in the pre
(02:36):
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 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
(02:58):
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 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
(03:20):
again was arrested, and this time he was thrown in
jail and a penitentiary in Atlanta, Georgia. So he spent
all this time in 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
(03:42):
woman named Rose, who becomes his wife. And Rose introduces
him to some, you know, members of the Boston community
that help him 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
(04:05):
this thing called international reply coupons, and this is because
if you send somebody a letter, a say, from Italy
to America, and 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
(04:27):
go to Italy without paying Italy some money. He felt like,
because the exchange rates were so different between what was
happening in 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
(04:47):
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 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,
(05:09):
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
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
(05:31):
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
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.
(05:55):
In March he had one hundred and ten investors and
he was making twenty five thousand dollars. By May he
would earning thirty thousand dollars a week. To be adjusted
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.
Speaker 3 (06:16):
This incredible returns.
Speaker 2 (06:20):
Everybody was super suspicious of this, like how could this
possibly be? And at one point they sent 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.
(06:40):
He had seventy eight hundred customers offices in Boston, he
had the New Hampshire and Vermont all 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, I think like one hundred and thirty pounds,
(07:01):
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 a 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. But none of this 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 business, and that
it was all a lie. He came clean, and he
(10:12):
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
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