Carlo Ponzi, famously known as Charles Ponzi, was a criminal with a cunning mind and a slick way with speech. Unfortunately for him, his talents did not keep him out of jail. His name would become permanently associated with a type of investment fraud in which handsome returns are promised from made-up sources and early investors are supposedly compensated with money raised from later ones.
Early on
Charles Ponzi was born in Parma, Italy, in 1882. He grew up there and then moved to the United States in November 1903, when he was 21 years old. Ponzi saw many opportunities to pursue, but could not find his "nitch." Over the next 14 years he bounced from city to city, working as a waiter, dishwasher, clerk, and translator of Italian. Then, around 1917 he settled down in Boston where he took a typing job and answered foreign mail.
Ponzi worked legitimately for two years until one day he discovered a way to make himself and investors rich. From that day on, Charles pursued for "the gravy train" — beginning a life of lies and scandals. During that time he married a woman named Rose, who stayed by his side through thick and thin. Oh, how the money started coming in. Unfortunately for him, the scandals caught up with him, then his became a life on the run, of trying to avoid jail.
Ponzi participated in scams from Providence, Rhode Island, to Montreal, Quebec, where he wound up in prison for his efforts. But Ponzi's ambition was as big as his adopted province. He thought he was destined to be rich.
The Security Exchange Company
On December 26, 1919, Ponzi established a firm called The Security Exchange Company. He boasted a return of 50-percent interest in 90 days, and the world wanted in on it.
Ponzi’s great idea created an instant "feeding frenzy," and within a few short months, lines formed outside his School Street office door. Thousands of people purchased so-called Ponzi promissory notes at values from $10 to $50,000. The average investment was estimated to be around $325.
Ponzi and his staff brought in a million dollars per week. Desk drawers, file cabinets, closet space, and virtually any extra storage area were filled with investors' hard-earned cash.
The scheme
Ponzi, who swindled the gullible out of millions by 1920, invented what came to be known as a Ponzi Scheme, a scam in which early investors are paid with money from new investors (similar to today's "pyramid scheme"). The con game had been around for years, perhaps centuries. But Ponzi played it on such a grand scale, with such flair, and in full view of the media and the world, that he earned a prominent place in criminal history. Some historians have described Ponzi as "a celebrity."
The most notorious "Ponzi Scheme" took place when he began to trade postal reply coupons in 1919. Plenty of Americans in other countries could include such a coupon in a letter, to be redeemed at the post office for enough money to send a reply. Ponzi used his Securities Exchange Company as a front to trade the coupons and make a 200-percent profit. That was not how he continued his business, however. He eventually moved to Florida to pursue new schemes.
After authorities caught up with him in Florida, he fled to Texas, where he was apprehended and sent to jail. Upon his release, Ponzi's wife divorced him and he was eventually deported to Italy. At the age of 52, he had to start over again.
Later years
Ponzi became an English translator while in Rome. Benito Mussolini offered him a position with Italy’s new airline and he served as the Rio de Janeiro branch manager from 1939-1942.
Ponzi discovered that several airline officials were using the carrier to smuggle currency, and Ponzi wanted his share. When the smugglers laughed at him, he tipped off Brazilian authorities — leading to the arrest of three top airline officials. World War II brought about the airline’s failure, and Ponzi soon found himself without a job again.
Charles stayed in Rio de Janeiro with hopes of "finding his way" financially. After trying to run a Rio lodge (which failed), Ponzi found himself either collecting Brazil unemployment insurance or giving English lessons — a far cry from the millionaire that he had become just a decade earlier.
Carlo "Charles" Ponzi died in the charity ward of a Rio de Janeiro hospital in 1949, at the age of 67.
"The last picture of Ponzi, taken in the hospital, showed him with a big smile on his face." - Boston Globe