The "Ponzi" Scheme
Charles was working at his typing and answering foreign mail almost scheme free until one day in August of 1919 it hit him that could become very wealthy and make some investors wealthy with him.
How the rollercoaster began was found accidentally. The scam started with stamps. Charles first noticed when he wrote a letter to Spain, and they wrote back and sent an international postal reply coupon. When Charles took the coupon into the post office he received six one cent American stamps when in Spain he knew that they cost one cent for one. The logic was simple, go buy stamps in Spain and then cash then in or get a third party involved and get the money. That was not enough for Charles, he wanted to get rich and he wanted to do it fast.
He had a plan now he just had to put it to action. He was going to try to convert American money into Italian lire or any where the currency rate was high. Ponzi's idea was for foreign agents to buy coupons in weak economies and then exchange them into American currency. He claimed he was going to profit 400%. His idea was good but when so many postal organizations are involved there are many delays and that is just the opposite of what he wanted. His first idea was a failure but he was not about to give up.
In 1919 Charles decided he wanted his own business. He stated The Security Exchange Company. He had a promise and the world wanted it. He promised 50% interest in 90 days, but the catch was he could make it happen in 45 days which meant doubling your money. Everybody wanted a piece of that.
News travels fast when it is about money and making it easy. Thousand of people joined up with Charles. Many people were purchasing promissory notes from $10 to $50,000 trying to double their money. Back in the 1920's if you invested that much money you were spending your life savings. His idea was working he was putting almost $1,000,000 a week in his own pocket. His business had a pyramid affect. He was paying off investors with other peoples money. His business was booming, opening up 35 different branches, money was coming in all directions.
Charles had it all, by the summer of 1920 he had taken millions and was leading a very wealthy life. From suits to jewelry for his wife, then even purchased a twenty room mansion.
Charles was always under some kind of investigation but nobody ever filed a complaint so it was hard to pin point his fraud. It was going to be hard to bring him down, but it happened. IN August of 1920 Charles was declared bankrupt by the auditors and banks. When investors found out about what happened law suits from every when were flying and Charles was in the center of it. His life was one big legal issue, from federal and state trials to bankruptcy hearing, his life would never be the same.
It was estimated that 400,000 people and 15 million dollars had gone to Charles. In today's money that would be equal to about 140 million. Who ever invested with him lost a great deal of money.
It was once said that "Ponzi" is to schemes as what Kleenex is to tissue. What a great way to describe just how big and nationally known Charles Ponzi really was.
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