Wednesday, September 28, 2016

Chapter Review: Streets of Gold: Charles Ponzi and the American Scheme

I am familiar with the term, Ponzi Scheme, but was not familiar with the man who prompted this term.  That man is Charles Ponzi, was born Carlo Ponzi in Italy.  He flunked out of university, and so set his sights on America as a place to win his fortune.  He had heard the streets in America were made of gold.  He eventually drifted north, where he became involved in  a scheme to pay back loans (self loans made to yourself illegally from people giving you money to wire to relatives).  It eventually tumbled, and Ponzi was jailed for writing a forged check to himself.  He then landed in Federal prison in Atlanta, Georgia for helping people enter the United States illegally.  While there he met Charles Morse, and from him learned more about speculation schemes.   He thought about returning to Europe, to fight for Italy in the war, but changed his mind  He met a woman, fell in love and married Rose Gneccco.  Rose contended they didn't need to be rich to be happy.  However Ponzi had other ideas, and began promising incredible returns to his investors in a scheme to buy International Reply Coupons abroad, and sell them in the United States.  The idea being they were accepted for postage any where in the world, but were sold more cheaply in Europe.  This he used as his draw, but what he was really doing was paying investors back with the money from new investors.  In fact the Post Office had written him a letter saying such a scheme was not allowed.  No matter if he made believe this was his method, and besides, he was paying people back with incredible interest.  We are all gamblers.  We all crave easy money.
Working upon this crave Ponzi kept his scheme going for several years.  He bought a large mansion.  He brought his mother from Italy.  He had made good.  When the paper ran an article about his investment program, he made even more money.  However, eventually in such a scheme, the debts our weigh the assets, and when that happens it comes crashing down.  Thousands of people lost millions of dollars.  When it collapsed, and he was audited, his scheme was up.  After serving five years in prison he was deported.  He died in Brazil a broke man, but he had given the people of America quite a show for a time.

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