Charles Ponzi

He landed in Boston on November 15, 1903 with 2.50 dollars, having gambled the rest of his savings away on the crossing. Born in Lugo to a family that had money once and no longer did, he had spent four years at the University of Rome and come home broke without a degree. In America he washed dishes and slept on the restaurant floor, then waited tables until he was fired for shortchanging customers. In Montreal he clerked at Banco Zarossi and watched its owner pay six percent interest out of new deposits until the bank collapsed. Ponzi forged a check for 423.58 dollars, went to prison for three years, and wrote his mother that he had a job assisting the warden.

The mechanism was a postal coupon. International reply coupons bought cheaply in postwar Italy could be redeemed for American stamps worth more, and Ponzi told investors this arbitrage paid 50 percent in 45 days. He never traded coupons in any quantity — about 27,000 were in circulation when covering his notes would have required 160 million. He paid the early investors with the later ones. The Securities Exchange Company opened in January 1920, was taking in something near a million dollars a day by July, and was finished by August.

Before any of it, working as a nurse at a mining camp, Ponzi volunteered for two operations to graft 122 square inches of skin from his back and legs onto a badly burned co-worker he barely knew. The complications cost him the job. By the summer of 1920 his investors included his chauffeur, his brother-in-law, newsboys putting in a few dollars, and roughly three-quarters of the Boston police force. Many had mortgaged their houses. When the Securities Exchange Company collapsed they recovered less than 30 cents on the dollar, having lost about 20 million dollars in 1920 money. Five banks went down with Hanover Trust. Investigators never untangled the accounts, which were index cards with names on them.

He was neither the first nor the largest. A Brooklyn bookkeeper named William Miller had worked the same arithmetic in 1899 and taken in a million dollars. Bernard Madoff's version, 88 years later, cost investors about 53 times what Ponzi's did. The name attached to Ponzi anyway. His run was short, loud, and reported in detail by a paper that won the 1921 Pulitzer Prize for Public Service for ending it. He had never become an American citizen. On October 7, 1934 the United States deported him to Italy. Rose divorced him in 1937. He died in a Rio de Janeiro charity ward on January 18, 1949, blind in one eye and partly paralyzed, leaving an estate of 75 dollars.

Charles Ponzi's life against the full span of the corpus.

• Securities Exchange Company company
  The School Street firm that took in about 20 million dollars before collapsing in August 1920
• Ponzi v. Fessenden case
  The Supreme Court held that a federal plea deal does not bind a state prosecutor 1922
• Charpon Land Syndicate company
  Florida land scheme selling tracts that were partly underwater at a promised 200 percent in 60 days 1925
• The Rise of Mr. Ponzi book
  His own account of the scheme, written after his deportation 1936

• November 15, 1903 aged 21 Arrives in Boston aboard the S.S. Vancouver By his own account he had 2.50 dollars left, having gambled away the rest on the voyage.
• 1908 aged ~26 Forges a check in Montreal and goes to prison for three years He wrote himself 423.58 dollars on a found checkbook and served the term at St. Vincent-de-Paul Penitentiary.
• 1911 aged ~29 Caught smuggling Italian immigrants across the border and jailed in Atlanta Two years, during which he worked as the warden's translator.
• 1918 aged ~36 Marries Rose Maria Gnecco in Boston His mother had written to warn her about the prison years. She married him anyway.
• January 1920 aged 37 Founds the Securities Exchange Company Eighteen investors put in 1,800 dollars the first month and were paid the next, out of newer money.
• July 24, 1920 aged 38 The Boston Post runs a favorable front-page story Thousands queued at his office the next business day. He was taking in about 250,000 dollars a day.
• August 11, 1920 aged 38 The Post prints his Montreal forgery conviction and the state seizes Hanover Trust He surrendered to federal authorities two days later.
• November 1, 1920 aged 38 Pleads guilty to a single count of mail fraud Five years in federal prison. State larceny charges and seven more years followed.
• October 7, 1934 aged 52 Deported to Italy after Governor Ely refuses a pardon A crowd met him at the prison gates. He told reporters he had gone looking for trouble and found it.

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