Ponzi: The Financial Idiot Who Scammed the World

There was a time when the financial world 

marveled at the genius of Charles Ponzi,  

the man who was in charge of one of the 

most successful business investments in  

America. He had millions of dollars at 

his disposal and crowds of people lining  

up literally begging him to take their money.

Little did everyone know that Ponzi’s business  

was built on nothing but lies. The 

whole thing was an outrageous scam,  

one which turned Ponzi into a very rich man, but 

ruined the lives of thousands of innocent people. 

Ponzi’s deception was so shocking and 

infamous that even now, a hundred years later,  

the scam still shares his name - the Ponzi scheme.

This video is the untold truth of the man behind  

the scam, and how to make millions 

of dollars with nothing but lies.

Charles Ponzi  

was born in Italy on March 3rd, 1882. 

His father was a hardworking postman,  

and overall his family was financially comfortable 

- but it used to be much more than that. 

Ponzi’s grandparents and great-grandparents 

had all been successful businessmen,  

merchants, and public officials.

The demotion to the working class really affected  

Ponzi from a young age, and made him bitter and 

resentful. He wondered why he had to suffer for  

his family’s failing fortunes? Why couldn’t he 

have been born rich and enjoy a life of leisure  

without having to worry about a job or money?

As a teenager, Ponzi inherited a modest sum of  

money following his father’s death. 

He used it to enroll in college,  

as his mother had her heart set on him going 

to a prestigious college to get an education. 

But Ponzi had other plans. Instead 

of studying and going to class,  

he decided to burn through his savings by dressing 

in the latest fashions and eating at the fanciest  

restaurants in town. Then, at night, maybe 

the theater or the opera, or some gambling  

at the casino with his wealthy friends. Nothing 

was too extravagant or too expensive for him. 

Ponzi liked to pretend that he was just like 

his rich friends and that he had endless money,  

but it was an illusion - and one day, it 

all came crashing down around him. His  

inheritance money finally ran out. And since 

his studies had been completely neglected,  

he had no chance of graduating.

His uncle offered him work as a clerk,  

but the idea of finding a 9-to-5 job repulsed 

Ponzi, who considered himself too good for menial  

labor. He felt he had only one choice left - 

travel to America and strike it rich there.

In 1903, Ponzi arrived in Boston aboard the SS 

Vancouver. He felt a deep shame in his heart  

that he let his mother down and believed 

that the only way to redeem himself was  

to return to Italy as a rich man. The only 

problem was he had no idea how to do that. 

America proved to be a much-needed reality 

check for young Ponzi. There was no more  

inheritance money and no more relatives to bail 

him out of trouble. As distasteful as he found  

physical labor, he had no choice - if he wanted 

to eat, he needed to work. Ponzi spent the next  

few years up and down the east coast, from New 

York to Florida. He worked as a sign painter,  

a waiter, a grocery clerk, a dishwasher, 

a factory hand, an insurance salesman,  

and a sewing machine repairman. None of the 

gigs lasted long though. Ponzi either quit  

because he hated the work or he was fired 

because he tried to cheat the customers. 

This often meant he resorted to stealing or 

begging for scraps of food and sleeping in  

parks. It was a far cry from his carefree 

days as a high-roller back in Rome,  

and even when Ponzi did manage to scrape together 

a bit of cash, he would inevitably spend it all  

on a big night out or a weekend vacation 

to remind himself of the good old days. 

In 1907, Ponzi traveled to Montreal, hoping 

that Canada would prove to be more welcoming  

and lucrative. And at first, things were looking 

up for him. He found work as a clerk at a bank  

that mainly served Italian immigrants called 

Banco Zarossi. It was the same type of job that  

Ponzi had turned down back in Rome because he 

considered himself too good for it, but it was  

surprising how a few years on the streets working 

for minimum wage could change his perspective. 

Unfortunately for Ponzi, his new job did not last 

long because his boss was a con man. Zarossi was  

using an age-old fraud known as “robbing Peter 

to pay Paul.” In other words, he was using the  

money from his newest clients in order to pay off 

his older ones. This allowed Zarossi to offer 6%  

interest rates on all deposits, which was double 

the average rate, however his clients started  

getting suspicious when their relatives back home 

kept complaining that they were not receiving the  

money the bank was supposed to send. In mid-1908, 

the authorities began investigating the bank for  

embezzlement, at which point Zarossi filled a 

suitcase with all the cash he could carry and  

fled to Mexico, leaving his employees and his 

family to deal with the fallout from his scam. 

Not wanting to be the one who takes the fall, 

Ponzi intended to travel back to the United  

States so he didn’t have to be involved in the 

investigation and fallout from Zarossi’s scam. But  

before that, he did something very stupid. So that 

he would not have to start from scratch again,  

he thought that he would give himself a little 

“going away present” by forging a check from one  

of his bank's clients, a shipping firm called the 

Canadian Warehousing Company. Ponzi stole a blank  

check from the manager’s checkbook and filled it 

out for $423.58. A believable and unsuspicious  

amount, thought Ponzi, but as soon as he tried 

to cash the fraudulent check, the bank teller  

easily spotted the fake signature and alerted the 

police. Ponzi got three years in prison at Saint  

Vincent de Paul Penitentiary. But of course, 

this was just the start of Ponzi’s crimes.

Ponzi was released on parole after two years, 

and he immediately made plans to travel to the  

States again, but he didn’t go alone. Instead, he 

took with him five Italian immigrants, all fresh  

off the boat without any proper papers, as he had 

been paid to smuggle these men into America. Ponzi  

figured this would set him up with a nice quick 

payday now that he was a free man again. However,  

he got caught, and was arrested once again.

Still, Ponzi hoped that if he pled guilty,  

the judge would go easy on him and 

let him off with a small fine. But  

once the judge banged his gavel and passed 

sentence, Ponzi’s heart sank - he was given  

another two years in a federal prison in Atlanta.

After being released from jail for a second time,  

Ponzi was unsure of his next move. He had 

come up with all these different plans to  

get rich while in prison, but they all 

required money, and Ponzi was penniless. 

Therefore, with little choice, he 

wandered from state to state again,  

working whatever odd jobs came his way. 

Ultimately, he found a decent position  

as a clerk with an import-export business 

called the J. R. Poole Company in Boston,  

so after a decade-and-a-half in North America, 

he ended up in the same place where he began. 

Life in Boston was decidedly better for Ponzi the 

second time around though. He was good at his job,  

for a change, and was promoted for it. Not just 

that, but Ponzi met 21-year-old Rose Gnecco and  

instantly fell head over heels for her. The 

first time they spoke, Ponzi was so nervous  

that he could barely string two words together. 

Fortunately for him, the feeling was mutual,  

and the two got married in early 1918.

His new married life made Ponzi feel happy,  

but he also felt inadequate. Even though Rose was 

content with a simple life, Ponzi had much grander  

ambitions. He wanted to be able to shower her 

with diamond rings, fancy clothes, and expensive  

holidays. Obviously, this was never going to 

happen on a clerk’s salary so, six months after  

the wedding, Ponzi quit his steady job at J. R. 

Poole and began looking for something new to do. 

He started off by joining his father-in-law’s 

wholesale fruit selling business. The company  

was struggling and since Ponzi always bragged to 

his wife about being a financial genius, this was  

the time for him to show everyone what he can do.

However, Ponzi was unable to save the failing  

business, and instead it went 

bankrupt by the end of the year. 

Undeterred by his recent failure, Ponzi rented a 

small office to start his own import and export  

business. But the world at large took no notice 

of him. Ponzi lacked the experience and the  

contacts to attract any serious business.

However Ponzi refused to believe he was the  

problem - and thought that maybe he just 

needed to advertise his services more;  

unfortunately a few quick calculations made 

him realize that the costs were well outside  

his reach. Just like that, Ponzi’s import and 

export business became another failed venture.  

The only silver lining for Ponzi was this 

failure had already given him his next idea. 

When Ponzi saw how much money it would 

cost him to publicize his services,  

he thought that maybe he should publish his own 

trade magazine, so that other companies would pay  

him the same kind of giant advertising fees.

Ponzi had zero experience when it came to  

publishing, but in his mind, this was already a 

million-dollar business idea. He would call his  

magazine the Trader’s Guide and he would send 

it for free to 100,000 companies, doubling the  

circulation number with each new issue. According 

to Ponzi’s calculations, his initial mailing would  

cost him around $35,000, but he would make $80,000 

in advertising income since he was certain that  

companies would be lining up around the block 

to publicize their services in his magazine. 

Certain of success, Ponzi rented a much 

larger office and hired three staff members.  

And then he began writing and writing and 

writing to investors and business owners  

about the possibility of getting involved with 

the first-ever issue of the Trader’s Guide. 

Then reality came crashing down on Ponzi like 

a ton of bricks. Nobody was interested. Nobody  

cared about his obscure little trade magazine 

and they certainly were not willing to pay  

his exorbitant rates to get featured in it. 

Then, when Ponzi went to his local bank to  

get a loan because he was almost out of money, 

he got another harsh dose of reality when the  

bank president refused his application on the 

spot, telling him that he would rather close  

Ponzi’s account than loan him a single dollar.

These were bitter pills to swallow for Ponzi  

and left with little choice, he had to fire his 

staff and sublet his office space to earn some  

money. But his dreams and ambitions remained as 

powerful as ever, and Ponzi hoped that his next  

idea would be the one that would make him rich.

One day in August 1919, Ponzi was going through  

his mail when he spotted a letter from Spain. 

Back when he still thought that the Trader’s Guide  

would become the next big thing in advertising, 

Ponzi was not content with simply doing business  

in America. He envisioned that his guide would 

be translated into French, German, Italian,  

Spanish, and Portuguese and that he would 

expand his business into Europe. And thus,  

he’d contacted many foreign companies about the 

possibility of doing business together, and it  

seems that at least one of them was interested. 

The Spanish author of the letter requested a copy  

of the Trader’s Guide and, to pay for postage, 

he included something that Ponzi had never seen  

before - an international reply coupon, or IRC.

IRCs were prepaid coupons that could be bought  

and exchanged for postage stamps in any country 

that was a member of the Universal Postal Union.  

They were commonly used by people who sent 

letters internationally to cover the costs of  

a return letter when they were not expecting the 

other person to pay the postage. But for Ponzi,  

they were a bolt of inspiration, and 

were about to change his life forever.

Years earlier, Ponzi had learned 

about the concept of arbitrage,  

the strategy of buying and selling an asset in 

different markets in order to take advantage of  

the price difference and make a profit. In the 

case of IRCs, they were always exchanged for the  

same postage value regardless of the country, but 

they were purchased at slightly different prices,  

depending on fluctuations in the local currency. 

So in theory, Ponzi could buy an IRC in Italy,  

where the lira had taken a serious hit after the 

war, and then redeem it in the United States for  

American postage stamps where he knew the dollar 

value would be slightly higher. He would then  

sell those stamps and make a tiny profit. Then, by 

scaling the operation to thousands, even millions  

of IRCs, he was looking at some serious money.

This was Ponzi’s new business plan and, on paper,  

it seemed not only like a good idea, but 

also perfectly legal. Arbitrage was a sound  

investment tactic that had been in use for 

centuries. So in January 1920 Ponzi started  

a new company to handle what seemed to be 

his most promising business venture yet - and  

he called it the Securities Exchange Company.

Unfortunately for Ponzi, like many times before,  

reality came in to crush his hopes and dreams. The 

truth was that the profits from the arbitrage of  

IRCs were so small that they would be completely 

wiped out by the costs of shipping the IRCs from  

one country to another. There literally were 

not enough IRCs in the entire world to sustain  

the kind of operation that Ponzi was imagining.

And yet, he refused to let go of this idea. Ponzi  

was convinced that this was his golden goose, 

his one-way ticket to the life of wealth and  

luxury that he always felt he deserved. So when 

the legitimate business proved unsustainable,  

he turned his idea into the infamous 

Ponzi scheme that shares his name. 

After all, his plan to arbitrage IRCs sounded 

really good. So even though it actually wasn’t  

good at all, maybe he could convince other 

people it would work, and take their money. 

Now, at its core, the Ponzi scheme is similar 

to the classic fraud “robbing Peter to pay Paul”  

which Ponzi saw firsthand back when he was working 

for Banco Zarossi. It involves getting people to  

invest in a business opportunity by promising 

them huge returns, in a short amount of time,  

with little to no risk. However, their 

money never really gets invested. Instead,  

the fraudster keeps most of it for 

themselves, whilst giving some of the  

profits to earlier investors. When these 

early investors see such large returns,  

most of them agree to reinvest their profits 

back into the business to make even more money,  

thinking it all seems to be working as advertised. 

Many of them even tell other people about the  

opportunity as they believe the earnings are 

perfectly legitimate. But in reality, all that’s  

happening is those earlier investors are getting 

paid using some of the money from new investors. 

It is a very simple but effective system that 

preys on people’s greed and financial naivety,  

but it requires a constant flow of new 

funds in order to keep the scam going.  

As soon as the fraudster can’t find enough 

new investors to pay off the returns to his  

older investors, the con usually falls apart.

Even though the scheme was named after Ponzi,  

he was not the first one to do it. A New York 

bookkeeper named William Miller used the same  

technique to con investors out of $1 million 

dollars back in 1899. And outside of America,  

a German actress named Adele Spitzeder may 

have operated the first-known Ponzi scheme  

in history in the early 1870s. However, 

Ponzi took the idea to a whole new level.

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Using his system, Ponzi offered investors 

a staggering 50 percent return in 45 days,  

or a 100 percent return in 90 days. He claimed to 

have a vast network of agents all over the world  

who were buying IRCs in bulk and shipping them 

to America. If pressed for any details on his  

operation, Ponzi would refuse to divulge any 

information, simply claiming that he couldn’t  

share all the details of how exactly it worked, 

as then it could potentially help his competition. 

Most banks, companies, and serious investors 

stayed away from Ponzi. They knew when something  

was too good to be true and, in fact, almost 

anyone who knew a thing or two about finances  

could tell that it was impossible for Ponzi to 

deliver on his promises. But they were not the  

ones that Ponzi targeted. He wanted the people 

who used to be just like him, with more dreams  

than common sense, who were always looking for the 

best way to get rich quick. This meant he preyed  

on the people with very little financial literacy 

- often people in desperate need of money fast. 

Ponzi understood that his true talent was 

not dealing with finances, but dealing with  

people. He knew how to sell his business 

without appearing too eager or aggressive,  

as if it made no difference to him whether 

he got their money or not. Ponzi started out  

with the people in his own neighborhood and got 

18 of them to invest in his first month. Once  

they were all paid their first round of profits, 

word started spreading fast and soon thousands  

of people began crowding the streets outside 

Ponzi’s office, desperate to invest their own  

money in this seemingly surefire opportunity.

Month after month, Ponzi gained more and more  

clients, raking in over $250,000 a day at the 

peak of his operation. The Boston Post hailed him  

as a financial genius, which gave him yet more 

perceived credibility and thus more investors.  

Soon, Ponzi was finally able to live the life 

that he had always dreamed of. He moved into a  

giant mansion, bought a fast car, dressed only in 

expensive clothes, wore gold watches and diamond  

pins, and went on lavish first-class trips. It was 

the lifestyle that Ponzi always felt he deserved,  

but he did not get to enjoy it for long.

By the start of the summer, less than six months  

after Ponzi launched his new venture, there were 

rumblings of doubt about his business. Initially,  

everyone was afraid to say anything, since Ponzi 

had successfully sued a financial analyst for  

libel who’d accused Ponzi of lying. After all, 

many early investors had been paid already, which  

Ponzi said was proof everything was legitimate.

But then the Boston Post, the same newspaper  

that once proclaimed Ponzi a genius, started 

to investigate his operation. They brought in  

Clarence Barron, President of Dow Jones 

and manager of the Wall Street Journal,  

who spotted the obvious scheme. By his 

calculations, Ponzi would have needed to  

purchase 160 million IRCs, and yet there were 

only 27,000 in circulation in the whole world. 

In July 1920, the Post presented Barron’s 

conclusions on the front page of the newspaper,  

decrying Ponzi as a fraud and prompting an 

investigation into his company. But the wheels  

of justice turn slowly and Ponzi was able to 

ease the concerns of government officials by  

cooperating fully and even saying he’d stop taking 

in new investments while he was under scrutiny. 

But then Ponzi caused his own downfall by hiring 

William McMasters as his publicist. Unlike Ponzi,  

McMasters was an honest man who soon realized 

that his client was a fraud. He later said “Ponzi  

is a financial idiot. He can hardly even 

add up! He sits with his feet on the desk  

smoking expensive cigars in a diamond holder and 

talking complete gibberish about postal coupons." 

With access to Ponzi’s records, 

McMasters collected the evidence  

he needed and went to the Boston Post, 

where he wrote a Pulitzer Prize-winning  

exposé detailing all of Ponzi’s secrets.

This time, the game was really up and the  

Ponzi scheme collapsed. Several banks had to 

declare bankruptcy, tens of thousands of people  

lost their life savings, and Ponzi himself 

was indicted on 86 counts of mail fraud. 

However, the conman managed to strike a deal, 

and pleaded guilty to only a single charge of  

mail fraud, receiving just five years in 

federal prison. A relatively small amount  

given the huge amount of money stolen 

and the vast amount of lives he ruined.

Ponzi was released after three-and-a-half years 

in prison, and this time, he was finally a changed  

man and ready to do some good in the world.

I’m just kidding, he literally tried a new  

scam immediately after getting released.

Ponzi knew that the government wanted  

to either deport him to Italy or 

imprison him again on larceny charges,  

so he fled to Florida where he planned to 

essentially repeat the Ponzi scam again. 

He started a new company - the Charpon Land 

Syndicate - and sought people to invest in  

property around Jacksonville. He offered 

even higher gains than before - saying he  

could get people a 200 percent return in just 

60 days. The only problem was that the property  

he was selling was worthless swampland.

This time though, there were no takers.  

Ponzi’s fraud was soon exposed and 

he risked being sent to Massachusetts  

where a lengthy sentence awaited him.

Not wanting to go back to prison yet again,  

Ponzi changed his look and tried to travel to 

Italy as a sailor aboard a cargo ship. However,  

he was recognized and arrested in New 

Orleans. Ponzi was now a desperate man.  

He wrote to President Calvin Coolidge asking 

for mercy. He even appealed to Mussolini to  

intervene on his behalf, but of course, nobody 

listened. It was the end of the line for him. 

Ponzi served another seven years in prison, and 

the man who came out was not the same as the one  

who went in. Ponzi was a broken mess who had lost 

all the charm and confidence that once made him so  

rich. As he faced deportation to Italy, his wife 

chose to stay behind in America and divorced him. 

Ponzi spent the rest of his years in 

poverty, with only memories to comfort  

him of the times when he had it all.

He ended up in Rio de Janeiro, where  

he died in 1949 in a charity hospital 

and was buried in a pauper’s grave,  

thus bringing to an end one of the most notorious 

tales of rags-to-riches-to-rags in history. 

However in terms of the amount of money Ponzi 

conned people out of, he’s actually not one  

of the biggest financial fraudsters. If you wanna 

know about the guy who stole billions of dollars,  

and then partied with celebrities like Leonardo 

DiCaprio, and made the wolf of wall street with  

the stolen money - check out the absolutely insane 

story of Jho Low. Just click the thumbnail here  

now, as it’s an awesome story and I think 

you’ll love it. I’ll see you there. Cheers.