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The FOMO That Ruined Lives

The man who lent his name to the pyramid scheme was not the first.

By Sam H ArnoldPublished 2 months ago 4 min read

Pyramid schemes are where the later investors pay the first investors; they never make any profit but encourage many to invest.

The other name for the scam is a Ponzi scheme, which was named after one of the more charismatic perpetrators of this fraud. Many believe it was Charles Ponzi who invented the scheme. However, he was not the first to profit. That accolade belongs to a woman.

In 1879, Sara Howe from Boston ran the first, asking people to invest in a ladies' deposit scheme to invest money in women. Howe's promises were astounding, and she promised to double everyone's money in nine months.

Journalists caught up with her, and she was convicted of the scam, serving three years in prison. When she was released, she started another scam, which resulted in another two years in prison.

Ponzi, however, is largely considered one of the best-known grifters who made the scheme work for him.

Charles Ponzi

Ponzi was born in Lugo, Italy, on 3 March 1882. His early life was several menial jobs and criminal enterprise. His parents, Oreste and Imelda, were said to be part of wealthy Italian families.

By the time Ponzi was born, his parents had spent most of their money and were borderline poor. Ponzi started stealing from his parents and parish priests and graduated from there.

In his autobiography, he says that he attended Sapienza University in Rome but openly says that he was not a model student. As a result, after four years, he was forced to leave with no money or qualifications.

At university, he heard stories about Italians who went to America to find fame and fortune. He decided this was the place he needed to go.


Ponzi arrived in Boston in November 1903; over the next few years, he learned to speak English and performed several odd jobs.

Most of these jobs did not last very long, and he was either fired, or quit before being fired. He was known to short-change customers or steal from them directly.

Eventually, he found himself in Montreal, Canada, where he started working as a bank teller. When he lost this job, he went back to his life of crime, resulting in him receiving a three-year prison sentence for forgery.

When he was released, he started smuggling Italian immigrants into the U.S., which resulted in another two years in prison. When he was thirty-five, Ponzi found himself back in Boston in 1917.

The following year, Ponzi married Rose Gnecco, and he took a job at his father-in-law's grocery store.


This job was also short-lived, and in 1919, Ponzi set himself up in a small export-import business. Then, he received a letter from a Spanish company requesting an advertising catalogue. Inside the envelope was an international reply coupon, which gave Ponzi an idea.

This voucher was accepted in various countries; the voucher could be used in exchange for local postage stamps. Ponzi realised he could use the exchange rate to make money.

Tiny price differences allow for a modest profit to be made. You buy the vouchers in Italy for one price and then exchange them for the higher-priced U.S. postage stamps.


In 1920, Ponzi set up a company called Securities Exchange Co. He started selling stock, promising a 50% return on anyone's money after ninety days.

Ponzi's genius lay in psychology rather than finance, as he manipulated and persuaded people to invest in his company. He played an elaborate game of borrowing from Peter to pay Paul.

Many investors would beg Ponzi to take their money with a large case of FOMO (fear of missing out). They wanted to be part of the investment, never considering they could lose all their money.

Ponzi had to do nothing for the money, not even purchase a voucher; he used the investment from later people to pay back the earlier investors. Everyone was happy until they weren't.

In eight months, Ponzi amassed a fortune of $15 million ($220 million in 2022 money.) The Boston Post ran a flattering front-page feature on him, saying he was worth over $8.5 million.

Less than one week later, the Post Office Department announced new conversion rates for international postal coupons. People become wary of investing in Ponzi's business.

It wasn't long before the Boston Post launched its investigation, which generated more bad press; new investments almost dried up, meaning that current investors could no longer be paid out.

The scam continued until no new investors came on board. That is the moment that everyone loses their money.


The bad press continued for Ponzi until he was convicted on federal mail fraud charges. He served 3.5 years; on release, he jumped bail and was caught going to prison again in 1934.

This time, on release, he was deported to Italy. Not only had Ponzi lost millions of dollars from unsuspecting investors, but he had never legally become a citizen of the U.S.

There is little known about him after this. He was said to have lived in Italy and Brazil, and his wife had divorced him. He died on 18 January 1949 in a charity hospital in Rio de Janeiro, leaving just $75 to pay for his burial.

It is fair to say that Ponzi died broke, like many of those who were unfortunate to get caught up in his scheme. Ponzi schemes continue to be famous for anyone trying to make money. Last year, U.S. law enforcement found sixty schemes running with victims investing $3.25 billion.


About the Creator

Sam H Arnold

A writer obsessed with true crime, history and books. Find all my dedicated newsletters whether you are a true crime fan, bookworm or aspiring writer on Substack -

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