Carlo Ponzi has the dubious honor of having gone down in history as the inventor of the pyramid scheme, a method emulated by many other con artists such as Bernard Madoff. What Ponzi did, an Italian who emigrated to the US in his youth, he was attracting investors to whom he promised a return of 50% of his capital in two months. This worked for a year because with the money that he collected he paid the interest. But everything collapsed and Ponzi ended up in jail after an attempted lynching.
He was a quirky character, who dressed like a dandy and traveled in luxury cars. He used canes with a golden hilt and lived in a sumptuous mansion of dozens of rooms. But in 1903, when he emigrated to the United States from Ravenna, he had to survive as a dishwasher, warehouse boy and street vendor.
A few years after settling in his new country, he was sentenced to a prison sentence for trying to defraud an old woman at the bank where he worked. He already pointed out ways, but it was still impossible to guess that he would deceive tens of thousands of investors in what would later be called the "Ponzi scheme", a name that still receives pyramid fraud in the United States.
Ponzi sold trade guides in 1919 when he came up with the idea of starting a business with the postal coupons that Italian emigrants sent to their country of origin. Those coupons were redeemable on stamps. The benefit was theoretically safe because it earned a margin for exchange differences.
The smart Ponzi created a company called Securities Exchange Company, which in practice became a bank because it captured money in exchange for those astronomical interests. People went crazy to invest in society, even mortgaging their homes.
But after almost a year suspicions began to emerge to the point that one day thousands of customers queued at the headquarters of Securities in Boston to ask for the return of their money. Ponzi went out to the street, invited the distrustful to eat and returned in a few hours about two million dollars.
But his luck was cast. Weeks later, the financial analyst Clarence Barron published in the Boston Post a comprehensive X-ray of the company, concluding that the coupons that Ponzi possessed were not enough to cover 1% of his payment obligations.
On November 1, 1929 Ponzi was arrested and sentenced to five years in prison by a Boston court. He was released after serving half of the sentence, but was re-prosecuted for fraud by another federal judge. At the last moment, when Ponzi was already on a ship that was going to take him to Mexico, he was arrested. The Justice decided to expel him from the country because he still maintained the Italian nationality.
He ended his days in Brazil, where he worked for several years for an airline. At the outbreak of World War II, he lost his job. He died in 1949 in Rio de Janeiro in a charity hospital.