Free Consultations Available

888.711.5947

Madoff's Role Model: Charles Ponzi

In a previous blog (Bernie Madoff: A Modern Day Ponzi), I discussed Bernie Madoff’s modern day Ponzi scheme. I would now like to look at the man who started this elaborate fraud system.
ponzi.jpgThe scheme got its name from Charles Ponzi, born in Italy in 1882. Ponzi immigrated illegally to Boston when he was 21. He arrived in the United States virtually broke having gambled most of his savings during the voyage. He worked at menial jobs including dishwasher and waiter, but was fired for shortchanging customers and stealing from the restaurant that employed him.
In 1907 Ponzi traveled to Montreal to work in a bank that catered to Italian immigrants. The bank paid 6% on deposits rather than the normal 3%. Interest was paid from new deposits. The bank failed and the owner fled to Mexico with most of the bank’s assets. After spending three years in a Canadian prison for forgery, Ponzi returned to the United States in 1911. Once again he was arrested, this time for smuggling illegal Italian immigrants into the United States from Canada. He spent two years in an Atlanta prison.
Ponzi’s crime spree continued. He started a company in which his friends invested, after being guaranteed a 50% profit in 45 days. The demand was great. People couldn’t get their money to him quickly enough. By 1920 Ponzi was making $250,000 per day ($2.3 million in 2008 dollars). Old “investors” would be paid by money from new investors, but the business was not investing anything. Ultimately there was a run on the bank with not enough money to repay investors. He was arrested after defrauding 17,000 investors out of millions of dollars. Acting as his own attorney he was found not guilty of fraud and larceny in 1920. Later he was tried on additional charges and was convicted. He received jail time for being a “common and notorious thief”.
After his release, Ponzi moved to Florida where he started selling swamp land to gullible tourists. He was once again convicted and sent to prison. In 1934 Ponzi was released from jail and immediately deported to Italy. During World War II he was appointed by Mussolini to a financial division of the government, later fleeing to South America with stolen Italian treasury notes. He died in a charity hospital in Rio de Janiero in 1949, never having shown any remorse for his life of crime.
Sad but true.
~Jim Gilbert~
Sources: www.sec.gov/answers/ponzi.htm

If your company or clients has been defrauded, please contact me.

Categories