Felix Stalder on Thu, 24 Sep 1998 18:35:54 +0200 (MET DST)

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<nettime> Crooks that made it into the cultural subcontiousness

Charles K. Ponzi

Great man, the inventor of the Ponzi scheme, the most famous pyramid
scheme ever in North America.  And the proof that greed is always stronger
than common sense.=20

The "Ponzi Scheme"=20

In the summer of 1920, Charles Ponzi and his Boston-based postal coupon
enterprise was the talk of the East Coast. Was he truly a financial
wizard, or merely an accomplished swindler? The latter was eventually
revealed to be true, but before his investment bubble burst, Charles Ponzi
had collected $9,500,000 from 10,000 investors by selling promissory notes
paying "fifty per cent. profit in forty-five days."=20

Ponzi claimed he was giving investors just a portion of the 400 per cent.
profit he was earning through trade in postal reply coupons. As Ponzi paid
the matured notes held by early investors, word of enormous profits spread
through the community, whipping greedy and credulous investors into a
frenzy. Investigation later revealed that there were no coupons or profits
earlier notes were paid at maturity from the proceeds of later ones. The
simplicity and grand scale of his scheme linked Ponzi's name with a
particular form of fraud. A swindle of this nature, once a "bubble," is
now referred to as a "Ponzi scheme." While the postal coupon scheme earned
Ponzi his place in history, it formed only the middle of what Justice Taft
referred to as "the remarkable criminal financial career of Charles Ponzi"
[Cunningham v. Brown, 265 U.S. 1,7 (1923)].=20

Immigrating from Italy in 1903, Ponzi went on to Canada, was convicted of
forgery, and served a prison term there. Within ten days of his release,
he was arrested for smuggling aliens into the United States and served a
term in an Atlanta Prison. He went on to develop his namesake postal
coupon scheme, earning a federal prison term and larceny charges in the
state of Massachusetts. Released from federal prison while his state
larceny conviction appeal was pending, he went to Florida, running afoul
of authorities there with a real estate pyramid scheme. After losing his
Massachusetts Larceny appeal, he fled the country on a ship bound for
Italy. When the ship docked in New Orleans, Ponzi was lured ashore,
illegally kidnapped by a Texas deputy sheriff, and taken to the Lone Star
state. Extradited from Texas to Massachusetts, Ponzi served out his term
there and was deported to Italy. He later went to Brazil, dying in the
charity ward of a Rio de Janeiro hospital in 1949, leaving an estate of
$75 to cover funeral expenses.=20

Copyright =A9 1996, Mark C. Knutson


Les faits sont faits.

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