Although the crime most associated with Charles Ponzi wasn’t new when he was arrested for it in 1920, somehow it stuck to him which was more likely the Media’s racist tendencies against Italians. Remember, a century ago, Italians occupied the same scapegoat roles Mexicans have in America today. I would prefer to rename what the Media lazily calls a Ponzi Scheme to a Madoff Scheme or maybe more appropriately Reaganomics since it does involve the trickle-down myth.
Charles Ponzi came to Boston around 1903 seeking his fortune. He had to since he allegedly gambled away what little money he had on the voyage. For a few years, Ponzi worked odds jobs to get by until he left for Montreal in 1907. In Canada he became a teller at Bank Zarossi which was the equivalent of a payday loan scammer because it preyed on Italian immigrants with its high interest rates. Obviously the bank collapsed leaving Ponzi on his own again. After a brief stint in Canadian prison for forgery, he turned to smuggling Italian immigrants across the US-Canada border. This earned him time in a US prison.
Upon his release, Ponzi returned to Boston in 1918 to go legit…maybe. He married Rose Gnecco and went back to earning money through odd jobs including his father-in-law’s grocery store.
This period of his life is where the debate amongst Historians becomes a little contentious. One day Ponzi received a letter from Spain containing an international reply coupon (IRC). What were IRCs? They were coupons for priority airmail stamps in another country. They’re extinct now thanks to the Internet and America’s Post Office stopped selling them two years ago. My personal experience with IRCs was through GDW’s international audience and Crowded House’s fan club based in Australia. For example with the latter, you’d join the fan club by sending a letter to an address Down Under and include two IRCs. I think they used to cost 80 cents each in 1992. The guy who ran the club (Peter Green, I met him once in 2004) would go to the Australian Post Office and receive the exact postage to send me my membership stuff. If sending a letter from Australia to America cost more than $1.60, hooray for Peter and me, IRCs were a good deal and boo! if it were the opposite.
Ponzi realized he could make a profit by buying IRCs and only exchanging them in countries where the postage cost more than the original purchase. He’d then turn around and resell these stamps. I’m guessing his customers were people who had relatives back in the “old country” and they wanted to set up international SASEs (self-addressed-stamped envelopes, showing my age with those TV shows requesting them). Where he went wrong was turning a small-time crime or oversight into a full-blown business with investors. He promised ridiculous returns like 50 percent in 45 days. If you studied the details of Madoff’s case, you know that Ponzi “succeeded” by giving investors other investors’ money since there wasn’t much real profit in IRCs. Recall my earlier mention of Historians arguing a tad? The debate is whether or not Ponzi was deliberately breaking the law at the beginning. On the podcast Stuff You Should Know, hosts Chuck and Josh’s sources claimed Ponzi thought he discovered a legitimate goldmine through IRCs. When he expanded, he got in over his head and then the lies escalated. Others say, no, Ponzi was always looking for an angle.
Before his downfall in 1920, Ponzi made a small fortune. It was enough for him to buy a mansion in the Boston suburbs with high-tech amenities: a heated pool and AC! Legends say he was making $250,000 a day, this would be $3 million today. He went from bum to multi-millionaire in just two years.
The Boston Post thought his returns seemed fishy so they investigated. This led to a run on the company and his inevitable arrest for mail fraud. Ponzi pleaded guilty, got 14 years but it probably absolved him of the $7 million he owed, $81 million today.