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Using his Securities Exchange Company, Charles Ponzi triggered a feeding frenzy of investors in Boston looking for easy money.

2/25/09 - (Boston Progressive Examiner) - Charles Ponzi was born in Italy in 1882 and immigrated to the United States in 1903 having lost all his money gambling on the cruise coming to Boston.

Odd jobs along the East Coast landed him in Montreal, Quebec where cashing a forged check cost him three years of freedom. Returning to the United States following his release from prison, Ponzi was caught in a smuggling scheme in 1911 and did two years in an Atlanta prison.

After release from his second stretch in jail, Ponzi moved back to Boston and married. Unable or unwilling to make a legitimate living, Ponzi realized that money could be made using International Reply Coupons that allowed postage stamp swaps for cash.



Unable to make the postage stamp trades pay off Ponzi changed the plan and just used the idea to lure investors, conning them out of all their money. The crafty swindler promised to double investments within 90 days using a pyramid scheme that left the last customer empty-handed.

Calling the scam the Securities Exchange Company, Ponzi triggered a feeding frenzy of investors looking for easy money. Within months Ponzi made millions of dollars. Lines of people would queue up to give him money. People began mortgaging their homes for investment money while others would surrender their life savings.

Ponzi bought a mansion in Lexington, Massachusetts and lived the wealthy lifestyle in a flamboyant manner. A Boston financial writer tried to blow the whistle but Ponzi sued for libel and took in another $500,000. The money flowed in faster then before.

Eventually the Boston Post did what the news media is supposed to do and investigated the rags-to-riches success of Ponzi. The newspaper showed that the math didn't work and a run on Ponzi's company occurred. The bold-faced Ponzi handed out $2 million in three days and stopped the run on his company.

Ponzi then hired a Post reporter to be his publicity agent but William McMasters discovered the fraud and went back to the newspaper with a story about the scam. Ponzi turned to gambling in an attempt to shore up the operation but only lost more money.

After Ponzi's arrest in August 1920 six banks were closed including Hanover Trust where he had made deposits. Ponzi pleaded guilty and got a five-year federal sentence. Then Massachusetts prosecuted him and he was sentenced to a seven-year sentence.

While on appeal, Ponzi moved to Florida and started a new venture selling swampland which netted him a year in prison there. Government investigators spent years trying to determine the full extent of Ponzi's swindles but never did determine actual losses of investors because of Ponzi's poor recordkeeping.

Ponzi was deported to Italy and ended up in Benito Mussolini's government where he embezzled an unknown amount of money before fleeing to South America. Ponzi died in 1947 in Brazil at a charity hospital.

Ponzi is probably the world's best known con man but his feats have been surpassed in scope and magnitude by Bernard Madoff with a Wall Street swindle that may have cost investors $50 billion. Madoff awaits federal fraud charges in home detention at his swanky $7 million Manhattan apartment.