Charles Ponzi

Charles Ponzi

The funny thing about Charles Ponzi is that he didn’t actually know what he was doing was actually a pyramid scheme in the beginning. He started the company that would later be a Ponzi scheme with the intent to invest in an arbitrage dealing with international relay coupons (which were almost like postage paid envelopes that were bought in one country but could be redeemed in another for cash). He thought he could make so much money doing this that he promised the first investors close to 50% interest and as he was trying to figure out how to make the original plan work, he just started paying out the original investors with money that came in from new investors. Those people spread the news so that more and more people were giving him money, so he kept it up. He hired other people to bring in more investors and it got to the point where he was receiving $1 million a day (in 1920) in investments (about $12.5 million in today's dollars). It all collapsed before he could figure out a way to make the original plan, or any other scheme, actually work. Ponzi's investors lost about $20 million in 1920 dollars ($225 million in 2011 dollars).

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