PONZI SCHEME

 A Ponzi Scheme is something we've all heard of.  It is an illegal way to grift money from unsuspecting souls.  It is based on greed - both by the operator and the loser.  The Ponzi scheme promises high return on investment and then pays initial investors with future investors money.  It all looks good as long as new investors and repeat investors keep putting money into the deal.  

Bernie Madoff was maybe the most recent of these big time schemers.  It is estimated he took investors for $65 billion.  He'll spend the rest of his life in jail while owing $170 billion to friends and associates - some of whom lost their life savings. 

The question is: "How did the Ponzi Scheme get it's name?"  Well, it is named after Charles Ponzi.  Ponzi was an Italian immigrant to the U.S. in 1899.  His lira were worthless here so he found ways to get a lot of American greenbacks as quickly as possible.  He started one of these pyramid schemes in New York in 1907.  He was caught without any capital and sent to jail for a short time.  He was just learning.  

He went the way of today's New Yorkers and went to Florida.  It didn't take long before he came back with a lot of swamp land for sale.  Back to jail he went.

This time, when he got out, he went to Boston for the big kill.  He came across  something that at that time they called the International Reply Coupon (IRC).  This coupon was a gizmo all the countries of the world used to equalize postage stamp pricing.  

You see, there was a lot of snail mail being used at that time.  To get return mail, you couldn't buy the foreign postage so you used an IRC.  Each country's IRC had a different value.  Charles Ponzi told people he could arbitrage the coupons and, though their value was small, he could make a lot of money trading them.  (Secret:  he couldn't).  He convinced a lot of people and businesses that his scheme would work.  (It didn't)  Chowder heads lost about $270 million (in today's money).  Mr. Ponzi was deported back to Italy.

Now, if you get an e-mail from Nigeria that a prince there will give you a lot of money if you will just send him the little he needs now . . .