Ponzi's Scheme: The True Story of a Financial Legend

This is a really great story and gave me a different view of Ponzi. Didn't know a thing about the guy, other than his name is synonymous with chain letters. <br /> <br />I found the book motivating. This guy built something from nothing, even if it didn't exactly work out in the end. <br /> <br />Better than fiction! If you want a book with interesting characters and a memorable story, this is it! I recommend it especially for people who like crime, history, or business books.

Arriving in the U.S. by way of Italy, penniless, Charles Ponzi amassed a fortune of over $8,000,000 before losing it all and winding up in jail. After serving his sentence, he was deported from the U.S., divorced by his American wife, and living without a dime to his name just as he had when he first arrived in the United States. <br /> <br />So how did this famous 'Ponzi Scheme' work? Read on... <br /> <br />The Business: Currency Speculation in the form of International Postage Coupons. If Ponzi bought coupons in bulk in countries with weak currencies, converted them into stamps, and cashed them in the United States or other countries with strong currencies, he would soon be the richest man in the world! (EXAMPLE) In the United States, $1 could purchase 20 Postal Coupons. With that same $1 U.S. Dollar, you could purchase 66 Postal Coupons in Rome Italy. 66 Postal Coupons purchased in Rome for a dollar would be worth $3.30 in the United States. Profits of $2.30 on every dollar spent, or 230%. Other countries might have even more devalued currencies and profits would be even higher. The Hitch, Ponzi understood, would be getting cash for the stamps he bought with the coupons. <br /> <br />Unfortunately, the post office would not allow a person to redeem a Postage Coupon for cash. Still excited about the concept, Ponzi decided to push forward with his plan anyway and decided to worry about the problem of exchanging the Coupons for Cash later. With the promise of 50% interest in 45 days, or 100% in 90 days, Ponzi Opened the doors to his new business dubbed 'The Security Exchange Company' the day after Christmas in 1919. Within 7 months since he had opened for business, he took in $9,600,000 from thirty-thousand investors. Not suprisingly, he still handn't found a way to make a profit through the postal reply coupons nor any other investment and kept paying old customers interest with new customers investment money. <br /> <br />Eventually the Local, State, and National Government took notice and began looking into Ponzi's outlandish claims for enormous profits. During their investigations into his "business practices," he voluntarily refused to accept new investments but still paid out either the principal to people who had invested with him but didn't wait the entire 45 or 90 days to withdraw, or when their Ponzi Notes matured, the principal + interest. Upon hearing of the Investigations, people turned up in troves to withdraw their money. Eventually the money ran out and Ponzi's business went bankrupt. All told, twenty thousand people who had held Ponzi notes at the time of the collapse received refunds equal to 37.5% of their initial investments. <br /> <br />All in all, Ponzi was a con-artist that swindled thousands of people out of their hard-earned money. But he wasn't all bad. He saved the life of a woman that was badly burned by an explosion. Upon hearing from a doctor friend that a caring Nurse was in desperate need of a skin graft, Ponzi voluntarily had 152 square inches of skin from his thighs and back removed. The donations would leave him with broad white patches of scar tissue on his back and legs, however, he saved the nurse's life and she recovered. <br /> <br />This book features old pictures of Ponzi, his family, his home, and other important people, & places at the beginning of every chapter that I found very entertaining. There are also quotes from ponzi and others taken directly from journalists which were in Newspapers of the day. In the end of this book it's stated that in the last years of his life, failing health, broke, Charles Ponzi wrote his own Autobiography called 'The Rise of Mr. Ponzi' which was not published until after his death. I haven't read it yet but plan to ;) <br />

This is a great biography of Charles Ponzi who, as we all know, gave his name to the scheme whereby an investment fund pays profits directly from the pooled receipts rather than utilizing receipts to produce any real income. Banks make their money by taking money from depositors and then renting it out. In Ponzi's day, banking was blissfully simple--pay 3% to depositors and collect 6% from creditors, a simple business model that tantalized Mr. Ponzi who, we learn, was a tremendously gifted individual with a quick wit and charisma who did not lack faith in himself. Ponzi made his money by selling the public on the fact that they would indeed be able to make a profit and then proving sufficiently capable of doing so that the needed new deposits continued to pour in to his fund. <br /> <br />Where this study becomes fascinating is in its exposition of the mindset of Mr. Ponzi who came very, very close to pulling it off. Mr. Zuckoff takes pains to point out that in writing this book he did not interpolate from extant facts and scrupulously notes his sources. Apparently Ponzi was of the type that just can't stomach the hard work of doing things the accepted way; however, ethics are ethics and regardless of his motive--Ponzi did commit fraud because he was not creating income with his depositors money. Yet, Ponzi's fraud was more of a "short cut" as he never really knew exactly what his liabilities were and was on the brink of figuring out a way to use his fund that would have produced profit; as he himself noted, he could have cut and run with the money but instead was trying to figure out a way to invest the funds. In fact, he did bank the money, so if he was guilty of anything it was overselling the returns. Really, Ponzi created a kind of liquid venture capital fund that just didn't ever get around to making investments. He could have pulled off his scheme and the way the book is written you are rooting for him to succeed. <br /> <br />Ponzi's public persona created such confidence that his fund was able to weather repeated attacks by the media. In fact, his strong public image and his ability to sway opinion actually stymied most of the law enforcement agencies whose responsibility it was to ferret out fraud. However, his past criminal record was his undoing. A sharp reporter figured out how to dent the public trust in Ponzi and a bank examiner unafraid to do his job managed to lock up Ponzi's remaining cash thereby forcing a default. In my opinion, but for Ponzi's past transgression, he would have ended up successful. There's a lesson. <br /> <br />The story is simple but the man was complex. His ability to appear completely unruffled in the face of the most dire of situations continually disarmed the media as well as the police, who were so accustomed to looking for signs of guilt that they let the guy go on repeated occasions. Even though you know what is going to happen it is fascinating to watch Ponzi continually evade detection and capture. There is a real lesson to legitimate business people regarding self-confidence and the power of dressing well. <br /> <br />And as a postscript: Anyone stupid enough to think we've progressed as an economy should turn on the TV after 11 PM and see ads for pills that either melt fat or grow a specific body part. Ponzi lives.

The great P.T. Barnum once observed "There is a sucker born every minute". Barnum knew human nature all too well. Take a look around you. How many times per day do you encounter those annoying radio ads, TV infomercials or bulk mailings that tout the latest way to get rich quick? It is increasingly hard to avoid them. You hear the stories and see the smiling faces of those who have allegedly made a killing by following some prescribed plan by a huckster with a book or DVD to sell. I suppose that in most cases these schemes are perfectly legal but I always wonder about the morality of most of them. You certainly never hear anything about those unfortunate souls who lose money in these deals. Yet the quest for easy money is really nothing new in America. Throughout our history Americans have sought out and been victimized by these schemes. It seems we never learn. Perhaps the granddaddy of all these many schemes was foisted upon the unsuspecting public by an Italian immigrant named Charles Ponzi. In his colorful 2005 offering "Ponzi's Scheme: The True Story of A Financial Legend" author Mitchell Zuckoff presents a portrait of a man with a plan. It is a fascinating and entertaining read to say the least. <br />Charles Ponzi was truly a man for his time. With a largely checkered past that he adroitly manages to camouflage Ponzi opened the Securities Exchange Company in Boston in 1920. <br />His offer was really quite simple and obviously too good to be true. Ponzi promised his customers to return their initial investment plus fifty percent in just 90 days! Now this was just the kind of fantastic deal that would appeal to many folks in the freewheeling decade of the 1920's. Ponzi cleverly positioned himself as a friend to "everyman" and criticized the banking industry for hoarding all of the profits for themselves. But what Ponzi's investors did not know or refused to believe was that the Securities Exchange Company was merely a front for a classic "rob Peter to pay Paul" scheme. This deal really was too good to be true. Nevertheless, tens of thousands would invest their hard earned money with Ponzi and when all was said and done many of them would lose a large percentage of their initial investment. What makes Ponzi such a fascinating charactor to study is that he really was a very charming and likeable fellow. Mitchell Zuckoff does a outstanding job of painting an intimate portrait of the man who would become a household name. Zuckoff also introduces us to the interesting cast of charactors who would have roles to play in the investigation and ultimate conviction of Charles Ponzi. <br />In a strange sort of way Ponzi would attain the notoriety he set out to achieve. In the late 1950's the Oxford English Dictionary actually added the term "Ponzi scheme" to its listing of words. A "Ponzi scheme" would be defined as "a form of fraud in which belief in the success of a fictive enterprise is fostered by payment of quick returns to first investors from money invested by others." It was really just that simple. As I indicated earlier this is history more Americans should be aware of. I found "Ponzi's Scheme" to be an extremely well written and entertaining book. Highly recommended!!