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Charles Ponzi: Creator of the Ponzi Scheme

Readmikenow has written about various medical conditions. He has previously written a series of articles on Polyarteritis nodosa.

Who Is Charles Ponzi?

Charles Ponzi is remembered as an Italian con artist and swindler. He worked his money-making schemes in Canada and the United States. Ponzi would promise clients a return of 50 percent profit within 45 days if they invested their money with him.

Ponzi's money-making schemes ran for years, and eventually they all collapsed. But he ended up costing investors tens of millions of dollars.

Early Life

Charles Ponzi was born in 1882 in the Italian town of Emilia-Romagna. His ancestors had been wealthy, but eventually experienced hard times and had little money. When he was young, Ponzi had a job working with the post office. He then attended the University of Rome La Sapienza.

Ponzi and his friends considered college a vacation, and he spent what little money he did have at cafes, the opera, and bars. He was not a good student. Four years after starting college, he had spent all of his money and had no degree to show for it.

United States

Ponzi befriended other Italian youths who went to the United States, and then returned to Italy after becoming wealthy. Ponzi was determined to go to the United States and become rich. His plan was to then return to Italy and restore all of his family's lost glory.

Ponzi arrived in Boston on November 15, 1903. During the voyage, he had gambled his life savings. Ponzi left the S.S. Vancouver with $2.50 in his pocket.

Ponzi easily learned English and worked at odd jobs at different places along the East Coast. He worked as a dishwasher and then worked his way up to being a waiter. Ponzi was eventually let go from the restaurant for theft, as well as shortchanging the restaurant's customers.


Ponzi failed to become financially successful in the United States. He moved to Canada in 1907. He worked at a bank designed to serve the large numbers of Italians arriving in Canada at the time.

When working at Banco Zarossi, Ponzi developed the concept of a money-making endeavor that involved taking money from one investor to pay another. This would eventually become known as the "Ponzi scheme."

He became a manager at the bank and soon discovered it was in serious financial trouble. The bank was funding interest payments on toxic real estate loans—not from any profits, but with the money deposited from newly opened accounts. The bank failed and its owner fled to Mexico, fleecing a significant portion of money from the bank.

First Arrest

After the bank collapsed, Ponzi was left penniless. He then walked into a warehouse to look for work. Nobody was in the warehouse. Ponzi found the checks used by the warehouse and wrote himself a check for over $400. He forged the signature of the warehouse owner.

When confronted by police, Ponzi held out his wrists and admitted his guilt. He then spent three years in a federal penitentiary.

Charles Ponzi and wife 1920s

Charles Ponzi and wife 1920s


Ponzi was always traveling around and looking for work. He met Rose Maria Gnecco and proposed marriage to her, and she accepted. The Gneccos had a small fruit stand in downtown Boston. Ponzi's mother sent Gneccos a letter telling them about her son's past, including jail time. Rose Maria still married him.

He tried to start a business selling advertising, but it failed. His wife's family let him take over their small fruit company, and it also failed.

Ponzi Scheme

Ponzi Scheme

Ponzi Scheme

In 1919, Ponzi set up an office in Boston. He spent his time writing to people in Europe who knew him. Ponzi was trying to get them interested in purchasing opportunities. He got a letter in Spain and inside the letter was an international reply coupon (IRC). Ponzi had never before seen one. He researched the IRC.

Ponzi discovered something in the system that he believed would enable him to make money. An IRC could be purchased in any country and used to pay for international postage. Ponzi realized if these values were different from one country to another, he could make a profit off of them.

Ponzi believed an IRC could be purchased cheaply in Italy and exchanged for U.S. stamps and then sold for a profit. He believed these profits could be in excess of 400 percent. It was actually legal to do such a thing.

Ponzi needed a large amount of cash. He tried unsuccessfully to get money from banks. Ponzi then set up a stock company to get public funding. He told people they could double their investment in 45 days at 50 percent interest. Some people were paid off as promised.

His company was eventually bringing in large amounts of money daily. It was still running at a loss. As long as there were new investors, existing investors could get paid. Ponzi made no effort for his company to generate legitimate profits.

Charles Ponzi's house

Charles Ponzi's house


Ponzi was living a life of luxury. He maintained bank accounts in several banks all over New England. Ponzi lived in a mansion in Lexington, Massachusetts.

He brought his mother over from Italy. She sailed on an ocean liner in a first-class stateroom. Ponzi donated $100,000 to the Italian Children's Home in Jamaica Plain in honor of his mother. During this time, he purchased a wine company and a macaroni company.


On July 26, 1920, the Boston Post hired a financial journalist to examine Ponzi's operation, and soon began publishing articles questioning his money-making process.

These articles caused a panic run on Ponzi's company. He paid out over $2 million in a few days. Ponzi gave the crowds coffee and doughnuts and assured them there was nothing to worry about.

This activity got the attention of the United States Attorney, Daniel Gallagher. An audit of the financial records of Ponzi's company was authorized. This was a challenge, as the bookkeeping system of Ponzi's company consisted of investor's names on index cards.


On August 12, 1920, Ponzi's certificate of deposit at Hanover Trust was used to cover significant overdrafts of his account. Ponzi realized he was going to be arrested. He was taken into custody by federal authorities and charged with mail fraud. He was also charged with larceny. Ponzi was denied bail based on the fear he would leave the country.

Newspaper article about Charles Ponzi going to jail

Newspaper article about Charles Ponzi going to jail

Indictments and Prison

Ponzi was charged with over 85 counts of mail fraud in two federal indictments. He pleaded guilty to a single count. Ponzi was sentenced to five years in federal prison, and was released after three and a half years.

The state of Massachusetts then charged him with twenty-two counts of larceny. Ponzi sued saying it was double jeopardy to be tried in the state court after serving a conviction for the federal court. The Supreme Court ruled the federal plea bargain has no standing concerning the charges brought by the state.

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Own Attorney

Ponzi went to trial in October 1922. He had no money so Ponzi acted as his own attorney. The jury acquitted him on all charges. He was tried again and the jury deadlocked. Ponzi was eventually found guilty at a third trial. This time he was convicted of being a common and notorious thief and sentenced from seven to nine years in prison.

Charles Ponzi after being arrested in Florida

Charles Ponzi after being arrested in Florida


Ponzi was released on bail in 1925 waiting for a decision on his appeal for the state conviction. He went to Florida and worked to offer investors pieces of land. It was swampland in Columbia County. Ponzi promised investors a 200 percent return on their money in 60 days.

In 1926, Ponzi was charged with violating Florida's trust and securities law. He was found guilty and sentenced to a year in prison. He posted bond and moved to Tampa. There he changed his appearance by growing a mustache and shaving his head.

He tried to leave the United States as a crewman on a merchant ship heading to Italy. Ponzi revealed his identity to a member of the crew and was arrested in New Orleans. He failed in his attempt to be deported and spent an additional seven years in jail.


Ponzi was officially deported back to Italy in 1937. He tried some schemes to make money but nothing worked. He then went to Brazil and worked for an Italian state airline. The operation was shut down and Ponzi again had no way to make money.


The last years of Ponzi's life were spent in poverty. He worked as a translator on an occasion. In 1941, he had a heart attack that left him very weak. By the time 1948 arrived, he was almost completely blind. He had a brain hemorrhage that left his right arm and leg paralyzed. He died in a Brazilian charity hospital on January 18, 1949.


© 2020 Readmikenow


Readmikenow (author) on December 01, 2020:

MG, I agree with you. He will be remembered for generations after I'm gone from this world.

MG Singh emge from Singapore on November 30, 2020:

Mike, Ponzi is a famous name that has lived on after his death. Well he is famous for whatever he did!

Readmikenow (author) on November 30, 2020:

Miebakagh, thanks. You make a very valid point. It's possible many successful criminals would do well if they just tried to get money honestly.

Readmikenow (author) on November 30, 2020:

Peggy, thanks. He was a fascinating man.

Miebakagh Fiberesima from Port Harcourt, Rivers State, NIGERIA. on November 29, 2020:

I pity the guy Ponzi. But had he apply his skill and talent in a positive and dignify manner, he would have been one of the world first billioners. Thanks for the read.

Peggy Woods from Houston, Texas on November 29, 2020:

Like Pamela, I was familiar with Ponzi schemes but did not know that much about the man. Thanks for writing about him.

Readmikenow (author) on November 29, 2020:

Pamela, thanks. I hope people have learned how to avoid his scams.

Readmikenow (author) on November 29, 2020:

Dora, thanks. It is some story.

Readmikenow (author) on November 29, 2020:

Liz, thanks.

Pamela Oglesby from Sunny Florida on November 29, 2020:

I certainly did not know all of the histroy of Ponzi. He seems he never gave up trying to be a crook and get rich until he was deported. I think most people have heard of Ponzi schemes but most of us really didn't know this history. This is an interesting article, Mike.

Dora Weithers from The Caribbean on November 29, 2020:

Good information about a bad operation. Didn't even know that the scheme was named after its operator. Thanks for the research and the presentation.

Liz Westwood from UK on November 29, 2020:

I had heard of Ponzi schemes before, but this article is an excellent biographical account of Ponzi. I now understand a lot more.

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