Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi, (March 3, 1882 -- January
18, 1949), commonly known as Charles Ponzi, was an Italian businessman
and con artist in the U.S. and Canada. His aliases include Charles
Ponci, Carlo and Charles P. Bianchi. Born in Italy, he became known in
the early 1920s as a swindler in North America for his money making
scheme. Charles Ponzi promised clients a 50% profit within 45 days, or
100% profit within 90 days, by buying discounted postal reply coupons in
other countries and redeeming them at face value in the United States
as a form of arbitrage. In reality, Ponzi was paying early investors
using the investments of later investors. This type of scheme is now
known as a "Ponzi scheme". His scheme ran for over a year before it
collapsed, costing his "investors" $20 million.
Ponzi was
probably inspired by the scheme of William F. Miller, a Brooklyn
bookkeeper who in 1899 used the same scheme to take in $1 million.
The
news brought down five other banks in addition to Hanover Trust. His
investors were practically wiped out, receiving less than 30 cents to
the dollar. His investors lost about $20 million in 1920 dollars ($225
million in 2011 dollars); as a comparison, Bernie Madoff's similar
scheme that collapsed in 2008 cost his investors about $18 billion, 53
times the losses of Ponzi's scheme.
http://en.wikipedia.org/wiki/Charles_...
A
Ponzi scheme is a fraudulent investment operation that pays returns to
its investors from existing capital or new capital paid by new
investors, rather than from profit earned by the individual or
organization running the operation. Operators of Ponzi schemes usually
entice new investors by offering higher returns than other investments,
in the form of short-term returns that are either abnormally high or
unusually consistent. The perpetuation of the high returns requires an
ever-increasing flow of money from new investors to sustain the scheme.
The
scheme is named after Charles Ponzi, who became notorious for using the
technique in 1920. Ponzi did not invent the scheme (for example,
Charles Dickens' 1844 novel Martin Chuzzlewit and 1857 novel Little
Dorrit each described such a scheme), but his operation took in so much
money that it was the first to become known throughout the United
States. Ponzi's original scheme was based on the arbitrage of
international reply coupons for postage stamps; however, he soon
diverted investors' money to make payments to earlier investors and
himself.
http://en.wikipedia.org/wiki/Ponzi_sc...
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