Library:Ponzi's Scheme
| Ponzi's Scheme: The True Story of a Financial Legend | |
|---|---|
| Author | Mitchell Zuckoff |
| First published | 2005 |
| ISBN | 978-1-4000-6039-9 unverified |
| Role | Analysis |
| Domains | Business, Finance & Scams History |
| Tactics | Fraud or Scam |
Ponzi's Scheme: The True Story of a Financial Legend is a 2005 book by Mitchell Zuckoff.
Summary
Mitchell Zuckoff, a former Boston Globe reporter and journalism professor, wrote this biography of Charles Ponzi, the Italian immigrant whose 1920 investment fraud in Boston gave the Ponzi scheme its name. Drawing on court records, newspaper archives and Ponzi's own writings, Zuckoff reconstructs how a charming, ambitious man with a history of petty crime persuaded tens of thousands of people to give him millions of dollars, and how journalists brought him down.
Ponzi's life
Zuckoff traces Ponzi's arrival in the United States in 1903 with little money, his years of menial work and small frauds, and a prison term in Canada for forgery. He portrays Ponzi as a man who longed for wealth and respectability and who may have half-believed his own promises.
The scheme
In 1919 Ponzi noticed that international postal reply coupons could be bought cheaply in some countries and exchanged for more valuable postage in the United States. He founded the Securities Exchange Company and promised investors returns of 50 percent in 45 days. In practice, he paid early investors with money from later ones. Zuckoff describes how money poured in during 1920, how Ponzi bought a mansion and took control of a bank, and how he became a celebrity in Boston.
The fall
The book gives special attention to the reporters at The Boston Post whose investigation exposed the scheme, and to the financial journalist Clarence Barron, who calculated that there were far too few coupons in existence to support Ponzi's claims. Ponzi was arrested in August 1920, investors lost millions and several banks failed. The Post won the Pulitzer Prize for Public Service. Zuckoff follows Ponzi through prison, deportation to Italy and his death in poverty in Brazil in 1949.
Relevance to Bullshitopedia
Ponzi's Scheme shows how the basic mechanics of a Ponzi scheme rely on charisma, social proof and the appearance of early success, and how journalism and simple arithmetic can expose a fraud that many people want to believe. The same patterns appear in later frauds from Madoff to cryptocurrency schemes.
Related entries
- Charles Ponzi's postal reply coupon scheme
- Bernie Madoff's steady returns
- OneCoin
- The Big Con (Maurer)