The Ponzi Scheme
Who says an immigrant can't
make a fortune in America? Italian born Carlo Ponzi proved it really was
the land of opportunity. Ponzi arrived in Boston after World War
I, married a nice girl whose father owned a grocery business, and promptly
ruined his father-in-law. In 1919, he discovered upon a hitch in
the operation of postal reply coupons. These coupons were sold abroad,
so that international correspondents could enclose return postage without
having to hunt down U.S. stamps. It was possible to buy a coupon in Spain
for a penny; the coupon was worth five cents postage. Thus, theoretically,
one could buy coupons abroad, take them home, cash in the coupons, sell
the stamps, and pocket the difference. Ponzi decided to sell the idea to
his acquaintances. For a small investment, one could reap huge profits.
Unfortunately, the post office refused to deal in such large quantities.
That didn't stop Ponzi; he just used the money from one investor to pay
interest to another, while he gathered more suckers. By 1920, his
Financial Exchange Company was taking in $3000 a day. That is, until someone
tipped off the cops, making it the financial scandal of the new decade.
Today, any pyramid operation bears his name: Ponzi Scheme.