Charles Ponzi's scheme (plus a new scam)

Nick Fountain (0:01)

This is Planet Money, from NPR.

Most of us in this world are destined to be forgotten. I know, it's sad, but it's true. A lucky few will land in the history books. Fewer still might have our names put on something. A road sign, a stadium, maybe even get a statue or a plaque. Probably the least likely scenario is to become so famous or so infamous that our names will live on in language.

Gerrymander, the word, named after Elbridge Gary, 19th century governor of Massachusetts and early pioneer of the Garymander. Saxophone, named after its inventor, Adolfi Sax. And then there's the Ponzi, the Ponzi Scheme, named after one Charles Ponzi.

A Ponzi Scheme is an investment opportunity that's more of a con. The way it works is you have to use or steal money from newer investors to pay back the earlier ones. They happen all the time these days. In fact, just recently, Travis Kelsey, husband to Taylor Swift, was named by prosecutors as a victim in a $35 million Ponzi Scheme. But I'm just going to come out and say it. Most of the time, these modern-day Ponzi's, they're amateur hour compared to the one pulled off by Charles Ponzi. An Italian immigrant living in Boston who pulled off his scheme for a brief seven months about 100 years ago. He wasn't the first, he wouldn't be the biggest. But after you hear his story, you'll get it. You'll get why he's allowed to live on forever in infamy. Hello and welcome to Planet Money. I'm Nick Fountain. Today on the show, in honor of the newlyweds, Taylor and Travis, one of my favorite shows from The Vault. The story of how Charles Ponzi stole millions of dollars and defrauded tens of thousands of people. It's way wilder than you think. It involves a system of speculating on worldwide currencies thanks to a loophole in the global mail system, a daring plan to rob a bank, and a very generous pound of flesh. You're going to want to stick around to the end because there is some news. Apparently, scammers have been impersonating us at Planet Money and other podcasters too. We're going to share what we know and how to avoid falling for their traps.

A Ponzi, a word so familiar that it just rolls off the tongue, a shorthand for robbing Peter to pay Paul. And while his name has become infamous, the story of Charles Ponzi was not that well-known. That is until journalist and author Mitch Zuckoff just kind of stumbled upon it.

Mitchell Zuckoff (2:58)

I was a banking reporter for a while at the Boston Globe, and I was at a press conference, and the state treasurer just offhandedly said, you know, banks haven't failed like this in Boston since Ponzi's day.

And I did like a comic double take of, huh? And he said, yeah, you knew Ponzi was based here in Boston. And I said, yeah, sure, I knew that. I'm a banking reporter. Of course I knew that. You know, I had no idea.

Nick Fountain (3:23)

Mitch kind of became obsessed with Ponzi and wrote a book about him. It's called Ponzi's Scheme, the True Story of a Financial Legend.

To write the book, Mitch went to Italy and found Ponzi's birth records. He read thousands of court documents. He found records of every single victim. And he read Ponzi's private letters. He also looked through a bunch of photos. There aren't many from when Ponzi's young, but in one, he's dressed in this three-piece suit with a tie. He has a pretty well-kept mustache, perfectly combed hair, and these big, thick eyebrows.

Mitchell Zuckoff (3:56)

And it's also worth mentioning that Ponzi is, he's diminutive. You know, he's a guy of five, two, five. I think he lied about being five, three, you know. Classic, yes.

And so if Ponzi was going to make it, he understood. He had to do it with his head.

Nick Fountain (4:12)

Uh-huh, just cause he's a little guy.

Mitchell Zuckoff (4:15)

He's a little guy. Yeah.

Nick Fountain (4:16)

Maybe it was the height, maybe it was something else, but throughout his life, Ponzi was always looking for the thing that was gonna make him rich. He was the type to take big swings, big risks, that often involved leaps of faith. And in 1903, he did what many young Italians in search of riches were doing back then. He got on a boat to America.

For the greater part of the next two decades, Ponzi tried to make his fortune. This guy had more jobs and more of a varied resume than anybody I've ever heard of. Can you just list off some of the jobs?