Charles Ponzi The Documentary

Boston Massachusetts, 1920 a brash and colorful  Italian immigrant Charles Ponzi promises investors   that he can give them a 50% profit on their  money in 45 days or double their money in 90   days. He explains his idea, an arbitrage in the  foreign exchange markets which seems low risk and   highly profitable. Unlike most con men it appears  that he may well have believed in his own scheme.   Over a period of slightly less than a year he will  cause financial calamity in Boston, cause multiple   banks to fail and his name will go down in  history as the most famous con man to ever exist. Today New York and London do battle to be the  global center of finance - and Wall Street in   New York is without a doubt the center of  finance in the United States, but this was   not always the case. Originally in the United  States Philadelphia was the financial center,   but by 1920 it had slipped and it was a toss-up  now as to whether Boston or New York were the   center of finance in the United States. Charles  Ponzi arrived on the scene in Boston at the   perfect time for a man like him, to his admirers  he was a financial genius and to his detractors   he was a fraud. His incredible rise would mark the  first roar of the roaring twenties. The core idea   that Ponzi came up with was actually a  fairly smart idea that he stumbled across   but as you'll learn he actually never got  around to pursuing any real investments as   he was just so busy running his scheme taking  in money paying it out talking to the press and   shopping on Newbury Street. The thing that really  makes this story so interesting is that it's an   unsolvable puzzle trying to work out what kind of  a person ponzi actually was was he smart or was he   a fool there are things that he did that a total  fool could not have done he did actually come up   with a kind of smart investment idea albeit one  that could not have been run on any real scale   and equally he was able to manage the logistics  of a business with numerous employees and open   branch offices all around the country that grew at  a phenomenal rate. In addition he must have been   an amazing salesperson we have to remember that  all of this took place over around six months   ponzi clearly got a lot done in that short  period of time on the other hand it would   appear that he was maybe not that bright a guy  in that he seemed to fall for his own trick,   he appeared to believe in himself right up  until the end and he didn't seem to understand   that there was no real way that any of this  could work out for him or for anyone involved. The world and the United States in particular  had changed a lot in the years leading up to   the early 1920's. America was now a prosperous  country where the idea that a penny saved is a   penny earned had disappeared. Money was to be  made fast easy and in large quantities. The   newspapers of the time were filled with stories  of vast fortunes being made by entrepreneurs,   stories of young girls marrying rich men and  people inheriting huge fortunes from long-lost   relatives. Prosperity was no longer the  preserve of the well-born now everyone   could become rich. If money didn't come fast  enough you had to just go out and grab it.   For promoters of get rich schemes this was the  time to think big. It was a similar time to the   tech boom of the late 1990s or the cryptocurrency  mania of the late 2010s but on steroids. So first up what is a ponzi scheme? A lot of  people confuse the idea of a ponzi scheme with   a pyramid scheme, in a pyramid scheme participants  only make money by recruiting more members there   are many different kinds of pyramid scheme but  the two most basic are product-based and so-called   naked pyramid schemes. In a naked pyramid  scheme no product is sold, with a product-based   pyramid scheme the concept is the same but it is  disguised as a legitimate direct sales opportunity   in either case a pyramid scheme usually involves  each person recruiting 10 additional people   who usually have to pay some sort of initiation  fee let's say a hundred dollars and then   they have to find 10 additional people it sounds  simple enough but here's the problem let's say the   initial 10 recruits each find 10 more people  those 100 recruits will then have to find   10 recruits each to make nine hundred dollars that  means they have to find a thousand people willing   to sign up for the program and if they somehow  do find a thousand people that next level of the   pyramid will need to sign up ten thousand people  to make a profit eventually there won't be enough   recruits at the bottom of the pyramid to support  the level above it that's when the pyramid topples   and everyone at the bottom loses their investment  once you get about 10 layers down the pyramid you   exceed the entire population of the planet a ponzi  scheme is quite different to that and what makes   it fascinating is that it's usually all about  one person usually a tremendously charismatic   and tremendously interesting person who can  convince people that you can trust them with all   of your money and all of your family's money and  that they can return it to you with an enormous   interest rate well beyond what a reasonable person  might expect usually in a short period of time   in ponzi's case the promise was to  double your money in three months   it was not a scheme invented by ponzi but it was  a scheme that he mastered before his scheme broke   and was all over the global press in 1920 the  scheme was known as robbing peter to pay paul ponzi was not taking all of that money and  blowing it on a lavish lifestyle as you may expect   although he did use some of it that way  he was taking the money setting it aside   and when an earlier investor came in to collect  their initial investment plus the 100 return   he would give the new investors money to  the old investor so the scheme involves   paying the early investors out of the  money that comes in from later investors the money just churns in and out until the scheme  eventually goes bankrupt usually the goal of a   ponzi schemer is to attract enough money for  new investors until you have a huge pile of   money and then you can skip town and live off your  ill-gotten games take the money and run basically   as you will see that's not what charles ponzi  ended up doing in fact it would appear that ponzi   possibly never intended to do anything like that  he had a huge belief in his ability to make money   with a variety of investment schemes that he was  constantly dreaming up and he seemed to believe   that he could pay off all of his investors and  become hugely wealthy himself he just needed time the core idea that ponzi came up  with was actually a fairly smart idea   that he stumbled across but as you  will learn he never really got around   to pursuing any real investments as  he was so busy running his scheme in order to understand Ponzi we must first  understand the world in which he lived   1920 was a remarkable time in America a time of  true change and the dawn of the modern world world   war one had just ended and people had suffered  through the deprivation of war and felt that it   was now time to get rich to have fun and to party  prohibition was in effect but prohibition had   a funny effect on the American people instead of  improving the morality of the country as one might   have expected prohibition instead made it feel  okay for people to break the law it undermined the   values of Americans who were normally law-abiding  citizens because prohibition was so widely broken   people began questioning which laws it made sense  to abide by and which ones were there to be broken   there was actually a huge spike in crime over  the years of prohibition in the united states   all kinds of seemingly amazing almost magical  technologies had been invented in recent years   airplanes automobiles and the inventors of these  technologies had become wealthy beyond belief   the stock market was ramping up companies were  all making money and the hardship of the great   war was well in the past there was a boom in  immigration and cities like Boston and New   York were filled with new and different immigrant  groups with very different ideas some were viewed   as anarchists and there was a lot of chaos women  had just gotten the right to vote in august 1920.   for the first time in American history  there were more people living in cities than   farming in the countryside it was a time when  money became a driving force in American life   more so than at any time in american history  ponzi was born in lugo italy in 1882 to a family   that was rich in name only all of his mother's  family had don ardana in front of their names   which tied them to the duchy of parma so they  were italian aristocrats but by the time charles   was born the money was all gone when charles  was born his father was working as a postman   his mother imelda ponzi clung onto this  aristocratic heritage and as charles would   say she spent his whole childhood spinning castles  in the air she would tell him how he was the one   who would restore the family name and lift them  back up to their rightful position in society   that idea stuck with him his whole life it stuck  with him long after his scheme had collapsed   some of his mother's ideas really went to  charles's head and using his family's meager   savings he attended the university of rome  it's worth noting that at the time less than   five percent of the population attended university  at all unlike today where one in three americans   has a bachelor's degree so this was quite an  opportunity that his parents had given him   a true ticket to the upper class instead of  studying at the university charles spent his days   in cafes he drank and gambled his nights away with  a group of young wealthy aristocratic students   he bought expensive clothes and refined  his tastes attending the opera he would   pick up restaurant tabs for his friends and the  pretty girls that they met when they were out   and he quickly ran through all of his family  savings trying to impress people and seem   wealthier and better bred than he actually  was in desperation his family scraped together   their last scraps of money around two hundred  and twenty dollars gave him two hundred dollars   in cash and spent twenty dollars on a first  class ticket on a ship to boston ponzi knew   that he had disappointed his mother but he was  sure that he would make his fortune in america   on the ship charles carried on as normal  however and by the time he arrived in   boston he had gambled away the 200 which was  supposed to get him started in the new world   his family having foreseen this had pre-paid for  a train ticket from boston to pittsburgh where   he could stay with a relative being  out of money he couldn't even get a cab   to the train station and ruined his fine  clothes walking through the mud from the port Charles was off to a poor start he found a  few odd jobs waiting tables and things like   that and traveled up and down the east coast of  the united states doing his best to become rich   he still held on to his mother's dream that  he would bring back the family's good name   after a while Charles washed up in Montreal  Canada and found a job working at a bank   called banco Zarossi by this time he  was using the name Charles Bianchi Banco Zarossi was run by a colorful Italian  named Luigi Zarossi. Canada was in the midst   of a wave of immigration from italy and all of  the poor italian laborers needed a safe place   to keep their wages and a way of sending  some money back to their families in italy   but the big banks were not interested in  these small accounts it's worth noting   that there was already an italian bank in  montreal that was serving these customers   so zarosi in order to compete for accounts would  offer a much higher interest rate at the time   the other bank would pay 2 interest which means  that they would take the money in invested in   italian securities that paid three percent and  that one percent difference was their profit   zarosi started paying depositors not just the full  three percent interest available through investing   in italian securities he also paid an additional  three percent as a bonus so the customers were   getting a return of six percent which is about  triple what they could have earned elsewhere asked   how he could do this zarosi explained that the  greedy bankers at other firms were just ripping   off their customers and he was simply sharing the  bank's earnings fairly with his customers this was   a line that ponzi would later use when he was  quizzed by reporters in boston about his scheme   of course how this all worked out was that zarosi  was unable to pay these high interest rates and   quickly started using one customer's new deposits  to pay out another customer who was withdrawing   money in what was at the time known as a robbing  peter to pay paul scheme as long as more money   kept coming in than was going out customers didn't  notice and they were just delighted to be getting   such high returns on their savings in 1908 less  than a year after ponzi had come to work for him   zarosi packed a bag full of money and fled on  his own to mexico leaving his whole family behind   ponzi made a terrible mistake he forged a  check to have some travelling money he was   caught almost immediately when he arrived  home after buying a new wardrobe of clothes   he was then sent to prison for more than  two years as soon as he got out of prison   he decided to help some other italians who  didn't speak english who were trying to cross   the border into the united states and ponzi  got caught once again his claim was that he   was just helping them out as a translator  and that no money had changed hands ponzi   only 17 days out of prison was sent back to prison  this time in the united states to atlanta georgia   where he spent two years for smuggling aliens  into the country the immigrants all testified   against him as part of a plea deal and afterwards  all of them were set free many men would have been   broken by this but that wasn't the stuff that  charles was made of when he got out of prison   he heads out to a small mining town in alabama and  he came up with what seemed to be a very good idea   he decided to start a utility company that would  provide water and power to all of the mining towns   it seems like it might have been a good idea  and a lot of people claimed that it probably   would have worked out for him he was going to sell  stock in the company while he was planning this he   was working as a nurse to make ends meet he was  just about ready to launch this company when he   heard about a local woman named Pearl Gossett who  had been horribly burned in a kerosene explosion   pearl needed skin grafts otherwise she  might lose her limbs or she might even die when ponzi was told this story he said to the  doctor how much skin does she need the doctor   said quite a lot and ponzi replied well you can  take all you need from me he did not know this   woman but in an act of great generosity donated  220 square inches of skin which was taken from   his back and legs he would be horribly scarred  for the rest of his life over this act it was a   generous and heroic act the community nominated  him for a Carnegie heroism prize charles was in   great pain and battled infections for months  after the operation he spent a total of about   four months in hospital and by the time he got  out another company had been launched to provide   electricity and water to the mines ponzi had to  return to the drawing board he needed a new idea   it's impossible to know if ponzi's utility company  idea would have actually worked out at all he may   never have been able to raise enough capital  he may never have had the specific knowledge   necessary to set up and run such a complicated  business like a utility he possibly didn't have   the ability to manage all of the logistics but  the one thing that we can see at this point in the   story is ponzi's entrepreneurial spirit and how he  always thinks big he wasn't planning on opening a   grocery store or working his way up at one of the  mining companies instead he plan on launching a   power and water utility a major type of business  that would have been quite high tech at the time   we're also able to see a lot of the contradictions  in his character at this point in the story there   are numerous stories of his generosity throughout  his life stories about how he would maybe pick up   the tap at a restaurant when he went out with his  friends and return home and have no money to pay   the rent for the rest of the month or how he would  walk by an ice cream store see children outside   and go inside and buy ice cream for the whole  crowd he had this unusual character he wasn't an   obvious greedy villain and this is kind of what  makes the story so good the fact that he had this   huge contradiction in his character means that we  can't just look at him and see a simple con man   and swindler he was much more than that and it's  really a struggle to understand what he was trying   to do or what was possibly going through his head  at really any point in this story ponzi once again   down but not out headed back to boston in 1917 and  at this point his luck finally seemed to change   his first bit of luck would be meeting rose  rose genecco was the italian-american daughter   of a fruit merchant near faneuil hall in boston  she was a beautiful girl about 17 years younger   than charles and ponzi fell madly in love  with her and rose fell madly in love with him   rose loved him and based on their letters it's  cleared that all she wanted was charles ponzi   she just wanted a small home children and  a humble lifestyle but ponzi transferred   all of his dreams onto her his dreams of great  wealth that he had inherited from his mother   he wanted to buy furs and jewelry for rose  he wanted her to live in a huge house with   servants and chauffeur-driven cars he would  tell rose of all of his dreams and explain   his complex money-making plans and describe  the lavish lifestyle they would live together   and rose would listen politely and remind  him that she did not need money to be happy   ponzi went back to his old ways doing everything  he could to get rich he even took over his   in-laws fruit business for a while but that  didn't work in truth the business was already   on the rocks and ponzi tried to turn it around  but it failed through no real fault of his own after the genneco family fruit stand had gone  bankrupt ponzi took his last savings and rented a   small office in downtown boston on the fifth floor  of 27 school street the niles building which is   still there today and it was here that ponzi came  up with his big idea ponzi could just about afford   his office rent and he could not afford furniture  so he went to a local second-hand furniture dealer   picked out around 350 dollars worth of furniture  and then struck a deal with the owner joseph   daniels that he would put fifty dollars down  and pay five dollars a month for the furniture   ponzi planned at first on running an import and  export business where he would help international   companies trade across borders but because he had  no contacts of his own he looked into advertising   in foreign trade magazines when charles  saw how expensive the advertising would be   he changed his plan and decided to open a magazine  of his own and sell advertising he would call the   magazine trader's guide and print it in multiple  languages he would mail the magazine out for free   and sell advertising in it he quickly found  himself unable to come up with sufficient   editorial content to fill a whole magazine and  he was also unable to sell enough advertising   trader's guide was about to go bankrupt  before even publishing its first magazine   sitting in his office alone ponzi leafed  through the mail and saw that he had received   a letter from spain requesting a copy of  the magazine enclosed in the envelope was   something he had never seen before a postal  reply coupon ponzi held the coupon in his hand   and felt that his whole life had led him to  this point this was how he would become rich   so what was it that ponzi found so interesting  in this coupon ponzi realized that this coupon   was possibly the only form of  international currency in the world in 1906 63 countries had gotten together  and they came up with these coupons as a   way to make it easier to send mail  across national borders the coupon   allowed a person in one country to send a stamped  self-addressed envelope to a person in another   before these coupons it was close to impossible  except at prohibitive expense to do such a thing   these coupons have value in almost every country  in the world but its only value however is to buy   stamps now if you remember world war one had just  ended after the war certain countries currencies   had moved significantly in value since this deal  had been struck in 1906. a number of european   currencies had plummeted over that period so  it was possible to go to europe buy a dollar's   worth of these coupons and return to the united  states and buy five or ten dollars worth of stamps   this is what traders refer to as an arbitrage  an opportunity to make a risk-free profit   the main problem that charles faced was that you  could not turn these stamps back into dollars   you would just have to buy  stamps and then sell those stamps on top of that back then it would have been  expensive to travel back and forth with all   of these coupons nonetheless it was a great idea  ponzi realized that done in enough size this could   make him rich beyond belief all he needed to do  was raise a lot of money travel to europe buy   these coupons bring them back and somehow convert  them into cash he took this idea with him around   the corner to the Hannover Trust Company and asked  to take out a loan to do this the bank's president   was quite rude to him and basically threw him  out of the office ponzi was told that his small   account was more trouble than it was worth and  that he would certainly not be getting a loan   charles tried a number of other boston banks  and none were interested he asked friends for   loans but they were all like him and had no  money to spare so he made the decision that   if the banks would not help him he would just  have to sell this idea directly to the public   ponzi decided that he could raise money this way  as long as he offered people a very high return   as otherwise they would simply invest their  savings with more established banks so what   he did was he set up a company and he named  it the securities exchange company or the sec   now it is worth noting that this was more than a  decade before the securities exchange commission   came about in 1932 so while the name  sounds quite amusing to modern ears   it would not have been so controversial back then   ponzi understood that he hadn't figured out the  logistics yet he did know he had a great idea   and it seemed to be both legal and possible to  execute but he knew that it might be difficult   he had to get all of these coupons ship them back  to the USA and somehow convert them into cash   he had not figured out the details  but he had spotted the opportunity   he felt he could sort out the details over time charles must have felt that he might run into  difficulties as he did quite an unusual thing when   he incorporated the securities exchange company he  incorporated with three names on the registration   papers he put down the name of john dondero his  wife's uncle as the president of the company   john did not know about this and had no idea what  was going on ponzi also put down his landlord from   parma italy's name gugliemo bertoli who ponzi knew  would have been long dead by this point in time   finally ponzi put down his own name third  on the company registration and listed his   title just as one of the company managers  ponzi may have expected things to go well   but it appears that he also knew that he might  have to evade investors at some point in time   and claimed to just be an employee ponzi  started offering what became widely known as   ponzi notes he told his investors that he would  take in any amount of money and pay 50 interest   in 90 days shortly after that he changed it to say  that he would pay the 50 interest in just 45 days there was huge and instant demand for these ponzi  notes one of the amazing things is how quickly   this scheme grew and then blew up everything  happened in less than a year in fact about eight   months from the first note being issued but in  that time a huge amount of money came in offices   were opened all over the united states it's quite  amazing to look at what happened and to see how   it happened in such a short period of time almost  100 orchestrated by one man there was no real team   there were plenty of employees but just one  person at the center of all of this charles ponzi in the first month of business charles brought in  around 1 700 by early spring he was bringing in   around 30 000 a week in new investments in june  he brought in two and a half million dollars   which in today's money is around 32 million  dollars he had by then opened offices all   over new england and was fielding phone calls  on a daily basis from all over the country   from people asking to be his agent in various  cities there are a few side stories that you   notice when looking at ponzi and his scheme  one of which is that fraud attracts fraud   other scoundrels noticed what ponzi was up to and  opened an office right next door to him offering   the exact same deal they just took advantage of  the huge lines for ponzi's office they called   themselves the old colony foreign exchange company  ponzi knew that they were frauds and wanted them   gone but there was not much he could do about  them he could hardly call the authorities in and   explain what is wrong with the deal they're  offering it's the same deal he is offering another problem quickly reared its head ponzi had  quickly paid off the used furniture dealer joseph   daniels that we mentioned earlier daniel's  however a deceitful man began to notice   how busy ponzi had become daniel's reasoned to  himself that ponzi must have used a small loan   from the previous december to start a successful  business he put it to ponzi that because of this   he was entitled to more than the repayment he had  received he was in fact a 50 owner in the business   when ponzi sent him packing daniels hired a lawyer  and filed a million-dollar lawsuit against ponzi   daniel's lawyer also filed an attachment  against five of ponzi's bank accounts   freezing about seven hundred thousand dollars of  his cash when news of this lawsuit reached the   press it caused a two-day run on the securities  and exchange company this lingering lawsuit and   frozen accounts would continue to cause trouble  for ponzi for months towards the end ponzi ended   up paying daniels a settlement of fifty thousand  dollars in order to unfreeze his accounts   most people in boston seem to want to invest  at least something even people who didn't   really believe in the story put a little bit  of money in so that they could participate   thinking of it as a lottery ticket other true  believers put in everything they had even   borrowing money to invest the note that you see on  screen right now was owned by principio santisoso   a reporter for the boston post he bought  it for 200 in 1920 which is about 2 500   in today's money principio invested but did not  write anything about ponzi in the boston post not   a word appeared in the press about ponzi for over  a month after principio bought that note with his   bank accounts bulging charles went on a shopping  spree he invested some of the funds in businesses   some in real estate loans to friends he even  lent money to friends so that they could invest   in ponzi notes his biggest and most important  investment however involved gaining control of   one or more banks charles started out by making  some small investments in a few boston-based banks   he figured that if he gained control of the  banks he could weather any storms that may arise   by using their reserves until he eventually  managed to flip his business into being profitable hanover trust was the nearest bank to his  school street office it had around five million   dollars in assets this was the same bank whose  president had been rude to him a few months ago   when he applied for a loan to start up his trade  magazine charles planned to take control of the   bank and began by slowly buying up blocks of stock  as they became available for sale at the same time   he slowly increased his deposits in the bank  quickly becoming by far their largest depositor   charles then befriended a number of  the existing shareholders many of them   were italian like him he even lent some of the  money so that they could invest in ponzi notes   charles kept money at a variety of banks all over  boston he had money at more than a dozen banks but   his largest deposits were at the hannover  trust around 2.7 million dollars in total   a lot of money for a bank with assets of 5 million  dollars hannover trust was planning to issue new   stock around 2 000 shares ponzi walked into the  bank shortly before the stock issue and asked to   speak to the president of the bank he offered  to buy every share of the newly issued stock   the bank president paused taught for a moment and  then explained that he had to decline this offer   if i sold you all of these shares when they are  combined with your current holdings you would   then be the majority shareholder and have control  of the bank that is just what i want said ponzi   the conversation went back and forth but  they were unable to come to an agreement   as ponzi got up to leave he stuck his head  back into the bank president's office and asked   do you mind telling me what my  current cash balance is here   the president of the bank knew exactly what this  meant he knew that if charles withdrew his 2.7   million dollars much of which had been lent out  to the bank's customers that the bank would be   insolvent hanover trust quickly agreed to sell  him three-quarters of the stock that he wanted   and give him a board seat knowing that he would  still be a minority shareholder they also got him   to agree to give them 30 days notice in advance of  withdrawing any funds so that they could deal with   the request in an orderly manner the board of  hanover trust were not aware that ponzi already   had many of the major shareholders in his pocket  hannover trust was now the bank of charles ponzi the scene on school street and pie alley  where ponzi's offices were were a hive of   activity people stood in line for hours to walk  up to the teller window and deposit their money   as time went by and ponzi showed an ability to pay  early investors their principal and interest back   his reputation grew of course many of the  investors who were paid their money back   quickly reinvested it often  adding additional capital   ponzi of course hadn't yet worked out how to do  this trade with the international reply coupons   so he robbed peter to pay paul using the money  from later investors to pay early investors   figuring that he could sort out the detail shortly  enough of course very few people actually took   their money out as they figured they could just  wait another 90 days and double their money again ponzi not only seemed willing  and able to pay people back   but he had his bookkeeper send people postcards a  few days before their money became due in order to   remind them to come in and collect their money it  made him look extremely credible to these people   that he seemed to want them  to collect their profits at this point ponzi could easily enough have taken  the money and run he had a huge amount of money it   was in banks all over boston held in his name had  he taken it back to italy the u.s law enforcement   would have been unable to extradite him at one  point he had bought two tickets back to italy   one for him and one for rose in order to return  to italy to visit his mother and to take the   honeymoon they could never have afforded before  he had a certificate of deposit for one million   dollars that he used to carry around in his suit  pocket he could easily have fled but he did not   at this point he was the toast of the city of  boston he walked around town in the finest of   clothes with a huge diamond tie pin and a  gold-handled cane he was chauffeured in and   out of work in a locomobile which was one of the  finest coach-built cars available at the time   the american equivalent of a rolls-royce he had  paid thirteen thousand six hundred dollars for it   which when inflation adjusted comes to around  two hundred thousand dollars in today's money   ponzi realized that if he left boston even  just for a short holiday that people might   think he had taken the money and ran instead  of taking the holiday he cashed in the tickets   and bought a ticket for his  mother to bring her to boston ponzi set about buying a house for himself  and rose and he looked at some of the finest   homes available for sale rose wanted none  of that she hated the idea of living in a   huge ostentatious house filled with  servants and got him to tone it down   to a more modest but still very impressive home in  lexington massachusetts a short commute to boston   charles wanted a mansion for rose to live in but  she wanted a home not a big place with great rooms   the house is still there 19 slocum road in  lexington massachusetts in fact it recently sold   but with no mention of its history in the  advertisement maybe it was seen as bad luck   there are stories you can find about the hugely  expensive renovations that he had done on the home   but these are mostly untrue it was heated and  air conditioned which would have been very   unusual at the time some people described the  home as having huge walls or a fence around it   but once again that is untrue as you can see  from photographs from the time and from today   charles did not own the home for very long and  rose was always trying to reduce his spending   rose was known to frequently return the expensive  gifts that charles bought for her to the stores   as lavish gifts did not suit her thrifty  ways she did not like having servants clean   the house and she always felt that she would  do a better job cleaning it herself anyhow   the evidence appears to show that ponzi had no  intention of absconding with the money he had   plenty of opportunity to do so but he did seem to  believe in his ideas and right up to the very end   he thought that he could turn things around around  this time the attorney general's office began   tapping ponzi's home and office telephones hoping  to hear damaging admissions or clues as to what   ponzi was up to but other than hearing him discuss  his fanciful business ideas they heard nothing of   use as wild as it might seem it is quite possible  that ponzi had no idea of how deep he was in   one of the things that differentiates  charles from other con men and ponzi schemers   that came after him is that he appears to  have genuinely believed in himself and his   business ideas even though he was doing  nothing to bring any of these ideas to fruition   ponzi seems to have been a combination of  a fool and a dreamer he was not a stupid   man it's worth saying but he did have an insane  deluded confidence in himself and really seems   to have believed that things would work out you  will see this more and more as the story goes on   charles seemed to have this confidence both  in his early life and even late in life after   everything had gone wrong for him he never gave  up dreaming and he never lost faith in himself   at this point in the story when huge sums of  money were coming in and he owed even larger   sums it appears that he had full faith in himself  and believed that everything was going to work out it's worth noting at this point in the story  that just because charles didn't necessarily   plan on taking the money and running that  in no way absolves him from what he did   at the core of what was going on here was a  big lie and the lie was that he was engaging   in a profitable business in international  reply coupons and there was also the lie   to his investors that he could easily pay them  back the money that he owed them in the 90s tv   show Seinfeld George Costanza famously says to  Jerry when asked how to beat a lie detector test   jerry just remember it's not a lie if you believe  it of course in the real world it is a lie and we   all know that ponzi appeared to have all sorts  of harebrained investment and business ideas and   we'll get to some of those in a few minutes but it  would appear that he never really lost a night's   sleep worrying that everything would fall apart  on him he doesn't seem to believe that at all   even right up to the very end he appears to have  believed in himself and believed in his scheme he   seems to have thought that it would all work out  which does make him a fascinating character but at   the center of everything is still this great big  lie and just because he didn't think of himself   as a con man doesn't mean that he wasn't a con man  up until now everything was going well for ponzi   he lived a lavish lifestyle the kind of lifestyle  he always felt he deserved he appeared to be   dripping in well he was married to a woman who he  was totally devoted to and she was devoted to him   his mother had just arrived from italy and  could see the success he had made of himself   as the money flowed in ponzi dreamed up new  ideas of how he would profitably invest it   one of his more harebrained schemes was to buy up  a fleet of old world war one ships he planned on   kidding them out like a huge c-bound shopping  mall and he would send them around the world   filled with the finest american goods and  they would dock at ports around the world   selling all of these wonderful goods it would be  the biggest import export business in the world he   told his wife and mother he felt he could convert  all of this debt into equity in this ponzi company   and he would become a hugely wealthy businessman  as harebrained a scheme as this sounds today   it might have possibly sounded a bit less crazy  in 1920 when great fortunes were being made in   bootlegging and in stock manipulation  by people like joe kennedy or al capone   the one cloud that was hanging on the horizon  at that point was a man named richard grossier   richard grossier was the editor and publisher  of the boston post one of the many boston   newspapers of the day richard's father edward  founded the paper and it was in 1920 the most   important newspaper in boston which was one of  the most important cities in the usa at the time   richard was edward's nerdywell son whose life  up until this point had been not unlike ponzi's   in the way that ponzi had flunked out of the  university of rome richard had lived similarly   while at harvard the big difference was that  richard had a deep pocketed and influential father   who was able to fund all of richard's failures  edward would write letters to the dean of harvard   on boston post stationary requesting more and more  chances for his son under normal circumstances   richard would have been thrown out of harvard he  barely attended class and failed to submit papers   he only scraped through and graduated because  of the pressure his father put on the college   richard at this point was 10 years out of harvard  and had in no way proved himself he had moved from   job to job at the boston post in 1920 richard  found himself leading the boston post because   his father had suffered a stroke month earlier and  richard was filling in for his hospitalized father   this was richard's moment in the summer of 1920 he  became convinced that the man with the midas touch   charles ponzi was a fraud grozier decided to go  after him and he decided that despite everyone   around him believing in ponzi the story  ponzi was spinning just could not be true the first story that appeared in the boston post  came in july 1920. it took no shots at ponzi it   just clearly explained what ponzi was claiming the  journalist visited ponzi at his house in lexington   and described it they described the scene on  school street it was simply a descriptive story   grossier felt that once the claims were spelled  out clearly in black and white people would   quickly realize how ridiculous they were  ponzi loved the article when he saw it   his favorite part was that  right next to the article   on the same page was an advert for a savings  bank offering five percent interest on deposits   the day that the story came out more people than  ever turned up on school street with cash in hand   they could earn five percent a year at the bank or  double their money every three months with ponzi   grozzier was enraged when he saw what happened  he had thought that people would easily spot how   implausible the story was instead he had just  given ponzi a free front page advertisement   day after day the post started publishing  articles about ponzi explaining how his   promises must be false the post brought in  experts published cartoons mocking ponzi   and slowly a few other papers joined in the other  newspapers always let the post take the lead   as they were afraid of being  sued by a wealthy man like ponzi clarence barron the publisher of baron's  financial and the wall street journal who   was based out of boston piled on two he was the  most listened to financial journalist of the time   baron explained in his papers that ponzi's returns  made no mathematical sense if ponzi could compound   money at that rate in no time he would have  all of the wealth in the world and somehow   all of that wealth would have been stripped  from the post office baron also pointed out   that ponzi kept most of his money at banks and he  questioned why ponzi would keep money at a bank   if he was able to compound it at the  rate that he claimed to be able to   ponzi fired back with a lawsuit against the post  telling anyone who would listen that he would   soon own the printing presses of the boston post  once he won his 5 million court case against them   he sued barron too saying that he would shortly  own baron's estate in cohasset massachusetts once the boston post started making noise some of  the regulators got on board they didn't want to   look asleep at the wheel as they had ignored ponzi  up until now the bank commissioner the attorney   general of massachusetts the u.s district attorney  and the suffolk county d.a all came to examine the   securities exchange company at once the newspaper  articles and law enforcement agencies sniffing   around were beginning to cause problems for  charles the bad press caused a run on the   securities exchange company during the run ponzi  kept his cool he was happy to pay everyone back   the lines were bigger than ever before at school  street some people still investing but many more   withdrawing ponzi had to rent additional  office space in order to deal with the rush   the streets were filled with pickpockets there  were other people there offering to buy the   ponzi notes at a discount from the people there to  redeem not only that but as we explained earlier   fraud attracts fraud people were turning up  with counterfeit ponzi notes ponzi and his   clerks knew that these notes were counterfeit but  ponzi told his clerks to pay out on these notes   too he didn't need to be seen arguing with  customers or refusing to pay redemptions   with all of this talk of limitless money  being made in international reply coupons   the postal inspector began to get nervous and  decided to look into the issue it barely made the   press that summer when a rule was passed at the  post office prohibiting the post offices around   the country from redeeming more than 50 cents in  international reply coupons per customer per day at 27 school street ponzi felt that if he could  sustain this run and survive he could still make   his fortune this was just a small road bump one  of the small benefits for him was that some of the   notes being redeemed had only a few days left to  go till the coupon would be paid and ponzi did not   have to pay any interest on these notes if they  were redeemed early all he had to do was to return   the initial investment principle around this time  some businessman from new york approached ponzi   offering to pay him 10 million dollars for his  business these talks fell apart quickly as the 10   million dollar payment would only come after the  buyer had learned his money making secret and had   earned the 10 million dollars from operating the  business this was not much of an out for charles   as the lines grew ponzi would arrive every day  to his school street office very conspicuous   in his fine clothes and locomobile he would  serve donuts and coffee to the crowd and he   would make them feel at ease he hoped that the run  would end shortly each day the charles survived   the panic weakened and slowly people started  putting money back in throughout all of this   chaos ponzi continued meeting with reporters  and telling his side of the story during this   period ponzi hired a man named william mcmasters  a former reporter and publicity man to help him   improve the press he was getting one evening while  charles sat chatting with a reporter at his home   his upset wife rose walked through the room  and when questioned by the reporter she replied   i would much rather that charles was a bricklayer  working eight hours each day and went undisturbed   by anyone on the evenings and on sunday than to  have all of the wealth that he has brought to me with the regulators circling and the press  writing negative articles about him ponzi   came up with a plan to save his business he set up  a meeting to meet with all of the regulators and   law enforcement agencies all at once accompanied  by his lawyer while not all of them agreed to the   meeting he turned up explained his postal reply  coupon arbitrage and then negotiated them into   an extraordinary agreement he would open his books  to an auditor of their choosing who would assess   all of his liabilities and only then would he  have to prove his assets met those liabilities   at that point charles said they would declare  him solvent and all investigations would cease   ponzi figured that this tactic would keep him in  control of his business and buy him some time to   make money on the way out of the meeting ponzi  stopped and said it just occurred to me that the   auditor's task might be impossible if i continue  issuing notes while my liabilities are being   summed up the task might never be completed the  regulators agreed that this might be a problem   and asked if charles could pause issuing  notes while the investigation was underway   i could replied ponzi acting as if the idea had  only just occurred to him it might also give   me time to spike certain insinuations that are  being made by the press at that point he picked   up the da's telephone called his office on school  street and asked them to stop issuing new notes ponzi at this point was happy to no longer be  taking deposits as each dollar that he took put   him deeper and deeper into debt each early  redemption on the other hand only involved   returning principal without interest ponzi had at  that time around 15 million dollars in liabilities   and eight million dollars in assets some  of which was tied up in various investments   some even being frozen by the lawsuit  against him from the furniture dealer   he realized that some early withdrawals which  were likely to come in the next few days   would help him out but by his calculations he  would need to show at least three million dollars   in cash more than he had his ace in the hole he  figured was the vault of the hannover trust the   bank he had taken control of he would briefly  access the vault take the cash and securities   pass them off as his own to the auditor and then  return them to the vault with no one the wiser   things went crazy the next day at 27 school street  once the press reported that ponzi was no longer   taking deposits and being audited it was the  busiest day ever with outbreaks of violence   people forcing their way into the office and the  windows and doors getting broken as ponzi returned   from his meeting with the various investigators  he had dropped into the hannover trust company   the bank that he controlled and he had given  them 30 days notice to withdraw the locked up   money he had on deposit there unknown to ponzi  the commissioner of banks a man named joseph   allen whose investigation had so far turned up  nothing illegal about ponzi's banking practices   had grown concerned that there could be a run  on the hannover trust and on other banks where   ponzi did significant business he ordered the bank  to provide him with daily reports of the bank's   financial status including reserves deposits and  whether any customers had overdrawn their accounts   such scrutiny would make ponzi's temporary bank  heist extremely difficult if not impossible on friday july 30th the boston post had the  front page headline new york post master says   not enough international reply coupons are in the  whole world to make the fortune that ponzi claims   grozier's constant hammering away was  really beginning to have an effect   mcmasters the publicity man that ponzi had  hired had begun to grow suspicious of his boss   he worried that if ponzi really was a fraud  it would harm his career he did some poking   around at the 27 school street office collected  some evidence and then called the boston post   he charged grozier six thousand dollars  for his story the next day the front page   of the post declared ponzi hopelessly insolvent  mcmasters declared that as a public relations man   his first duty was to the public saying nothing  about the money he had been paid for his story   the final nail in ponzi's coffin hammered in by  the boston post was when richard grozier sent   a reporter up to canada to follow up on a tip  they had received the tip was that ponzi had   spent time in prison in montreal for bank fraud  when they published the story on august the 10th   about him having done time for bank fraud  along with his mug shot the panic intensified   the reporter had walked around montreal and spoken  to old colleagues of ponzis from zarossi bank   he showed them photos of ponzi and they  replied yes that's him bianchi he was   positively identified by the prison warden  too who described him as a model prisoner this story upset ponzi hugely as he had not told  his wife rose about any of the time he had spent   in prison rose however was not surprised as before  the wedding date ponzi's mother had written rose   a letter letting her know about his two prison  sentences she knew that charles had not disclosed   them to rose imelda had given rose charles's side  of the story and rose viewed the story as more   evidence of his good character that he had taken  the fall for other people who needed his help   once that story got out the game was  about up for charles ponzi ponzi spun   a tale to whoever would listen that  he had taken the fall to save his boss   who had a family and who had been tricked  into the illegal act by an extortionist within days after his mug shot being published  the auditor finished his work he calculated   liabilities of roughly seven million dollars  ponzi realized that he could only show assets   of around four million dollars at most even  when using trickery to overvalue certain assets   when the time came for ponzi to seize  assets from the vault of hanover trust   the state banking inspector had  already unwittingly foiled that plan   ponzi arrived to find the bank had been seized  by the regulator and the doors were barred rather   than be arrested and humiliated in front of his  wife and his mother ponzi decided to turn himself   in while he disputed the findings of the auditor  he said that he had agreed to abide by them he   was charged initially with mail fraud a slightly  confusing charge as he had only used the mail to   notify investors to come in and collect the money  he had owed them more charges would shortly follow rose who didn't claim to understand her husband's  business dealings stood by him she told the press   i love my husband more than ever my faith in  my husband is as unshaken as it was before   i'm rather pleased with what happened today for it  gives me the chance to show the world and to give   added evidence to my husband that i love him on  friday the 13th of august 1920 charles ponzi was   put in prison unable to post bail but that is by  no means the end of the story charles ponzi was as   you can see a man who could take a punch and stand  right back up again charles ponzi was sentenced to   five years in prison in plymouth county jail  for federal crimes in the end ponzi had taken   and spent around twenty five thousand dollars  not including his home and car which were sold   and returned to investors this comes to around  four hundred thousand dollars in today's money the   rest of the money was lost due to poor investments  and payment of interest to early investors charles had expected that to be it but while in  prison massachusetts state prosecutors continued   to press charges against him in 1922 while still  in federal prison he was back in the courthouse   this time unable to afford a lawyer he defended  himself charles impeccably dressed as always   shocked the prosecutors by how capable he  was at providing testimony and at questioning   witnesses over the six weeks of his trial ponzi  managed to convince the jury to find him and his   co-defendants innocent of all charges against  him after four years in prison he was let out   early for good behavior the state of massachusetts  had not yet given up though and after being free   for three months charles found himself back  in front of the court on five additional   state charges once again ponzi acted as his own  lawyer and the case ended with the jury deadlocked   the state then tried a third time with new charges  and this time ponzi's luck was out the prosecutors   had learned from their prior mistakes and were  better able to deal with his courtroom tricks   ponzi was found guilty and sentenced to seven  to nine years as a common and notorious thief   he was allowed free on bail while his  appeal was pending and he immediately   began plotting his comeback determined to  repay his creditors and regain his fortune   in 1925 while out on bail charles ponzi headed to  florida and assumed the name charles borrelli he   opened a company called the charpon land syndicate  charpon from charles ponzi he was offering   investors returns of 200 in 60 days the highest  returns he had offered to date ponzi bought 100   acres of land some of which was waterlogged for  40 dollars an acre he divided each acre into 23   tiny lots and tried to sell them for 10 each each  acre he hoped would yield a profit of 500 charpon   was quickly shut down and ponzi was sentenced to a  year in jail for violating florida securities laws ponzi finally decided to flee the country to  avoid his seven to nine year sentence he faked   his suicide and boarded an italian ship under  a false name to work as a dishwasher and waiter   unable to keep quiet he foolishly revealed his  true identity to a shipmate and the story of who   he was travelled like wildfire on board the  ship ponzi was then arrested in new orleans   when the ship stopped in port before leaving for  italy so how did things finally end for charles   ponzi was released from prison in 1934 and was  promptly deported to italy he had never gained   u.s citizenship his wife rose stayed in boston  and divorced him two years later in 1936 saying   she still loved him but could not remain his wife  knowing that they would never likely be reunited   charles and rose however continued their love  affair riding back and forth until they died   neither of them married again or had children   rose kept all of charles's letters which  were found by her family after she died   in them charles said that he could never marry  again as he believed he was still married to rose   although he did often try to make her jealous  in order to encourage her to come back to him   in 1939 ponzi moved to brazil and while he  was always dreaming of money-making schemes   he ended up running a small rooming house he tried  to cash in on his story by writing his memoirs   and tried to sell shares in the book to investors  at twenty-five dollars a share but by then people   were no longer interested in his story in 1948  blind sick and in hospital in brazil he allegedly   came clean to a reporter who visited him he said  that his business had been simple the old business   of robbing peter to pay paul charles ponzi died in  january 1949 at the age of 66. at the time of his   passing the new york times said that it was almost  possible though not quite to believe that he was   as credulous as his victims and deceived himself  as much as them after the scheme collapsed in 1920   all of the banks where charles had done business  fell under scrutiny from the banking inspector   along with the hannover trust three  other boston banks failed that september   partially due to bank runs caused by the unwinding  of the securities exchange company it was not just   runs on the banks though some of the bankers  in the aftermath were accused of having been   so reckless with depositors money that their  behavior would have embarrassed even ponzi   what about ponzi's trade in international  reply coupons in the end it turned out that   he had only ever bought three dollars worth  of international reply coupons from europe   he had bought one dollars worth in spain one  dollars worth in italy and one dollars worth   in france he had done this in the early  days of his business as a proof of concept   the french and spanish deals were awash and the  italian deal was a money maker when everything   was wrapped up investors who had stayed in ponzi's  scheme until the end eventually got back 37 and a   half percent of the money they had invested many  people had borrowed money to invest and ended up   losing everything others had managed to get in and  out and walked away with huge gains some of those   felt that the money they had made was distasteful  and returned it to the liquidator of the scheme   daniels the furniture dealer who had shaken  ponzi down for fifty thousand dollars   came under scrutiny for his claim  that he owned half of the business   he ended up having to return his ill-gotten gains  in the end ponzi's name would go down in history   but not in the way he wanted it to the old scheme  of robbing peter to pay paul would be renamed the   ponzi scheme others would go on to do it on an  even bigger scale than ponzi had most famously   bernie madoff the reason that this story is so  interesting is that there are tons of lessons that   can be taken away from it the most obvious one is  that if an investment idea seems too good to be   true it probably is but unfortunately investors  do seem to still make that mistake to this day   but if there is one big lesson here it is that a  good way of avoiding big losses is staying away   from any sort of get-rich-quick scheme there are  other lessons here too though while ponzi's life   worked out to be a total unmitigated disaster  where everything went wrong for him over and   over again usually driven by his deep character  flaws you still do have to admire certain things   about him like his spirit ponzi never really  gave up not after failing at university gambling   losses multiple prison sentences he just stood  up and tried again and if there's nothing else   you have to admire that about him his perseverance  ponzi may have been delusional about his abilities   and a fool in terms of finance but many of his  characteristics can be found in some of the most   successful people in the world today he was always  looking for opportunities which is a good thing   he was always thinking big instead of  grumbling to people who would listen to   him about his current place in society instead  he just went out and tried to change his world

Channel: Patrick Boyle

Views: 467,306

Rating: 4.8587813 out of 5

Keywords: finance, patrick boyle, charles ponzi, ponzi scheme, bernie madoff, scam, pyramid scheme, history channel, documentary, conman, con artist, financial history, ken burns, the history of the ponzi scheme, charles ponzi the documentary, the most famous con artist, finance documentary, conmen, true crime, ponzi scheme explained, history, channel, charles ponzi documentary, ponzi scheme history, madoff scheme, greatest con man, con man, what is a ponzi scheme?, bernie madoff death

Id: w4waqVKanxA

Length: 72min 53sec (4373 seconds)

Published: Sun Nov 08 2020

Reddit Comments

[u/Narradisall]

Patrick Boyle is great if anyone else wants to check out his other videos. Such dry sass

[u/EffectiveLead4]

There is a plot of land outside of Boston called Ponzi Con Land.