During this tour that I took, I still can't believe that Boston was a city of many trials and tribulations. You would think that people would stop coming here. But you have a guy who came to Boston from Italy. This guy was a smooth talking guy....everybody liked him and when he talked people listened.
So he comes selling this idea to several of his friends to where if they invested their money he could double their money in 90 days. Sounds like a good deal right? Sounds like a familiar deal right? It is because this gentleman was the one and only Charles Ponzi. So now you are getting where the term "Ponzi" scheme comes from. Bernie Madoff wasn't the only one who got busted big time.
So after a few of investments of Charles Ponzi's friends went through with no problem he decided to start his own business called "Securities Exchange Company" so he could "legally" promote his scheme. Now in the meantime when he is getting tons of investors because word is spreading like wildfire! So he goes to the Hanover Trust Bank of Boston and started depositing money he got from investors in this account so once he had a large enough balance in the bank he could impose his will on the bank and possibly become president. He eventually bought a controlling interest in the bank after he deposited $3 million in the bank. My July 1920 he had made millions of dollars and when people saw how successful his idea was they were mortgaging their homes and investing their life savings. Alot of them didn't take their profits but they reinvested the money so they could make even more money. People started to get greedy!!!!
Well the more money people made the more popular Charles Ponzi became until a Boston financial writer said that there was no way Ponzi could legally deliver such high returns in a short period of time. Well when Ponzi got word of that he immediately sued this person based on the fact that he had no proof. Ponzi won and received $500,000 for damages and was glad because it kept the focus off of his scheme as he knew it would eventually fail
And shortly after that things started to crumble, he got furniture that he received on credit that he could not pair for. And people were thinking how could this guy that could double your money can't even afford furniture. Then they found out he was putting his money away in a bank yet telling them not to use the services of a bank. This turned many heads and things were good for awhile until.....the United States Attorney for the District of Massachusetts requested an audit to be done on the books of the company Charles Ponzi owned. More people started asking questions and once the audit was done it revealed that he was $7 million dollars in debt.
So what ends up happening??? August 11, everything came crashing down Ponzi was arrested and charged with mail fraud and his investors lost in total of about $20 million dollars!!! That was alot of money back then, just like when Bernie Madoff's scheme collapsed his investors lost a total of $13 billion dollars!!! I understand when you have money you should invest it. But like you always hear...if it's too good to be true then it is. And alot of people back in the 1920's as well as recently in 2008 had a hard lesson to learn. And it's not fair and I definitely feel bad for people who trusted these crooked men. Who would have thought that this scheme started right here in Boston Massachusetts? I would have never guessed in a million years.
So I guess the moral of the story is be happy when you are broke...because at least you won't be mad when you lost money you don't really have!
Well until next time....
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