Charles Ponzi

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Charles Ponzi
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(No Transcript)
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Facts about Charles Ponzi

• flamboyant con man whose scam followed a
  particularly spectacular course
• Mr. Ponzi began telling New York investors in
  December 1919 that investments in foreign postage
  coupons could yield 50 percent returns in 45
  days.

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• By redeeming coupons bought cheaply overseas for
  much higher amounts in the United States, he
  could double their money in three months, he
  claimed.
• Mr. Ponzi was a fast-talking immigrant and
  college dropout

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• His scheme rested on the eagerness of ordinary
  working people to benefit from the wealth they
  saw being generated around them as the economy
  recovered from World War I.

• As the fever spread, millions of dollars were
  coming in every week, most of it from ordinary
  working-class people investing as little as 10
  at a time. It's estimated that nearly
  three-quarters of the Boston Police Department
  invested in "Ponzi notes," as they became known.

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• With successive waves of people entrusting him
  with their cash, Ponzi needed only enough money
  to pay off those people redeeming their coupons.
  Of course, with the prospect of increasing their
  savings exponentially every couple of months, few
  ever redeemed anything.

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• Mr. Ponzi was convicted of mail fraud in 1920 and
  served time in federal and state prisons before
  he was deported to Italy in 1934, never having
  become a citizen. He died penniless in Rio de
  Janeiro in 1949 and was buried in a paupers
  cemetery there.

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Definition

• A Ponzi scheme is an investment fraud that
  involves the payment of purported returns to
  existing investors from funds contributed by new
  investors. Ponzi scheme organizers often solicit
  new investors by promising to invest funds in
  opportunities claimed to generate high returns
  with little or no risk.

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Other Notorious Ponzi Schemes
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Biblical Bilker

• In Florida, the Greater Ministries International
  church used Bible-speak to cheat its flock out of
  500 million. Starting in the early 1990s, the
  church, led by gun-toting minister Gerald Payne,
  offered worshippers investments in gold coins.
  Payne then created an investment plan that would
  "double the 'blessings' that

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• people invested" by funneling money towards the
  church's fake precious metals investments.
  According to the Anti-Defamation League, Payne
  said that God had modernized the multiplication
  of the loaves and fishes and asked him to share
  the secret. 500 million later, the Feds caught
  Payne, but most investors never got their money
  back.

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Retiree Robber

• Mexican resort owner Michael Eugene Kelly schemed
  retirees and senior citizens out of 428 million.
  He offered them timeshare investments in Cancun
  hotels that he called "Universal Leases.

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• The timeshares came with rental agreements
  promising investors a nice fixed rate of return.
  Most of his victims used their retirement
  savings, thinking they would get solid, low-risk
  returns.
• The SEC says that "more than 136 million of the
  funds invested (came) from IRA accounts." Kelly,
  bought himself a private jet, racetrack, and four
  yachts.

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What exactly is the SEC?

• What do the letter stand for?
• Where is it located?
• What is its job?

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Letters

• SEC
• Securities and Exchange Commission

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Location

• SEC Locations The SEC employs approximately
  3,500 staff in Washington, DC and in 11 regional
  offices
• New York
• Boston
• Philadelphia
• Miami
• Atlanta
• Chicago

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Job

• to protect investors, maintain fair, orderly, and
  efficient markets, and facilitate capital
  formation
• main areas of enforcement activity are
• Insider trading
• Accounting fraud
• False or misleading investment information

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Ladies only

• In 1880, Boston native Sarah Howe promised women
  8 interest on a 'Ladies Deposit." She said it
  was only for women, selling the fact that their
  money would be safe with her. She took the money
  and ran.