Charles Ponzi was an Italian-American entrepreneur who became famous for his huge fraudulent scheme, named the "Ponzi Scheme" in his honor.
How did it work?
Charles Ponzi founded a company called the Securities Exchange Company in 1919. He attracted people by promising them huge profits in a short time. Ponzi claimed that he would invest their funds in international postage stamp operations. These promises of huge profits were a key element of his scheme.
Ponzi initially attracted a small number of investors who actually made high profits. This created the appearance of success and stability of his business.
With each new gullible person, the Ponzi scheme grew larger. He used the money of new investors to pay profits to previous ones. This created the impression of high profitability and attracted even more investors.
The Ponzi scheme became so large that he could no longer pay profits to previous investors. This led to its collapse. Many investors lost their savings.
How did it end?
In 1920, Charles Ponzi was arrested and sentenced to 5 years in prison. His scheme is considered one of the largest and most successful financial fraud schemes in history.
Now you know who was the founder of all financial pyramids.
