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What is a Ponzi Scheme Scam

By on March 19, 2013 in High Yield Investment Programmes with 0 Comments

I have written a series of reviews on the subject of High Yield Investment Programmes (HYIP) and in those reviews I often mention HYIP Monitors and reference Ponzi schemes.  I thought it would be useful, as I have with HYIP Monitors, to provide a little more detail on Ponzi Schemes and their origin.

A Ponzi scheme takes its name from Charles Ponzi or Carlo Pierto Giovanni Guglielmo Tebaldo Ponzi (March 3, 1882 – January 18, 1949).  Ironically, Ponzi was not the father of this type of fraud, he actually stole the idea from William F. Miller, a Brooklyn bookkeeper, who in 1899 used the same scheme to make $1 million.

On 15th November, 1903 Charles Ponzi landed on the shores of American, Boston, as an Italian immigrant, born in Lugo, Italy in 1882.  Ponzi arrived in American with $2.51 in his pocket after gambling his life savings away on the journey to America.  Ponzi held a number of menial odd jobs before becoming a dishwasher, subsequently rising to the position of waiter only to be sacked for short changing customers.

In 1907, Ponzi moved to Montreal and became an assistant teller at a new Bank, formed specifically to cater to the large influx of Italian immigrants.  Ponzi later progressed to the position of Bank Manager only to find that the Bank was in serious trouble.  The Bank owner fled to Mexico and Ponzi stayed with the Bank owners abandoned family in Canada.

Ponzi, a penniless man, got involved in crime again when plotting his return to America.  He forged a cheque, a crime that he admitted to and served 3 years in prison for committing.

On release Ponzi returned to America but immediately got involved in smuggling Italian immigrants across the border.  He was caught and spent 2 years in prison where he became a translator for the Governor.

After his release Ponzi returned to Boston and got married to Rose Maria Gnecco.  Around 1918 Ponzi struck upon an opportunity to make profits from buying International Reply Coupons cheaply in Italy and selling them in the US at a massive profit.  However, this scheme ran into massive amounts of red tape when trying to sell the Coupons.  But this didn’t stop Ponzi using it as an elaborate story to con people into investing in his opportunity.

Ponzi set up a shop and hired agents to seek investors, word spread of the massive opportunities available with Ponzi and people invested their life savings with him.  Investors kept their money in the investment compounding over and over again and by 1920 Ponzi had made over $420,000 ($4.53 million in 2010 terms)

Ponzi’s scheme continued to grow in size, his 50% profit after 45 days or 100% profit after 90 days opportunity tricked investors from all over North American.  Ponzi was subject to a liable case and even a run on the scheme but he survived both.  It was only when he was investigated by the Massachusetts Bank Commissioner Joseph Allen and a statement was made by Massachusetts Attorney General J. Weston Allen that Ponzi was in fact 7 million in debt did his fraud collapse.

In essence Ponzi was robbing Peter to pay Paul or in effect using new investors and Banks money to pay old investors returns, there was no legitimate profit or investment income.

The subsequent collapse of Ponzi’s Securities Exchange Company brought down 6 Banks and his investors lost over $20 million ($225 million in 2011 terms).  Ponzi served only 5 years in prison for his fraud and went onto commit further frauds in both America and Italy.

In recent years (December 2008) Bernard Madoff was convicted of operating the largest Ponzi scheme in US history with losses accounted at $18 billion.

Ponzi schemes are still a credible fraud as people are all to keen to make quick easy money often with little or no forethought or due diligence.

Don’t get scammed by a Ponzi scheme!

If you want to make money online you don’t need to get involved in Ponzi schemes.  I use a very simple 3 step system to make money online every day.  This same system paid out over 30 million dollars in commissions to its members last year alone.  You can get instant access to a free video that explains the system in full by clicking here.

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