Charles Ponzi, The Wizard of Lies Who Fell for His Own Scheme

If an investment deal seems too good to be true, it probably is. But when someone as charismatic as Charles Ponzi offers you the deal, it’s kind of hard to remember that. A bashful, colorful Italian, Ponzi arrived in the US in the early 20th century, a time when money became the driving force in America, and “get-rich” schemes were everywhere.

Charles Ponzi and his wife standing in an office room / Charles Ponzi walking down a set of steps with his hat off / Bernie Madoff arriving in a white car to court / Larry King sitting behind his desk with a microphone, mug, and papers on his show Larry King Live
Photo by Bettmann, Getty Images / Pictorial Parade, Archive Photos, Getty Images Stephen Chernin, Getty Images / Jordan Strauss, WireImage, Getty Images

Ponzi seized the opportunity and gave people what they wanted – fast money. He used the old “rob Peter to pay Paul” trick and took it way too far. But Ponzi wasn’t your obvious, greedy thief. He didn’t run off with the money because he genuinely felt like he was helping his clients. Looks like the clever conman managed to fool even himself.

Everyone Wanted to Get Rich Fast

The years leading up to Ponzi’s arrival in the U.S. were a true time of change. WWI had just ended, and people felt it was time to get rich and enjoy life to the fullest. As a consequence, the concept of money changed dramatically. It was no longer for the well-born. It was for everyone to reach out and grab. It was to be made fast, easy, and in large quantities.

Charles Ponzi posing holding a cane in front of a brick building
Charles Ponzi circa 1920. Photo by Bettmann / Getty Images

The newspapers at the time were filled with stories of brave entrepreneurs, young women marrying rich men, and poor people becoming rich overnight after inheriting their family’s fortune. Such a climate allowed promoters of “get rich” schemes to work their magic and fool the public by selling them outrageous dreams that anyone could become a millionaire.

What Exactly Is a Ponzi Scheme?

To clarify things, a Ponzi scheme isn’t the same as a pyramid. A pyramid scheme is when members make money off different members, with each person added recruiting more people. And in order to join the pyramid, you have to pay an initiation fee. But a Ponzi scheme is different. What makes it fascinating is that it all revolves around one person (as opposed to many members).

A portrait of Ponzi wearing a wicker hat
Photo by Pictorial Parade / Archive Photos / Getty Images

This one person is usually incredibly charismatic and can work their charms to convince you they can double the money you invested. Before Ponzi blew up, this scheme was called “robbing Peter to pay Paul.” Basically, you pay old investors back with new investors’ money.

Ponzi Wanted to Make His Mom Proud

Charles Ponzi was born in Italy in 1882 to a poor family that was rich in name. His mom was tied to the Duchy of Parma (a noble title founded in the 16th century), but by the time Charles was born, the money was all gone. His dad was a postman who desperately tried to make ends meet, and his mom was a bitter woman who clung to her royal heritage.

Charles Ponzi on front steps with his wife and mother posing for a photograph
Charles Ponzi with his wife and mother. Source: Twitter

Growing up, Charles’s mom would tell him all about his family’s long-lost riches. She planted a seed in her little boy’s head that he would be the one to restore the family name and lift them back up to their rightful place in society. This idea stuck with Ponzi until the end of his life.

He Blew All His Money on His Rich Friends

Charles’s parents used what little money they had to enroll him at the University of Rome. At the time, less than %5 of the population could afford an education, so this was a huge opportunity for the young Italian. It was his golden ticket to the upper class.

Charles Ponzi standing in front of a palm tree
Photo by Bettmann / Getty Images

But Ponzi wasn’t interested in school. He found it more important to fit in and show his wealthy friends he was one of them. So instead of reading books, he went to cafes and opera shows. And instead of spending wisely, he blew it all on expensive clothes. He ran through all of his family’s savings just to prove he was rich. The foolish spender never finished his degree.

He Dreamed of Making It Big in the US

Broke and without a degree, there wasn’t much left for him in Italy. So he decided to immigrate to the land of opportunity – the United States of America. He arrived in the US in 1903. Ponzi later told The New York Times: “I landed in this country with $2.50 in cash and $1 million in hopes, and those hopes never left me.”

Charles Ponzi sitting behind his bank desk
Photo by Gircke / ullstein bild / Getty Images

The newcomer quickly learned English and worked as a dishwasher at a restaurant, where he slept on the floor because he couldn’t afford to pay the rent. But Ponzi wasn’t worried. He knew he would make it big. It was only a matter of time…

He Learned From His Boss How to Trick People

Ponzi felt things were a bit stale in the US, so he moved to Canada and found a job at a bank that was run by an Italian man named Luigi Zarossi. His encounter with Zarossi marked the beginning of Ponzi’s deceitful ideas. He saw that his boss wasn’t as honest as he claimed to be.

Charles Ponzi waving his hat in front of cameras standing in front of a brick wall
Photo by Bettmann / Getty Images

Zarossi offered his clients a better deal than other banks in the area. He offered them outrageously high-interest rates, but he wasn’t able to pay them back. So he took money from old investors to pay new ones, and as long as the money kept coming in, his customers didn’t notice. But less than a year after Ponzi had come to work for him, Zarossi packed his bags and fled to Mexico with his clients’ cash.

Ponzi Had Been to Prison Twice Before the Scheme

Ponzi’s first time behind bars came after he forged a check for $423.58. When his boss took off, he was broke and had to take drastic measures. But the police caught up to him pretty quickly, and Ponzi was sentenced to three years in prison on the outskirts of Montreal.

Charles Ponzi’s mugshots
Charles Ponzi. Photo by Bettmann / Getty Images

After 17 days out of prison, Ponzi found himself yet again behind bars. Why? Because he helped Italians who didn’t know English cross the border from Canada into the US. He was trying to do good, but his plans backfired. He spent another two years in prison, this time, in the US.

The Love of His Life Was a Humble Woman Who Didn’t Care About Money

Once he got out of prison, Ponzi headed back to Boston, where he met a beautiful young woman by the name of Rose Maria Gnecco. She was the daughter of a fruit merchant and wanted nothing more than a small home, children, and a humble lifestyle.

Rose Ponzi stroking Charles hair sitting in a field together
Rose and Charles Ponzi. Photo by Bettmann / Getty Images

But Ponzi wanted to buy her jewelry, fancy cars, and a mansion. He told her all about his money-making plans and promised he would grant her the most lavish lifestyle in the world. Rose listened politely but insisted that none of it really mattered to her.

He Published His Own Magazine

Ponzi’s first big idea was to help international companies trade across borders. He rented a small office to get his business rolling but had barely any money to furnish it. With his half-empty office and a few rented chairs, Ponzi did his best to make things work.

Ponzi standing in a yard in front of a tree trunk wearing a tailored suit
Photo by Bettmann / Getty Images

He looked into advertising his business in foreign exchange magazines, but the ads were so expensive he decided to open a magazine of his own – The Trader’s Guide. It completely flunked because he didn’t have enough content to fill the paper and he wasn’t able to sell enough ads.

His Dreams of Becoming Rich Were Finally Coming Together

One day, Ponzi received a letter from Spain requesting a copy of his failed magazine, and in that letter lay a little coupon that was about to change his life forever. A postal reply coupon that Ponzi realized could make him rich beyond belief. So what exactly was this little piece of paper?

Charles Ponzi eating spaghetti at a dinner dable with a man to his right
Photo by Bettmann / Getty Images

With this coupon, people could buy stamps that allowed them to send envelopes across countries. At the time, this was the only form of international currency. Ponzi realized he could buy a dollar’s worth of these coupons in Europe, and then and go to the US to buy five dollars’ worth of stamps, and then sell these stamps and make a profit. This marked the beginning of his criminal plans.

He Asked the Public for Money

Ponzi had to raise money to get his plan going, so he headed to banks, pitched them his idea, and then asked for a loan. One bank president laughed in his face and told him his small account was more trouble than it was worth. He kicked him out of the office and told him never to come back again.

Charles Ponzi sitting in a chair outdoors reading a manuscript
Photo by Keystone View Company / FPG / Archive Photos / Getty Images

Ponzi decided that if banks wouldn’t lend him money, he would sell his idea directly to the public. He knew he could raise money that way, as long as he offered people a very high return. So he set up a company called “Securities Exchange Company” or SEC.

He Knew He Was Going to Run into Trouble

Ponzi knew he wasn’t 100 % kosher here because he did an unusual thing when he incorporated the company. He wrote three names on the registration – John Dondero ( his wife’s uncle who had no clue about the whole thing), Gugliemo Bertoli (his former landlord who had passed away), and his own, Charles Ponzi.

Charles Ponzi standing on a staircase
Photo by Bettmann / Getty Images

He enlisted himself as company manager so that if anything were to go wrong, he would play it out innocently and claim he was just the little man in the venture. Even though Ponzi had faith in his idea, he knew he might run into trouble at some point.

Everyone Wanted to Give Ponzi Their Money

Ponzi told his investors he would take in any amount of money and pay them back with a whopping 50 % interest in 90 days. He later changed it to just 40 days! The audience was taken, and everyone wanted to give Ponzi their money.

Charles Ponzi and his wife standing in an office room
Charles Ponzi with his wife. Photo by Bettmann / Getty Images

In his first month of business, he brought in around $1,700. After a few months, he was bringing in around $30K a week, and after six months, he brought in two and a half million dollars (in today’s money, that’s around $32 million).

Fraud Attracts Fraud

The absurd thing is that some people knew exactly what Ponzi was doing. But instead of spreading the word, they decided to embrace his con ways and do exactly the same. They took advantage of the huge lines in front of Ponzi’s office and opened their own offices right next door.

Charles Fonzi playing a ukeleili sitting in a wicker chair
Photo by Bettmann / Getty Image

Obviously, Ponzi wanted them gone, but he couldn’t do anything about it. Because what was he supposed to do? Call up the police and explain how fraudulent his neighbors were? They were doing the same thing he was! Ponzi had nothing to do but let his imitators do their thing.

He Took Over the Banks

As more money rolled in, Ponzi decided it was time to take over the big boys in the financial field – the banks. He invested in several banks in Boston in order to slowly gain control over them. Which, amazingly, he did.

Charles Ponzi holding his hat up on the steps of a government building
Photo by Bettmann / Getty Images

He ended up owning the same bank that had kicked him out a few months earlier when he asked for a loan. He had deposited so much money into them that he knew if he were to withdraw it all at once, that would be the end of them. They relied on him, and he became the majority shareholder.

He Could Have Run Off With the Money, but He Didn’t

At this point, Ponzi was swimming in cash. He didn’t need to go along with this anymore, and he could have just run off with all his accumulated wealth. He could have gone back to Italy and put the whole US saga behind him. But he didn’t.

Charles Ponzi wearing an all white suit relaxing in a chair
Charles Ponzi circa 1925. Photo by Bettmann / Getty Images

He enjoyed his life in Boston way too much. He was the talk of the town and the most respected person around. He drove his Locomobile (fancy car) everywhere and impressed his clients with how filthy rich he was. But the fact that he didn’t run away with the money doesn’t mean that what he did was okay. At the core of all this lay a big, fat lie.

People Started to Catch On to Ponzi’s Scheme

This is when things started to get messy. The editor of the Boston Post, Richard Grossier, felt that something was terribly fishy about Ponzi and he decided to go after him. He used his power as a publisher to spread the word about this tricky man.

Charles Ponzi sitting at a desk reading a book
Photo by The Boston Globe / Getty Image

The first time Ponzi appeared in The Boston Post was innocent. Grossier simply described what Ponzi was doing. He hoped that once his actions were printed in black and white for people to read, they would understand how impossible the whole thing was. But his post just caused more people to arrive at Ponzi’s office, cash in hand.

Ponzi’s Returns Made No Mathematical Sense

Grossier wasn’t the only one who was suspicious. Financial journalist Clarence Barron joined in and explained that Ponzi’s returns, once calculated, were mathematically impossible. He published a paper explaining how improbable it was that Ponzi was speaking the truth.

Charles Ponzi and his wife walking away from a government building
Charles Ponzi with his wife 1934. Photo by The Boston Globe / Getty Images

Ponzi threatened to sue both Grossier and Barron, claiming he would rob them of everything they owned. Well, that didn’t happen, and the conman was slowly sinking into the muddy mess he created. Finally, Ponzi wasn’t feeling so confident anymore.

He Had to Stop Accepting Money

Ponzi knew he had to stop accepting money, at least for a little bit, until the newspapers calmed down and law enforcement stopped snooping around his business. The moment he announced he would not be accepting more clients, people lost it. There were outbreaks of violence outside his office, and people forced themselves into the building through the windows.

Crowds outside of an old office building
Crowds outside of Charles Ponzi’s office. Photo by Bettmann / Getty Images

Finally, on Friday, July 30th, The Boston Post wrote something that shut everyone up: “New York Postmaster says there aren’t enough international reply coupons in the world to make the fortune that Ponzi claims.” That headline made it clear to everyone – Ponzi had tricked them.

The Skeletons in His Closet Resurfaced

Things heated up even more when the public found out about his criminal past in Canada. His time in prison was revealed to the masses, and his story was published in the news with his mug shot underneath the title.

Charles Ponzi walking up the steps of the courthouse in custory of the sheriff
Charles Ponzi and Deputy Sheriff George Lacy at the Harris County Jail in Texax in June 1926. Photo by Pictorial Parade / Archive Photos / Getty Images

Ponzi was especially humiliated because he hadn’t told Rose about his past troubles. But Rose took his time in prison as evidence of his good nature. She loved him more than anything else and appreciated how he had taken the fall for the Italians he helped smuggle into the US.

He Couldn’t Bear the Humiliation, so He Turned Himself In

Ponzi didn’t wait for the police to arrest him. He went down to the station and turned himself in before anyone could humiliate him in front of his wife. He was initially charged with mail fraud, which was funny because he barely used the mail and never fulfilled his postal coupon idea.

Charles Ponzi and District Attorney William Foley outside of the courtroom after his hearing
Charles Ponzi and District Attorney William Foley in the detention pen in Superior Court. Photo by Bettmann / Getty Images

Unable to post bail, the conman was sentenced to five years in prison. His wife, Rose, still stood by his side. She told the press: “I love my husband more than ever. My faith in my husband is as unshaken as it was before.”

Unable to Afford a Lawyer, Ponzi Defended Himself

Even behind bars, Ponzi kept getting more and more charges thrown at him. He found himself yet again in court, but this time, with no lawyer to defend him. So he decided to represent himself. He arrived to court impeccably dressed as always and amazed everyone with his sharp wit and quick responses.

Charles Ponzi arguing his own case in front of the jury
Charles Ponzi arguing his own case in front of the jury in court. Photo by Bettmann / Getty Images

He knew exactly what to ask and what to say in order to convince the jury of his innocence. So he wriggled his way out of those additional charges, and after four years behind bars, Ponzi was let out early for good behavior.

He Flew the Country, but His Big Mouth Got Him in Trouble Again

After three short months, the conman found himself back in the courtroom for additional charges. And this time, he wasn’t able to sweet talk his way out of it. He was sentenced to nine years but was allowed to go free on bail while his appeal was pending. Ponzi saw this as the perfect time to run off.

Charles Ponzi standing next to a woman who is sitting behind a large fancy desk
Charles Ponzi surrendering to Immigration. Photo by Bettmann / Getty Images

He faked his suicide and boarded an Italian ship under a false name to work as a dishwasher and waiter. But he couldn’t keep his mouth shut for long, and he let his secret slip to one of the passengers. The news spread on board like wildfire, and Ponzi was escorted back to prison for good.

What Happened to Ponzi?

He was released from prison in 1934 and deported back to Italy. Rose stayed in Boston, and despite the great love between them, she divorced him because they couldn’t make a long-distance relationship work. Ponzi tried to make some money off his story, writing memoirs and all that, but no one seemed to care about him anymore.

Charles Ponzi walking down a set of steps with his hat off
Charles Ponzi leaving prison on February 14th, 1934. Photo by Pictorial Parade / Archive Photos / Getty Images

He moved to Brazil in 1939 and rented a small rooming house. A decade later, at the age of 66, Ponzi died in a hospital in Rio De Janeiro. Before his passing, as he lay sick in the hospital, he came clean to a reporter and said he never intended for things to happen as they had, and he really believed he would be able to pay everyone back.

What Happened to His Investors?

After the scheme collapsed, some lucky investors managed to get in and out of the whole ordeal quickly, with no harm done. Others got back 37% of the money they had invested but ended up with nothing because that money was a loan they had taken to invest in the first place.

Ponzi crying into a hankercheif
Charles Ponzi being deported on October 7th, 1934. Photo by Underwood Archives / Getty Images

Some people were so distraught by the whole scheme that they felt the money was distasteful and refused to take anything back. All the banks Ponzi had done business with were also pretty much doomed and under a lot of scrutiny from banking inspectors.

There Were So Many Contradictions in Ponzi’s Character

Charles Ponzi wasn’t an obvious greedy villain. He was pretty generous with his money. He would buy kids on the street ice cream and candy, and he would give his friends as much money as they needed, never demanding it in return.

Charles Ponzi lying on a blanket at the beach reading a book
Charles Ponzi at Copacabana Beach in Rio circa 1942. Photo by Bettmann / Getty Images

The fact that he had this huge contradiction in his character means that we can’t just make him out to be a simple, devious conman. He never ran off with the money, and he genuinely believed he could make it all work out. The New York Times once said that among all the people Ponzi managed to fool, he had fooled himself most of all.

Modern Day Ponzi – Bernie Madoff

The notorious Bernie Madoff was born in 1938, a few years before Ponzi passed away. The two men have one main thing in common – they knew what people wanted and found a way to bank on it. But Bernie surpassed Ponzi and created the biggest Ponzi scheme in history.

Bernie Madoff’s mugshot circa 2008
Photo by Bureau of Prisons / Getty Images

While Ponzi rose and crashed in less than a year, Madoff managed to scheme thousands of investors over the course of 17 years! Tens of billions of dollars rolled around this man’s fake business until an accountant named Harry Markopolos blew the whistle on him.

Bernie Is Still Alive, but Both of His Sons Are Gone

Both Madoff’s sons were involved in his business yet had no idea what their dad was up to. They believed everything was legit and that their dad was as straight as an arrow. His arrest was impossible to stomach, and his family’s reputation was tarnished for life. Two years after his arrest, his son did the unthinkable.

Bernie Madoff with his sons at one of their college graduations
Source: CBS

Bernie’s eldest son, Mark, couldn’t handle the shame and grief, so he decided to take his own life. He hung himself with his dog’s leash. He had already tried to commite suicide before and even left a note saying: “Now you know you have destroyed the lives of your sons by deceit. F*ck you.” But this time, he left no note. His younger son, Andrew, died of cancer four years later.

Madoff Wants Early Release Because He’s Dying

Madoff was sentenced to 150 years. He is currently held in a federal prison in South Carolina but is seeking compassionate release. He’s terminally ill with kidney disease, and doctors say he has only 18 months to live.

Bernie Madoff being led into court by US Marshalls
Photo by Hiroko Masuike / Getty Images

Bernie doesn’t want to spend them behind bars, and his lawyer is pushing for them to let his client out. For now, things aren’t looking so good for the fraudster. His request is being consistently denied, and it looks like he is going to leave this earth behind bars.

Larry King Fell For Madoff’s Tricks

One of the most recognizable hosts out there, Larry King, also fell prey to Madoff’s vicious scheme. The two met through King’s childhood friend, Fred Wilpon. At the time, King and his wife were looking for an investment firm, and Madoff seemed to be the perfect fit.

Larry King sitting behind his desk with a microphone, mug, and papers on his show Larry King Live
Photo by Jordan Strauss / WireImage / Getty Images

He entrusted the man with $700K and, luckily, got it all back. King admitted: “If I could interview one person on the planet, it’d be Bernie Madoff, and the obvious [question] would be ‘Why? Why did you do this to people?’” I bet a lot of people would like to hear his answer.

Ellie Wiesel Says “Psycopath” Is Too Nice of a Word to Describe Madoff

Noble Peace Prize winner and Holocaust survivor Ellie Weisel was one of Madoff’s famous clients. His charity lost $15.2 million, and all his life savings evaporated due to this deceitful conman. He mentioned, “This was a personal tragedy where we discovered all of a sudden what we had done in 40 years, my books, my lectures, everything was gone.”

Ellie Wiesel leaning his head on the one hand over a stack of papers in an office
Ellie Wiesel. Photo by Nancy R Schiff / Hulton Archive / Getty Images

According to Weisel, calling Madoff a “psychopath” is too kind of a word to describe the cruelty of the man: “Psychopath means there is a sickness, a pathology. This man knew what he was doing. I would simply call him a thief, scoundrel, criminal.”

The Wizard of Lies

In 2017, Madoff’s scheme reached the screens but, this time, the messy ordeal was played out by Robert De Niro as Bernie and Michelle Pfeiffer as his wife. The casting choice is incredible. It’s creepy how similar De Niro and Madoff are (visually).

Michelle Pfeiffer and Robert De Niro walking in to a film premiere
Michelle Pfeiffer and Robert De Niro. Photo by Barry King / WireImage / Getty Images

1.5 million viewers watched its premiere on HBO, and additional replays and views through streaming added up to a total of 2.4 million people for its premiere weekend! People find these types of stories incredibly interesting because it’s hard to fathom how someone could do such a thing.

John Malkovich Was Humbled by His Loss to Bernie

Actor and film producer John Malkovich is yet another celeb who fell for Madoff’s act. But the way he reacted when he discovered he lost $2 million to the conman is simply incredible. He said, “I don’t view it as a negative experience. To me, it was, ‘You think you have a bunch of money – and you don’t.’ So what? Most people don’t (have a lot of money). I think it kind of reconnected me to how most people live all the time.”

John Malkovich posing leaning against a wall
John Malkovich. Photo by Lisa Maree Williams / Getty Images

John said he had to work non-stop the decade following his tremendous loss. But as you can see from the quote noted above, he didn’t let it wear him down. He appreciated the fact that he was still alive and lucky enough to have a job.

Where’s Ruth Madoff?

Bernie’s wife, Ruth, got a ton of heat after her husband’s cruelties were exposed. Whether she knew of his wrongdoings or not was irrelevant to the masses. All they wanted was to tear the whole Madoff family down.

Ruth Madoff photographed leaving the prison visiting her husband
Ruth Madoff leaving Metroplitan Correctional Center after visiting Bernie Madoff. Photo by Yvonne Hemsey / Getty Images

Ruth lost everything: her family, money, and friends. Some loyal companions still keep in touch, but a lot of people couldn’t go on talking to her. It’s incredibly sad, considering she swears she had no idea of her husband’s sick plans. She now lives in Old Greenwich, and neighbors say her life is pretty comfortable.

So What Can We Learn From All This?

As mentioned at the beginning, if something seems too good to be true – it probably is. Don’t let personality traits fool you into believing the person in front of you is speaking the truth. Charisma, wit, and intelligence are wonderful, but those qualities say nothing about the person’s honesty.

Bernie’s accountant leaving court after his hearing
Bernie Madoff’s accountant David Friehling leaving federal court. Photo by Rick Maiman / Bloomberg / Getty Images

Ponzi schemes occur because people have faith in others and feel like financial issues are too complicated to understand, so why to bother looking closely at what’s happening with their money. Well, that’s a huge mistake, and you should always be wary of whose hands you give your hard-earned cash to.