Thursday, July 30, 2020

Ponzi Enterprise Collapses, Gives Birth to "Ponzi Scheme": 100 Years Ago

Here's an interesting diversion. 100 years ago the empire of Charles Ponzi began to unravel and his name appears in the paper for the first time locally.

The very first story was published in Salem on July 29th, 1920. Interestingly, only the morning paper, the Statesman, published stories and the Capital Journal was silent in the afternoon, even after the story blew up the next day. They finally picked up the story on August 2nd.

That first story on July 29th is flat and neutral: "The accounts of Charles Ponzi, dealer in international postal coupons, who has obtained several million of dollars from the public on his promise to pay 50 per cent profits, will be audited by county and federal authorities."

July 30th, 1920
By the next day, the stories about the "stamp juggler" were far more lively. From July 30th:

Italian Millionaire Stamp
Juggler Tells Pressmen
New York Banker Wants to
Buy His Business


New York Postmaster States
That Such Fortune in
Stamps Impossible

BOSTON. July 29. A New York banker offered him $10,000,000 today for his business, according to a statement Ponzi made to newspapermen tonight. He added that he had not decided whether to accept but would hold another conference with the banker.

Ponzi added that he intended to resume his operations In Boston and other cities where he has branch offices when the district attorney's auditors have completed their investigation, if he did not accept the banker's offer.

He [said] he had been informed by his secretary that he had paid out to customers today about $250,000.

The three-day run on the coffers of Charles Ponzi by doubling investors ia his quick-rich scheme of international postal exchange, continued today while new believers in the possibility of abnormal profit took their money to a rival a few blocks away.

Ponzi, having agreed with District Attorney Pelletier to accept no further deposits until investigation of his accounts had been made, stood in his enlarged offices and saw every thing going out, with no new funds coming in; but although payments in the last two days are estimated to have exceeded a million dollars, he was honoring every demand.

NEW YORK, July 29. Postmaster Patten today declared that the entire world's supply of international postal coupons is not large enough to enable any person to accumulate the fortune which Charles Ponzi, the Boston financier [,] is said to have made through coupon transactions and foreign exchange.

In order to make $8,000,000, the sum which Ponzi is credited with having realized from his operations, 160,000,000 coupons would have been required, according to Postmaster Patten.

"To have made his money in these coupons would have oeen impossible," said Mr. Patten, "for the reason that enough have not [been] printed to permit it. There are not enough coupons In the world. Here In New York we keep not more than 27,000 on hand, the demand for them is so small."

The records of the New York post office, Mr. Patten explained, show that only $370.50 was paid to redeem coupons during the three months ending June 30 and only $360 worth of coupons were sold here during that period.
After nearly daily updates on the developing story, by the middle of August authorities had arrested Ponzi. We all know how the story ends!

August 13th, 1920

No comments: