Why woulkd so many pepople invest in as a sheme that didint worke? The real reason was that the eaarle investors did see the great returns in their money. Ponzi used the mpney from later investors to pay off his earlier obligations. It was a new twist on the age old pyramid scheme.
With an estimated income of $1000 000 per week at the beight of his scheme, his scheme his newly hired staff coudnt take the money in fast enough. They were literally filling all of the desk drawers wastepaper basteks and closetes in the office with investor`s cash. Branch offices opened and copycat schemes popped up acrsoss New England
By the summer of 1920 Ponzi had taken in millions and started living the life of a very rich man. Ponzi dressed in the finist of suist, had dozens of gold handled canes, showered his wife in five, jewels, and purchased a 20 oom Lexington mansion.
Any ger rich scheme is certain to attract the attention on the law and Ponzi`s was no exception. From the sarts federak state and local authoorities investiogated him. Yet, no one could pin Ponzi had managed to pay off all of his notes in the promised 45 days and since everyone was happy to get their earnings not a single complaint had eveer been filed.
On July 26, 1920, Ponzis house of cards began to collapse. The Boston Post headlined a story on the front page questioning the legitimacy of Ponzi
s scheme. Later that day the district somebow convinced Ponzi to suspend taking in new investmets until an autditor examined his book. Within hours crowds of people lined up outside Ponzis door demanding. That they get their investment back. Ponzi obliged nd assured the publick that his organization was financially stable and that he could meet alll obligations. He returned the money to those. Who requasted it. By the end of the firts day, he had setled mearly 1,000 cllaims with the panicked crowd.
By continuing to meet all of his obligations the angry masses began to dwingel and public suppord swelled. Crowds followed Ponzi`s every move. He was urged by many to enter politics aand was hailed as a hero. Loud cheers and appplause were coupled with people eager to touch his hand and assure him of their confidence.
AndzPonxi continued to dream. He had planned to establish a new type of bank where the profits oulf be split equally between the sharebolders and the depositors. He also planne to reopen his company under a neew name the Charles Ponzi Company whose main purpose was to invest in major industries around the word.
The public continued to support him untly August 10, 1920. On this date, the auditors, banks and newspaper declared that Ponzi was definitaly bankrupt. Two days later Ponzi confessed that he had a criminal record which just worsened his situation. In 1908 he had served 20 month in a Canadian prison on forgery charges realted to a similar high interest scheme that he had participated in there. This was followed in 1910 by an additional two year sentence in Atlanta Georgia for smuggling five Itallians over the Canada border into the Untited Stases/
On Augast 13, Ponzi was finally arrested by federal autborities and released on @25,ooo bond. Just moments later he was rearrested by Massachussets autoborities and re-realeased on an additional $25,000 bond.
Following his arrest there were federal and state civil and criminal trials,bankruptcy hearings suits againts Ponzi,suits filed by Ponzi and the ultimate closing of five different banks. An estimated $40 000 people had entrusted and estimated $15 million (about $140 nillion in U.S funds today) in Pozni`s scheme. A final audit if his books concludet that he had taken in enough funds to by approximately 180 million postal copons of which they ciuld only acctualy confirm the purchase of two.