What is an example of a Ponzi scheme
Capital crimeCharles Ponzi - the inventor of the pyramid scheme
In June 1920, Charles Ponzi had $ 7 million handy and had two first-class transatlantic tickets in his pocket. What he didn't have was an exit plan. On the contrary: he wanted so much to settle down. Starting a family with his beloved young wife Rose, holding court in the new giant villa and increasing his newly earned stardom with good deeds. His financial business in Boston exceeded expectations - it just had to be kept going somehow.
Ponzi returned the two tickets for the planned honeymoon and preferred to bring his old mother and a nurse from Italy over to him.
17 years earlier, the now 38-year-old had left his old homeland as a failure: a bankrupt young dandy who wanted to make it rich in America. For sixteen and a half years, to put it mildly, it hadn't turned into much. It was only for a few months that he had finally been living in the style of the rich and famous, with housekeeping and bodyguard, with the most expensive of all bodies and an estate in the posh Boston suburb of Lexington.
Word spread like wildfire across the country: This Mister Ponzi is a gifted financial genius. And a good-hearted and amusing person on top of that. The office workers of his Securities Exchange Company (SEC) collected the dollars and checks of the enthusiastic small savers as evidence of the baskets.
Synonymous with one of the oldest of all scams
On August 12th, however, it was all over again: Ponzi was arrested. His bankruptcy and its legal processing made headlines for years. A good 20,000 aggrieved investors remained who in the end had to write off almost two thirds of their money.
And the term Ponzi remains as a new synonym for one of the oldest of all scams: In the Anglo-Saxon world, the name today stands for every pyramid scheme in which investors are lured with a sensational return - but this interest only comes from the inflowing funds of further Investors get paid. Until the influx stops and the whole thing collapses.
It is the principle of the pyramid games, in which everyone who participates has to recruit new beginners for the next level. Except that the trick is not that easy to see through with a Ponzi. In a chain letter, everyone can calculate that the number of potential participants is limited. Where and how the top return is earned, which a sympathetic financial genius pays out seemingly reliable, is difficult to overlook.
The temptation for small investors is great: does such a magician really have the perfect strategy? Can he outdo everyone else? If you believe brightly colored leaves and red theorists, then the super-rich know how to do it. So why not take part in the insider tricks of this high society?
The article was published inFinancial crimes: the biggest scammers, criminals and speculators in economic history. The magazine can be ordered in the Capital subscription shop
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