This day in history: Italian swindler and con artist Charles Ponzi was born on this day in 1882.
Born and raised in Italy, he became known in the early 1920s as a swindler in North America for his money-making scheme. He promised clients a 50% profit within 45 days or 100% profit within 90 days, by buying discounted postal reply coupons in other countries and redeeming them at face value in the U.S. as a form of arbitrage. In reality, Ponzi was paying earlier investors using the investments of later investors. While this type of fraudulent investment scheme was not invented by Ponzi, it became so identified with him that it now is referred to as a "Ponzi scheme". His scheme ran for over a year before it collapsed, costing his "investors" $20 million.
Ponzi may have been inspired by the scheme of William F. Miller (also known as "520% Miller"), a Brooklyn bookkeeper who in 1899 used a similar deception to take in $1 million (approximately $35 million in 2022).
Ponzi schemes were certainly not new. Long before Charles Ponzi, Charles Dickens wrote about such schemes in his 1844 novel Martin Chuzzlewit and his 1857 novel Little Dorrit. The Mormon Kirtland Safety Society in the 1830's had some of the hallmarks of a Ponzi scheme.
Some of the most notorious participants in this type of crime were women. In the 1860's, Nancy Clem ran such a scheme, as described in the book, "The Notorious Mrs. Clem: Murder and Money in the Gilded Age." In Munich, Germany, Adele Spitzeder founded the "Spitzedersche Privatbank" in 1869, promising an interest rate of 10 percent per month. By the time the scheme collapsed in 1872 it had become the largest case of fraud in 19th-century Bavaria. Sarah Howe opened a savings bank called Ladies' Deposit Company in 1878 meant to target unmarried women. She claimed that the bank worked with a Quaker charity that wanted to help less privileged women. She promised high interest rates of eight percent per month. There was in fact no such charity. Howe was able to gain over 1,200 clients and $500,000 in deposits before she was outed as a fraud in 1880. After Sarah Howe was released from prison she become a fortune teller until her death in 1892.
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