Take you through the Ponzi scheme of MLM schemes – the story of Ponzi

Ponzi schemes, which usually rise with economic bubbles, crash when the bubble bursts! Many people think that the initiator of the Ponzi scheme is Charles Ponzi. But in fact, as early as the birth of the financial industry, this kind of scam existed, and Ponzi only "carried it forward", and in order to commemorate his "great achievements", it was named after him.

In 1882, Ponzi was born into a middle-class family in Parma, Italy. At the age of 21, Ponzi spent all his savings and bought a ferry ticket to Boston, USA. With only $2.50 left, he is determined to create his own world on the free North American continent. Arriving in the United States, however, his life was simple, devoting himself to two things: cheating and going to jail. But soon after, an accident happened that made Ponzi's name "famous all over the world".

It was a perfectly ordinary morning, and Ponzi opened the mailbox as usual. He saw a letter from a Spanish company with an "International Reply Coupon" (IRC) attached to it and sent it abroad without having to pay for the postage. The role of the IRC is equivalent to that of an international stamp.

Ponzi immediately sniffed out the business opportunity. IRC can be purchased in one country and used in another. If the postage rates of the two countries are not equal, there is room for arbitrage. After World War I, many European countries fell into hyperinflation and their currencies depreciated sharply. Countries like Italy and Germany are much cheaper than in the United States if the postage is converted into dollars.

Ponzi estimated that buying IRC from Italy and sending it back to the United States, then exchanging it for an equivalent stamp in the United States and selling it, after excluding various costs, the arbitrage profit was as high as 400%! The so-called arbitrage is what we often call "speculation": by buying low and selling high, using the spread to make a profit, this speculation method is legal even now, as long as it does not destroy the market order.

However, this business is far from being easy than expected, IRC's liquidity is very poor, and It is difficult for Ponzi to find buyers to liquidate. Soon, there was a problem with his capital chain. He told his friends who had lent him money: "Please spare some more time." Within 90 days, I will surely double your return on investment! IRC stamp arbitrage is a lump sum business. "Ponzi is really trustworthy. Many creditors got their principal and interest back on schedule. Someone put in $1250, plus interest to get back $2000, only 90 days of yield as high as 60%!

Soon, Ponzi established the "Securities Trading Company". The news soon spread, and people knew that Ponzi was doing a big money business, so more and more people invested money in him. And Ponzi is also quite trustworthy, after the debt expires, the interest commitment to give as much as possible, never renege on the word.

In February 1920, Ponzi had only $5,000 (equivalent to more than $60,000 today); by March, the total amount had soared to $30,000 (about $400,000 today)!

The frenzy began. Ponzi's name spread through the streets and alleys, and investors from all over the country flocked to him, almost bursting the threshold of his home. Early investors got their principal back and incredibly high interest rates, making subsequent investors more reassuring and eager. By May 1920, Ponzi had more than $420,000 in funds under management (about $5 million today).

Ponzi deposited the money in a small bank in Boston, the Hanover Trust. The reason why he chose such a small bank was because he hoped to be able to control it, and one day if he encountered trouble, the bank could be rescued at any time as "his own person". After saving a huge amount of $3 million, he became the bank's president and finally managed to take control of the bank.

By July 1920, Ponzi had absorbed several million dollars. People scrambled to put their life savings, even mortgaged properties in exchange for cash, and handed them over to Ponzi to take care of. Most people are reluctant to withdraw their money and remain in Ponzi's banks for "reinvestment."

Ponzi could not support it, and his secret was to transfer Zhang San's money to Li Si (demolishing the east wall to make up for the west wall). Although he claims to have $7 million in liquidity, he is actually in debt of at least $2 million, and if you include interest, his total debt is as high as $4.5 million, which is already insolvent.

Alain, chairman of the Massachusetts Banking Commission, has long suspected that Ponzi is defrauding, but what disturbs him even more is that once investors withdraw large amounts, the risk could affect the entire Boston banking system, which is absolutely intolerable.

Alain discovered that a large number of Ponzi's customers had asked for $250,000 in withdrawals, and Alain immediately ordered two financial inspectors to keep a close eye on the bank's movements. On August 9, 1920, the Ombudsman reported that many investors had begun to withdraw cash from Ponzi's main account and would have to overdraft if not prevented. Alain immediately ordered Hanover Trust Bank to freeze Ponzi's main account and prevent Ponzi's customers from continuing to withdraw.

At the same time, the Massachusetts Attorney's Office also issued a notice confirming that Ponzi's so-called "large-scale return coupon transaction" was purely fictitious. State officials summoned all the victims to city hall, registered their names, the amount of investments, and truthfully informed the process of being defrauded and detailed audit reports revealing that Ponzi's company actually had $7 million in net debt. His investors, who have not yet withdrawn, lose an average of more than 70% of their principal per person.

On August 11, 1920, for Ponzi, it was all over. In the morning, the Boston Post published an article on the front page exposing his 13 years of "Laodice" — having worked at the infamous Zarosi Bank, falsifying checks, and assisting illegal immigrants in the country; in the afternoon, Alain took control of Ponzi's old lair, The Bank of Hanover, and took away his last straw. In addition, 5 local banks went bankrupt as a result of the incident.

On August 12, 1920, Ponzi was formally arrested by the FBI, but because the U.S. Securities Act had not yet been introduced, he was sentenced to 5 years for "mail fraud"; three and a half years later, Ponzi was released early for good performance. But almost as soon as he stepped through the prison doors, he was indicted by the Massachusetts government on 22 counts of theft. At that time, Ponzi was penniless and could not afford to hire a lawyer, so he was invited to prison and sentenced to another 7 years.

In 1949, Ponzi died in a charity hospital in Italy, and as he died, he told his only English-speaking friend: "Even if their money is all cheated out, it is not a big price." You know, my intention was absolutely not malicious. I just wanted the people of this country to see how successful my performance was, a success not seen since pilgrims landed on the North American continent. At that time, if I only gave me another $15 million, I would definitely be able to make the scene end well. (Could it be that he absconded with a huge amount of money?) ）

Nowadays, many pyramid schemes in society, the routine used is the routine of the Pang's scam, saying that this makes Xiao Su think of the "1040 Sunshine Project", using the name of the national project, paying 69800 yuan and finally getting 10.4 million yuan, but the condition is to promote the boss to develop the offline line or something, etc., obviously a scam, why is Xiao Su so impressed? Because Xiao Su's brother-in-law is the victim, the savings of the migrant workers to save money were cheated away, xiao Su advised many times, but still failed to help his uncle save the loss, you must know that the stolen money of telecommunications fraud and pyramid scheme fraud is basically impossible to recover, you should take it as a warning!

I am Suwan, thank you for your attention!