Get All Access for $5/mo

Who Was Charles Ponzi? The Forgotten Story Behind the Scheme. We've all heard of Ponzi schemes, but the man they're named after is a mystery to many. This week's Dirty Money takes a deep dive into his spectacular rise and fall.

By Jonathan Small

Opinions expressed by Entrepreneur contributors are their own.

In 1903, a penniless Italian immigrant with a gambling problem arrived in Boston with dreams of making it big in America. His name was Charles Ponzi.

Standing 5'2 and weighing 130 pounds, the diminutive man may not have been imposing, but he made up for it with his ambition. Ponzi would ultimately invent the most elaborate investment scheme ever perpetrated at the time, earning him the equivalent of $220 million in just a few years.

How did this happen, and what was the fate of the man immortalized forever for perpetrating the ultimate money con?

On this week's episode of Dirty Money, Entrepreneur editors Dan Bova and Jon Small tell the mostly forgotten story of the man behind the original Ponzi scheme. Charles Ponzi's classically American tale is about ambition, greed, ingenuity, and hubris. There's a reason they named a con after this guy.

Rags to riches

Like so many newcomers to the U.S., Ponzi honestly believed that the city streets were paved with gold. All you had to do was stoop down and shovel it into bags.

But that didn't work out for him. Ponzi traveled America taking odd jobs as a grocery clerk, factory hand, dishwasher, sewing machine repairman, nurse, insurance salesman, and sign painter. He was always scribbling ideas for businesses in his notebook. He was broke, in and out of jail, and most people thought he was a joke.

The laugh was on them. In 1919, Ponzi pawned his wife's jewelry to open up the Securities Exchange Company, promising investors a 50% return on their investment within 45 days or a 100% return within 90 days. He told them he could do this by exploiting the difference in international postal reply coupons' value.

Ponzi became very rich and famous — very quickly.

But just as fast as Ponzi built his empire, everything came crashing down.

What is a Ponzi scheme?

A Ponzi scheme is an investment scheme where the returns are paid to earlier investors using the money contributed by newer investors. The scheme often relies on attracting a large number of investors and promising them high returns with little or no risk. The returns are usually paid from the investments made by newer investors rather than from legitimate profits earned by the scheme.

Charles Ponzi didn't invent this scheme, but he perfected it, laying the groundwork for even bigger scammers in the future — such as Bernie Madoff, who stole $50 billion.

Ponzi always dreamed he'd be the talk of the town. But he never imagined his name would forever be associated with a scam.

Jonathan Small

Entrepreneur Leadership Network® VIP

Founder, Write About Now Media

Jonathan Small is an award-winning author, journalist, producer, and podcast host. For 25 years, he has worked as a sought-after storyteller for top media companies such as The New York Times, Hearst, Entrepreneur, and Condé Nast. He has held executive roles at Glamour, Fitness, and Entrepreneur and regularly contributes to The New York Times, TV Guide, Cosmo, Details, Maxim, and Good Housekeeping. He is the former “Jake” advice columnist for Glamour magazine and the “Guy Guru” at Cosmo.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Side Hustle

The Side Hustle He Started in His College Apartment Turned Into a $70,000-a-Month Income Stream — Then Earned Nearly $2 Million Last Year

Kyle Morrand and his college roommates loved playing retro video games — and the pastime would help launch his career.

Science & Technology

Why We Shouldn't Fear AI in Education (and How to Use It Effectively)

Facing resistance to new technologies in the educational process is nothing new, and AI is no exception. Yet, this powerful tool is set to overcome these challenges and revolutionize education, preparing students and professionals for a future of unparalleled efficiency and personalized learning.

Business News

Apple's AI Has a Catch — And It Could Help Boost Sales

Not every iPhone owner will get to use the new Apple Intelligence.

Business News

Elon Musk Threatens to Ban Employees from Using Apple Products, Says Will Lock Devices in 'Cages'

The Tesla founder sounded off on X following Apple's 2024 Worldwide Developer Conference on Monday.

Business News

Y Combinator Helped Launch Reddit, Airbnb and Dropbox. Here's What I Learned From Its Free Startup School.

The famed startup accelerator offers a free course on building a business — and answers five pressing questions for founders.

Business Culture

You'll Always Have Anxious Employees if You Don't Follow These 4 Leadership Tactics

Creating a thriving workplace environment hinges on the commitment of company leaders to nurture and inspire their teams.