A man, a plan, a scam


A man, a plan, a scam

Herald investigation pulls back curtain on Durangoan’s worldwide scheme

A man, a plan, a scam

A century of Ponzi schemes

Ponzi schemes are named for Charles Ponzi, an Italian immigrant who ran a scam that was the talk of Boston in 1920.

Ponzi began his scheme when he discovered international reply coupons – a voucher purchased in one country that is redeemable for postage stamps in another. He figured out that he could pay people to purchase cheap IRCs in countries like Italy and redeem them for costlier stamps in the United States.

Ponzi rounded up investors for his gambit, but soon he was making all his money from new investors and not from the postal coupon idea.

He paid off old investors with money from new ones – the classic definition of what has become known as a “Ponzi scheme.”

Ponzi made $15 million in less than a year. When his scam fell apart, he was prosecuted and served time in prison.

He died in a charity hospital in 1949 in Brazil.

“It was easily worth 15 million bucks to watch me put the thing over,” said Ponzi, according to Smithsonian magazine.

Ponzi’s name lives in infamy thanks to the hundreds of similar frauds that criminals pull every year.

The largest such scheme operated for decades. Celebrity financier Bernie Madoff lost about $65 billion of his clients’ money when his scheme collapsed in 2008.

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In this series

Today: Fred Baker is serving time for his part in a Ponzi scheme, but he was just one player in a worldwide network of fraud.

Monday: Four mysterious $100,000 checks to Baker’s victims coincide with another fraud case in Utah.

Tuesday: The money trail from Baker’s victims, and many others, leads to a company with ties to Panama, New Zealand and Europe.

Wednesday: Victims often fail to heed advice for spotting financial fraud.

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