Charles Ponzi duped thousands of New England residents into investing in a postage stamp speculation scheme in the 1920s. He thought he could take advantage of differences between U.S. and foreign currencies used to buy and sell international mail coupons.
Ponzi, who is said to have sailed from Italy to America in 1903 when he was in his early 20s, told investors that he could provide a 40 percent return in just 90 days compared with 5 percent for bank savings accounts. Ponzi was deluged with funds from investors, taking in $1 million during one three-hour period. Though a few early investors were paid off to make the scheme look legitimate, an investigation found that Ponzi had only purchased about $30 worth of the international mail coupons.
The scheme wasn't the first time Ponzi tried to bilk unsuspecting individuals, however. In 1909, Ponzi was convicted of forgery in events surrounding the collapse of the Montreal banking firm of Zrossi & Co., of which he was a member. For this crime he was sentenced to a three-year term in the St. Vincent De Paul Penitentiary in Montreal.
To this day, the term "Ponzi scheme" is used to describe a scam where money from new investors is used to pay off earlier investors until the whole scheme collapses.