Cheated, swindled, bamboozled, these are some choice words to describe people who fell for a ponzi scheme. The term Ponzi scheme was coined after Charles Ponzi who is credited to be the father of the pyramid scheme and modern get rich schemes. While there have been large attempts at financial fraud before Ponzi, it is his creativity in finding opportunities and his means of deception. They were so good that thousands have replicated his operation to varying degrees of success. Steve Sorensen Embezzlement.
Charles Ponzi arrived in America in 1903 all the way from Italy. He quickly learned English by doing odd jobs in his early years in the country. His claim to fame began when he received a letter from Spain and noticed a return coupon attached to the mail. The prices of return coupons varied from country to country so he thought of the idea of buying coupons in large quantities in countries that sold them cheap and sell them in countries where they are sold at a higher price. According to Steve Sorensen, this was basically arbitrage, or buying from a cheaper market and selling to a higher paying one. Steve Sorensen Embezzlement.
The legitimacy of this scheme allowed him to gather investors whom he promised to double their investments in just three months. However, the actual scheme wouldn’t sustain all the new investors. So what he did was use the money brought in by new investors to pay-off the older investors. This has become the very definition of a Ponzi scheme. Steve Sorensen Embezzlement.
When Ponzi was making millions of dollars a day, he thought about buying legitimate companies in hopes of paying investors and keeping his luxurious lifestyle. Unfortunately, the entire scheme collapsed before his plan came to fruition. His downfall also led to the collapse of several banks as well. Steve Sorensen Embezzlement. Steve Sorensen Embezzlement.