Spawning generations of Pyramid Scams, everything from chain letters to shady business opportunities can trace their lineage to Charles K. Ponzi, a smiling, well-dressed Italian immigrant.

    In the latter half of 1919, Ponzi opened the Securities Exchange Company, issuing $10 promissory notes with an assured 90-day return, plus 50% interest. All seemed fair, and investors flocked to get in on such a great deal.

    Then Ponzi sweetened the pot by repaying the notes in 45 days, instead of the 90 promised. These first investors were so excited they reinvested in his company and urged others to join. Within eight months, the Securities Exchange Company raked in 15 million dollars

    Hailed as a financial wizard and "savior of the little people" Ponzi joined the lecture circuit, creating an early structure of today's "infomercial." This brought him additional millions.

    But, suddenly, things began to fall apart for Charles Ponzi. Investors started losing money. They sued; and eventually hounded him into jail.

    The following years found him in and out of prison for comparable frauds.

    Upon his final release he was deported to his native Italy, where he served as an economic adviser to Pascist prime minister, Benito Mussolini.

    Partially crippled in a suspicious hit-and -run truck accident, and never able to recoup his past fortune he emigrated to Brazil as an infirm, dying in a charity ward of a Rio de Janeiro hospital on January 15, 1949, at the age of 67. His estate worth was listed as $75. Just enough to cover his burial expenses.

    What happened?

    Simply this:

    All of Ponzi's "businesses," starting with the Securities Exchange Company, were formed from thin air. They had no financial found-
ation. With no start-up money, no operating capital, no products or services to sell, he was paying off his first investors with monies brought in from later joiners to his "downline." His were gyrating dreams bound for disaster, having eventually more people to pay than people paying in.

    Unfortunately, The Ponzi Schemes—like all scams—gained their initial success through three defects in human nature:

1. GREED: His investors could not pass up such a speedy return for their low-cost investment—plus interest.

2. NAME ASSOCIATION: It's a sad fact that we subconsciously associate one like name with another. In Ponzi's case, his investors assumed his "Securities Exchange Company" was affiliated with the reputable "Securities Exchange Commission." Although Ponzi never claimed affiliation, he never denied it.

3. A DESIRE TO SUCCEED—THE EASY WAY: Why work hard when one can become rich through an investment? Yes, it can be done. But not without knowing what you're investing in, nor whom you're investing with. Investigate before you invest!                                                            

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