Wednesday, February 1, 2012

Ponzi! It sounds like Fonzi, but it's definitely not as cool…eeeyyyy

Ponzi schemes, I’m sure by now were all familiar with Bernie Madoff and his ponzi investing scheme. Yea a lot of people got screwed over, but that’s what happens when something is to good to be true…chances are its probably NOT true. Anyhoo I thought ponzi was kinda like widget, just an arbitrary term given to something. Well it’s not, turns out there’s a Charles Ponzi who’s scheme in the 1920s was so detrimental, they named every subsequential scheme after his.Thats kind of an awesome legacy... So who was this guy and what exactly is a ponzi scheme?

Charles Ponzi lookin super sharp,
I'm guessing this was before his scheme fell apart.
In 1920 Charles Ponzi’s scheme wasn’t exactly new; he just executed it in a big way.A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going.” (wikipedia)
So pretty much for it to keep going you need to keep bringing in people. These are usually common with churches and people influenced by some higher authority. But when the flow of people stops, the system collapses, and well everyone and their momma who gave any kind of money is officially screwed.
Charles Ponzi Started the scheme in Boston in 1920 using international postage stamp stuff and ended up raking in millions of dollars. In the 1920’s omg he was like super mega richtastic. This spark huge red flags with the Boston bank commissioner and while they didn’t originally find anything illegal, Ponzi ended up serving jail time for it but then was later deported, cause well he wasn’t a U.S. citizen anyway.  
wanna learn more: Ponzi Schemes

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