Mitchell Zuckoff

From the Christian Science Monitor Q & A with Mitchell Zuckoff about his 2005 book, Ponzi's Scheme: The True Story of a Financial Legend:

Q: Who was this guy Ponzi?

A: He was an Italian immigrant who came here in 1903 and, like so many immigrants, was looking to make a fortune. He had no success, and ends up in Boston in 1917.

He comes up with this idea about opening an import/export company and [hears about] something called an international reply coupon, a way to send a self-addressed, stamped envelope from one country to another. It's almost like a form of global currency, used only to buy stamps.

He thought he could buy these things cheaply in countries whose currencies were depressed, bring them to the United States, transfer them to stamps, and make money.

On paper, it was actually feasible. This is the idea of arbitrage: buy something in one place at a lower price and sell in another place at a higher price. The problem was that there weren't enough international reply coupons printed on the planet to pay back even the first group of investors. There wasn't a market for this.

Q: How come people didn't figure this out?

A: He was a razzle-dazzle kind of guy, and he had tremendous charisma. He just said he'd figured out a way to do this, and he had a secret method. Most of all, his promises were so amazing. He'd double your money in 90 days.

The two sides of the human brain were working against each other. It was too good to be true, but people also thought it was too good to miss. And at first, he...[read on]

--Marshal Zeringue