Coupon book pyramid scheme

Rose's youthful innocence shines through even in newspaper photographs, as does her unswerving devotion to her husband. The couple married in February Ponzi took over his father-in-law's grocery business and proceeded to make a mess of it. He had already left Poole, who apparently failed to recognize his new clerk's latent financial genius. It was not long before Ponzi struck out on his own, and finally hit upon the scheme that—for a short time—was to make him rich beyond his wildest dreams.

He had come up with the idea for an international trade journal, which he believed could make a tidy advertising profit. Following a brusque rejection by the bank president, Ponzi sat alone in his little School Street office and pondered his next move. It came to him while opening his mail one day in August As Ponzi relates in his shamelessly exuberant autobiography, The Rise of Mr.

Ponzi , a business correspondent from Spain, interested in learning more about Ponzi's aborted journal, had enclosed a small paper square that put the well-oiled wheels of Ponzi's imagination into overdrive.

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The little scrap of paper was an international postal reply coupon, and the Spanish correspondent had enclosed it in prepayment of reply postage. Purchased in a Spanish post office for 30 centavos, it could be exchanged for a U. But the Spanish peseta, Ponzi knew, had fallen recently in relation to the dollar. Theoretically, someone who bought a postal reply coupon in Spain could redeem it in the United States for about a 10 percent profit.

Purchasing coupons in countries with weaker economies could increase that margin substantially, he reasoned. It should be possible, then, to make a financial killing by buying huge quantities of these coupons in certain overseas countries and redeeming them in countries with stronger currencies. Ponzi called his new business the Securities Exchange Company, and set out to promote his idea. It was a big idea—one that Ponzi managed to sell to thousands of people.

He claimed to have elaborate networks of agents throughout Europe who were making bulk purchases of postal reply coupons on his behalf. In the United States, Ponzi asserted, he worked his financial wizardry to turn those piles of paper coupons into larger piles of greenbacks. Pressed for details on how this transformation was achieved, he politely explained that he had to keep such information secret for competitive reasons. Of course, there was no network of agents.

Nor, for that matter, did Ponzi expend any effort to corner the market on postal reply coupons. Dunn's book, Ponzi! The Boston Swindler , provides a dramatized account of Ponzi's wild ride to riches and shows that, if anything, Ponzi's genius lay in psychology, not finance. Ponzi knew that his concept—the path to easy riches—was so alluring that the worst thing he could do was try to sell it too aggressively.

Ponzi scheme - Wikipedia

Borrowing a page or two from Tom Sawyer , he cultivated an image among friends and acquaintances as a man on the verge of wealth who preferred not to discuss his good fortune in detail—unless, of course, he was pressed. Only after his victims were well primed was Ponzi ready to dangle his bait: the grand plan in which his investors received 50 percent interest in 90 days.

Later he sweetened the pot, promising 50 percent interest in 45 days. By December, the money had begun to roll in. Most of the actual investment pitches were done by sales agents who were trained by Ponzi and received 10 percent commissions for investments that they brought in to him. In turn, many of those sales agents recruited "subagents" who received 5 percent commissions for new investors. Once Ponzi paid off his first round of investors, word of the financial "wizard" on School Street spread quickly. Ultimately, some 40, people joined the feeding frenzy.

Many people simply reinvested their profits with Ponzi, thereby relieving him of actually having to make good on his promise. At the height of his success, Ponzi had offices from Maine to New Jersey, and was fending off shady offers from prospective "partners" in New York. Daniels, a furniture salesman, laid claim to a share of Ponzi's fortune on the basis of an old debt. His lawsuit for what was at the time an enormous amount of money started a buzz about Ponzi outside the circle of investors he had cultivated.

By then, Ponzi had built the lifestyle he had pursued for so many years: a room mansion in upscale Lexington; servants; a couple of automobiles, including a custom-built limousine; and fine clothes and gold-handled Malacca canes for himself, and diamonds and other baubles for Rose. He purchased commercial and rental properties all over Boston and acquired stock in several banks. He even bought out his former employer, Poole. He arranged a takeover of Hanover Trust, the same bank that had turned down his loan application the previous year.

A few months later, when Ponzi fell, so did Hanover Trust. Monday, the 26th, started out as a banner day for Ponzi. The scene that awaited him as he approached his office that morning in his chauffeur-driven Locomobile "was one that no man could forget," he later wrote. Guessed from the wads of money nervously clutched and waved by thousands of outstretched fists! Madness, money madness, the worst kind of madness, was reflected in everybody's eyes! Interestingly, the U.

Post Office Department announced new conversion rates for international postal reply coupons less than a week later—the first change in the rates since prewar days, the New York Times reported. Officials insisted that the new rates had nothing to do with Ponzi's scheme. However, they also insisted it was impossible for anyone to do what Ponzi claimed to be doing. Postal authorities today say the same thing: although international postal reply coupons are available at post offices where there is a demand for them, regulations make speculation in them impossible.

The tide turned quickly against Ponzi. He had come under investigation by postal and legal authorities as early as February, but they appeared to be making little progress in their efforts. Meanwhile, the editors at the Boston Post, possibly chagrined at having published the article that injected so much momentum into Ponzi's enterprise, launched an investigation into his business. The bad press enraged Ponzi. At the advice of his publicity agent, a former newspaperman named William McMasters, Ponzi offered to cooperate with the U.

District Attorney's office by opening his books to a government auditor and declining to accept new investments, as of noon that day, July 26, until the audit was complete. Word that Ponzi was closing his doors prompted a huge run, as thousands stormed School Street to redeem their investment vouchers. Ponzi directed his clerks to refund the money of everyone who presented a voucher.

The Secret Look Into An Usborne Book Party - Is It A Pyramid Scheme?

Frightened investors who cashed in their chips early got back only their principal, which, Ponzi noted, saved him considerable interest. Ponzi maintained a cool head. He played games with the authorities—on the one hand appearing to cooperate with them, and on the other snubbing them to talk to reporters, who provided daily coverage of the unfolding drama. In the article, Ponzi shrugged off the notion that he was under any obligation to reveal details of his business dealings to officials. I do not tell it to anyone," he asserted.

As the run continued, Ponzi ordered up sandwiches and coffee to be distributed to the mobs of people waiting outside his office. He directed that women be moved to the front of the line, after hearing that several had fainted in the sweltering summer heat. Uncertain whether he was a crook or a hero, the crowds simultaneously booed and cheered him.

Many people changed their minds while waiting to turn in their vouchers, convinced that their investments would pay off in the end. The Boston Post reported how one man proclaimed Ponzi "the greatest Italian of them all. The investigation slogged on. Then, on August 2, the Post dropped a bombshell after enlisting the cooperation of McMasters, Ponzi's erstwhile publicity agent, who wrote a copyrighted, first-person report in which he proclaimed Ponzi "hopelessly insolvent.

Still, McMasters found it difficult to condemn the little financier: "No wonder Ponzi is confident: He sees an apparently unlimited pile of cash Note holders besieged the School Street office the day the McMasters article ran. Ponzi hotly denied the charges of insolvency, and threatened to sue both McMasters and the Post. The public circus escalated. On August 10, Ponzi gave a luncheon address at Boston's Hotel Bellevue for the Kiwanis Club, which had invited him for a "battle royal" with a mind reader named Joseph Dunninger.

The idea was that Dunninger would "throw the X-ray of clairvoyance on the subtle brain of the little Italian and reveal what he found to the audience," the Boston Globe reported. But the spectators were so enthralled by Ponzi that the contest apparently never came off; at , Ponzi was still fielding questions from the audience.

Ponzi audaciously implied that he dealt directly with foreign governments in order to purchase the vast quantities of coupons needed to support his enterprise. Because the governments from whom he bought coupons profited themselves, they "naturally would not care to reveal" the exact nature of their business, he explained. On August 11, the Boston Post made the sensational revelation that the financial wizard was a former jailbird, having served time in Canada for forging checks.

The article, the result of the Post's own investigation, ran complete with mugshots of Ponzi from Montreal police. Later, it was learned that Ponzi had served another term in a federal prison in Atlanta for smuggling five Italians from Canada into the United States. The next day, Edwin Pride, the government auditor, concluded his examination of Ponzi's books.

Ponzi was placed under arrest. Half-a-dozen banks crashed in the aftermath of Ponzi's fall. His note holders received less than 30 cents on the dollar; many investors held on to their notes, clinging desperately to the belief that their hero would somehow come through, Dunn says. For its relentless reporting, the Boston Post won a Pulitzer Prize.

Ponzi was convicted on federal charges of using the mail to defraud. In , he was convicted on state fraud charges. Out on bail while the verdict was under appeal, he headed for Florida to raise money by selling swampland under the name "Charpon. He jumped bail when he learned that the Supreme Judicial Court of Massachusetts had upheld his conviction in that state. With authorities in two states in pursuit, Ponzi fled to Texas.

He signed aboard as a seaman on an Italian freighter, but was captured in New Orleans. Ponzi was returned to Massachusetts to begin his sentence at the state prison in Charlestown. When Ponzi emerged from jail in , balding and 40 pounds heavier, immigration authorities were on hand with a deportation warrant.

He had never become an American citizen and was considered an undesirable alien. On October 7, after his appeals to remain in the United States were rejected, he was deported to Italy. Rose stayed on in Boston with plans to join him once he found employment, but after two years she tired of waiting and finally divorced him. For years, says Dunn, who interviewed her not long before her death, she was dogged by rumors that she had a secret stash of her husband's ill-gotten gains. After Ponzi's departure, Rose led a pinched and quiet existence, eventually remarrying after her husband's death and moving to Florida, where she tried to escape the notoriety of her former husband's escapades.

Accounts of Ponzi's life after his eviction from the United States vary. My friend Gus disagrees with me on this subject. Facebook Have you seen a post from a Facebook friend asking you to participate in a book exchange? The system is basically an old-school fraudulent chain letter. It won't work the way you probably expect, and it might be illegal. Hello all!

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Calling out to all of you who are bookworms, book lovers, and bibliophiles like myself from all walks of life. We need at least 6 people to participate in a book exchange but can be more. You can be anywhere in the world. The further we get, the better! All you have to do is buy one of your favorite books and send it to one person. You will receive approximately 36 books back! If you are interested like this status so I can fill you in on all the details! Chains like this — with every new member sending books or gifts or money backward to the last people on the chain— are basically efficient systems for enriching a small group of people at the expense of a much larger group.

In fact, no matter how big the chain grows, it's mathematically impossible for more people to get free stuff than people who spend money without getting anything at all. The chain asks you to believe that if you send an item to one person you stand to benefit because you will recruit six more people and they'll all send you books. Of course, once you finish those books you send them along to the person who recruited you. And all the books your recruits receive will eventually end up in your hands. But because each link on the chain has to include more people than the last one for the chain to work, there will always be this massive, expanding group of people who have bought books and sent them up the chain that far outweighs the group of people who have received books.

Eventually, the chain will run out of steam with a small group of people at the middle who've managed to hoard lots of books and a giant group of people who eagerly signed up but ultimately spent money they'll never get back. Even if the chain spread all over the world, it would eventually die out when all seven billion people had signed up, and it would die with billions more losers than winners.

Receive 36 books by recuiting 6 people on Facebook? It’s a pyramid scheme

You are much more likely to be one of the losers. The only difference between this book chain and chain letters that typically target elderly, under-educated, or otherwise vulnerable people is that it seems to go after college-educated nerds. In case you don't care, maybe because you're confident you're jumping on board early enough that you think you're guaranteed to be one of the winners, you should know that there's a good chance it's illegal.

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The U. Postal Service says this on the matter:. They're [chain letters] illegal if they request money or other items of value and promise a substantial return to the participants. Chain letters are a form of gambling, and sending them through the mail or delivering them in person or by computer, but mailing money to participate violates Title 18, United States Code, Section , the Postal Lottery Statute. Chain letters that ask for items of minor value, like picture postcards or recipes, may be mailed, since such items are not things of value within the meaning of the law.

Recently, high-tech chain letters have begun surfacing. They may be disseminated over the Internet, or may require the copying and mailing of computer disks rather than paper.