Why Do We Call It A Ponzi Scheme?

02:09This is World's Greatest Con. I'm Brian Brushwood. You are programmed. Think about it. We all are.

02:25We're given lessons and morals.

02:28We follow laws and traditions.

02:32Humans are pattern-recognizing creatures.

02:35It's how we survive the world around us.

02:41Let's go a step deeper.

02:44Before we know not to run a red light, we have to know what to call a street.

02:50We have to know what a stoplight is.

02:52We have to know that the crimson beacon you're seeing is called red.

02:55The names we give things are the base code.

03:01Most of the names we know for things were minted and codified before we were even born.

03:07They were passed down to us.

03:09Slang names are hip because they're hip.

03:11They're new and therefore by design from a younger generation.

03:14But there's one arena where the names for everything are fought over.

03:19An entire industry that wakes up every day determined to convince you that something you used to know by one name deserves a new one.

03:29The information war known as brand advertising.

03:32Or as it's called in the biz, positioning.

03:37The battle for your mind.

03:40If I say the best part of waking up, you involuntarily just thought is Folgers in your cup.

03:51380 billion dollars was spent on advertising in 2024.

03:55That's projected to go up to near 400 billion dollars by the time 2025 is done.

04:02And most of that money will have virtually no impact.

04:06People like you and me, we bristle at the very thought of being told what to call something or how to think about it, especially by a corporate entity, especially when it's something as trivial as gum or razors.

04:21Yes, we all hate ads, but.

04:24Every so often they win every once in a while, something breaks through into our collective consciousness.

04:33It's a concept that has met a moment, maybe a jingle that's irresistible, a bargain we can't resist, and it becomes a name you remember. Those are nice.

04:47They happen a few times a year.

04:50Even rarer are the brands that become common nouns, products that break through the noise to not only become memorable, but they define an entire genre.

05:01These are the legendary rarefied brands, your Kleenex, Xerox, Escalator.

05:10As you might guess, this whole world of player versus played, this is a world that I'm fascinated by.

05:19I read books on branding, I study it.

05:21To this day, I work with top companies to help shape their messages to connect in this noisy world.

05:27And if there's one thing I know for sure, it's that every common noun brand has a great story about how they got there.

05:37Here's one of them.

05:39In America, the Midwest, Rocky Mountains, and Pacific Northwest, they all call carbonated beverages pop.

05:46In the Northeast, California, and Florida, that same thing is soda.

05:51But through the American Southeast and Texas, all these fizzy beverages go by one genre name, Coke.

05:59It's 1899, and the president of Coca-Cola in Atlanta, Georgia, doesn't believe in bottling.

06:06He's convinced that the only way to get that mix exactly right, the only way to get that pause that refreshes, is to have it handcrafted by a soda jerk.

06:16In fact, he's so certain that there's no value in bottling Coke, he sells the rights to it for a dollar.

06:24A dollar he doesn't even collect.

06:27And the two lawyers who buy these rights for a dollar, they end up defining the landscape.

06:33They are the ones that make Coca-Cola a household name.

06:37Because these two visionary profiteers, they turn around and they sub-license the rights to bottle Coca-Cola to hundreds of distributors all across the South.

06:47So now you have hundreds, thousands of people buying into a system, a format, a franchise.

06:54Everybody playing the same game with the same set of rules.

06:58Everybody working with the same quality product.

07:01All of them with their own small market with no competition.

07:06All of them with one shared message. Drink Coca-Cola.

07:10Coca-Cola signs, vending machines, trucks, ads, you name it.

07:17During this important nascent moment, when the public consciousness is ready to be impregnated with a brand new concept, the idea of a refreshing drink on a hot summer's day.

07:29Soon there was only one word for that experience. Coke.

07:34Now in some of the busier, noisier parts of the country, the name didn't catch.

07:41But rest assured, as I talk to you right now, somewhere in a Mississippi restaurant, somebody's asking for a Coke.

07:48The waitress is asking, what kind?

07:50And the customer's replying, Dr. Pepper, please.

07:53In the world of cons, we don't have a lot of Cokes.

07:59Not a lot of brand names that became common nouns.

08:03But we do have one.

08:04A brand name that defines a genre.

08:07A name that to this day makes people want to spit upon the ground.

08:13Because when you want to explain that something's a fraud and your money belongs nowhere near it, there's only one name you use. A Ponzi scheme.

08:23The biggest brand name in cons.

08:26How did it pull that one off? Why Ponzi?

08:32It must be an amazing story, right?

08:36That's what we find out today.

08:39Because before Ponzi was a scheme, he was a man named Charles.

08:44And in the right place, at the right time, with a city hungry for profit and drunk on optimism, his little spark was about to set the city of 1920s Boston on fire.

08:58A big, loud, hairy scandal that made over 40,000 suckers in just over eight months.

09:07Cons don't fool us because we're stupid.

09:11They fool us because we're human.

09:15And when shame detonates across an entire city, shattering egos from the harbor to the hills, what do you do?

09:24You got no choice.

09:25You only have one face-saving move.

09:28And that is to boldly proclaim that you weren't just fooled, you were fooled by the best.

09:35Because, and I think we can all agree on this, the Ponzi scheme might just be...

09:42the world's greatest con.

09:44All right, we know there's a great story in here.

10:09You don't become a common noun without some epic reason.

10:12So let's do detective work. The classics.

10:14Who, what, when, where, why, and how.

10:17Let's start with the who. Let's see here. Foley work. Charles Ponzi.

10:22Born into a world on the cusp of rapid change.

10:31You could feel it throughout the streets of Lugo, in the market square where farmers line up in the earliest of mornings to sell their wares.

10:40You could feel it whenever a train reached the town's terracotta roofs.

10:44A single stretch of rail offering the promise of escape to anyone who needed it.

10:49You could feel it in the alleys lining the neighborhoods outside the cafes.

10:54Where the morning's news is discussed over a cup of coffee and a plate of cheese and cured meats.

11:00You could feel it everywhere.

11:02Except for Charlie's house.

11:04Charlie grew up in poverty.

11:07Tight common spaces, shared bedrooms, all packed into a single cottage clustered among a million more just like it.

11:15Life wasn't always like this for the Ponzi's.

11:18Just a couple of generations ago, the family was wealthy and influential enough in Italy that his mother was still referred to as a donna.

11:26A title usually held for royal offspring.

11:29By the time a young Charles is growing up though, that money had been spent and the title long forgotten.

11:37Didn't stop Charles from dreaming though.

11:39His mom was convinced they were meant for something better. These living conditions?

11:44Oh, don't worry about those.

11:46The Ponzi's are just temporarily embarrassed millionaires.

11:49They'll be back on their feet in no time. But how?

11:53Little Charlie, he doesn't have many skills, does he?

11:56And even less patience.

11:58If Charles wanted to live the playboy life of his dreams, he had to get real about his vision.

12:06He had to switch things up.

12:08He had to find opportunities.

12:10And really, there's only one place to do that.

12:13The same place any immigrant dreamt of arriving in. America.

12:18At 21 years old, Charles boarded the SS Vancouver, a massive ocean liner setting sail from Italy to Boston.

12:28Arriving in the US, he had $2.

12:3150 to his name.

12:34He had departed from Italy with more than that.

12:37But the gambling gods on the boat were cruel. Huh.

12:41Biggest name in crime.

12:43Lost all his money on the boat.

12:47You'd think he could, uh, I don't know, done some crime.

12:50And so Ponzi began his quest to make his fortune. Boston.

12:58The Boston of 1903 is optimistic, expanding, and immigrant-driven.

13:03There's plenty of work for anybody who wants to put in the hustle.

13:09A plurality of new arrivals from Italy, Ireland, and Eastern Europe. Industry is booming.

13:13Neighborhoods are being built out.

13:15Streetcars and electricity are modernizing daily life.

13:18The mood is new world hope, hustle, and upward mobility.

13:22He looked for the work.

13:24And he found, well, nothing actually.

13:27So he left Boston.

13:29Moving up and down the coast.

13:31Doing odd jobs anywhere he could find employment.

13:35He worked as a dishwasher.

13:36Sleeping on the restaurant floor for a time to save cash for room and board.

13:42Spent time working in one factory. Then another. And another.

13:45One time he worked as a bank clerk.

13:48Talked his way into the job through his sheer love of money.

13:52And when inevitably he grew bored or find the work unfulfilling.

13:56Or he'd get fired for missing a shift or two.

14:00He'd just move on to the next spot.

14:02And finally, after a few years of transient employment.

14:05Ponzi had accrued the money he needed to launch his next great endeavor. Moving to Montreal.

14:10See, despite his efforts, it turns out that being the loner drifter type comes with some downsides. Like being alone.

14:18Ponzi never stayed in one place long enough to make much in the way of friends or connections.

14:27Another downside was his complete lack of upward momentum.

14:29Ponzi would score these jobs for a month or two, maybe six.

14:33But inevitably, promotions never came.

14:34How was he supposed to rise up to the world of the riches he was properly owed if he kept having to start over on the bottom? So, Montreal.

14:46Charles was working night shift in one of the factories when he heard the news.

14:53The opportunities for Italians in Montreal far outweighed anything.

14:55he'd find in the US.

14:57Determined to make something work, he packed up what little he had to his name and headed north, landed a job at a bank that catered to Italian immigrants.

15:08Little did Ponzi know that a regional bank run directly by an Italian immigrant would give him everything he needed to fulfill his dream of fame and fortune.

15:18And it all started when he found out that the bank was weeks away from bankruptcy.

15:25And that's Ponzi, hustler enough to leave his home country and seek the dream, but not exactly a criminal mastermind.

15:35I mean, I'm not gonna call him a sucker, but seemed like he had a rough go on the gambling on the boat ride.

15:42Doesn't exactly jump out as the greatest mind in financial scam history, does he?

15:47Which moves us on to the what?

15:49You've heard the phrase robbing Peter to pay Paul.

15:56This is what we used to call a Ponzi scheme before we started calling it a Ponzi scheme.

16:02Let's say you owe one hundred dollars to Paul McCartney.

16:07This will ring a do.

16:09Hell of a card game.

16:10You need that money.

16:11So you go to your friend, Peter Gabriel, and you borrow one hundred dollars from Peter Gabriel.

16:17You pay off Paul McCartney.

16:19Of course, now you owe Peter Gabriel, so you hit up Paul Giamatti. Remember sideways?

16:23But now you're on the wrong side of Paul Giamatti.

16:26So what do you do?

16:27You reach out to Peter Tork from the monkeys. Here we come. Another hundred dollars. Another happy Paul.

16:33Now, Peter Tork turns out tougher than you think.

16:36He wants his hundred ASAP. Here we come. Hang on.

16:40Let me call Paul Simon. Hey, Paul.

16:43Am I good for a hundred?

16:45You could be my bodyguard. Great. Oh, shoot.

16:46I need another hundred.

16:48Let me go to the Death Star and visit Peter Cushing.

16:53You may spend when ready.

16:55Peter Cushing wants to get paid, so I hit up Paul Newman. Solid dressing. You get it.

17:00To pay Paul Rudd, you gotta hit up Peter O'Toole.

17:03To pay Peter Billingsley, you gotta hit up Paul Bettany.

17:06To pay Paul Rubens, you gotta hit up Peter Steele.

17:09That's the entire mechanic.

17:10There is no investment, no growth, no clever math.

17:14It's just a juggling act.

17:15You keep the balls in the air as long as the new money keeps rolling in. And it works.

17:21I mean, as long as nobody stops to ask where the profits are coming from.

17:25Might even look legitimate. Even generous.

17:27Let's say you're running an investment fund using this principle.

17:30Take some money from a first round of investors.

17:36Then you take more money from the second round, pay off the first.

17:41First round starts singing your praises. They bring friends. They bring family.

17:45Third wave comes in.

17:46Second wave just got paid.

17:48Now you got more money to keep the illusion going.

17:52You pay the second round folks from the third round folks money.

17:55Then you pay the third round from the fourth. And so on.

17:59All while you take a little healthy slice off the top for yourself.

18:03But here's the trap.

18:04The second you stop getting new money, whole thing falls apart.

18:08The debts collapse backward, crushing everyone who's not gotten paid.

18:12As simple and as obviously unsustainable as this is, this is one of the oldest scams in history.

18:20It feeds on one of the oldest human instincts. Trust.

18:24If your neighbor got paid, you assume you will too.

18:28And you see that evidence right there with your own eyes.

18:32You see that cash in hand.

18:34You see those checks that clear.

18:36And you, the savvy investor, tell yourself a story that sounds too good to your own ears, but feels real enough.

18:43It's not magic you're caught up in. It's momentum.

18:47That's all a robbing Peter to pay Paul scheme ever is.

18:52It's momentum dress up as growth.

18:54Momentum masquerading as profit.

18:56Momentum running on borrowed time.

18:59The scheme's a classic, but it already had a name and a biblical one at that.

19:08So why do we know it as the Ponzi scheme today? Why?

19:13Why does Ponzi think he can pull this scheme off at scale?

19:23Because that Montreal bank he worked at, that's exactly what they did.

19:28Ponzi's boss simply offered a bigger interest rate than any of his competitors and paid older customers with new customers' money.

19:37Banco Zerassi collapsed not long after that little fact came to light.

19:43Zerassi himself fled to Mexico, taking some of that hard-earned Canadian cash with him and leaving Ponzi without a move.

19:50But he did leave Ponzi a checkbook.

19:53There Ponzi was, no moves, nobody around, just him and a checkbook.

20:00See, Ponzi had paid a visit to one of Zerassi's former customers, Canadian Warehousing.

20:07He was looking for a job, living in Zerassi's old house and trying to figure out his next move.

20:15And where he expected to find the boss of Canadian Warehousing, he instead found this checkbook.

20:21A checkbook linked directly to the once successful Banco Zerassi vaults.

20:26I mean, it's worthless now.

20:28But maybe, maybe he could just cut himself a small little advance, a little nest egg.

20:36I mean, all of this chaos, the collapse, it's all so fresh.

20:41What's one more little bushel of cash gone missing?

20:44In fact, if he splits the country just after getting the money, it's the perfect crime.

20:50I mean, how quickly could any other bank even be able to verify it?

20:55As it turns out, less than an hour.

20:58That's how long it took the cops to put Ponzi behind bars after he tried to pass a $423.

21:0358 check to himself.

21:04And just like that, three more years of Ponzi's life disappears down the drain.

21:11All spent in the cold maple scented cells of a Canadian prison.

21:17Okay, this is supremely stupid.

21:20I'm starting to have my doubts that Ponzi's brilliance is the driver of this story.

21:27Anyhow, he gets out of jail and immediately goes back into jail because he's busted trying to smuggle other Italian immigrants across the US border.

21:38By the time he's out the second time, he's now spent half of his time in North America behind bars.

21:45So I'd imagine, at this point, Ponzi has the same realization we're having. He's dumb.

21:52But remember, a successful criminal doesn't have to be smart.

21:59You just have to be one step ahead, right?

22:03And with that, he returns to the city that spat him out when he first hit US shores. Boston.

22:11But this Boston, this is a different place than the one he left.

22:19Which brings us back to when.

22:21The Boston of 1919 is a very different animal. Exhausted, angry, anxious.

22:26World War I was finally over and the returning soldiers were clashing with all these immigrants.

22:34You had massive inflation, job insecurity.

22:36The working class was getting squeezed.

22:39A police strike shatters public trust.

22:42Along with that comes fear and lawlessness.

22:45The Red Sox sell Babe Ruth to the Yankees.

22:49And in the middle of all this tension, January 1920.

22:53Prohibition shuts down the saloons.

22:55That starry eyed optimism of 20 years ago is dead and buried.

23:02Boston's dollars and its patients are stretched thin.

23:06They need something to believe in.

23:08And they're not terribly picky about who it comes from.

23:13But for Ponzi, almost immediately things start looking up.

23:16He finds a wife.

23:18And soon after that, he finds his opportunity.

23:22The how has arrived.

23:24It started with a letter.

23:26A piece of mail from Spain.

23:31And inside, something most people wouldn't have even noticed.

23:35An international reply coupon.

23:37To our 21st century ears, that sounds exotic and fancy. It is neither.

23:44It is quite simply a tiny boring piece of paper that you could trade in for postage in another country.

23:52Imagine I had a friend in Spain and I was writing them a letter and I really wanted them to reply.

23:58Let's say hypothetically I needed 100 bucks from Peter Frampton.

24:01To make it easy for him to respond, I would include a little coupon.

24:07An international reply coupon.

24:09That way he wouldn't have to fuss over the postage and I'd get my response.

24:14I'm essentially prepaying the postage on his return letter.

24:17Hopefully with a check for $100.

24:18Because Pauly Shore will not stop calling me.

24:21The coupon may be worthless.

24:24But to Ponzi, it looks like opportunity.

24:26The economy might have been at the peak of a boom in the U. S.

24:33But globally, everything still felt lopsided after the war.

24:36Exchange rates were a mess. The U. S.

24:39dollar was strong, but European currencies were weak.

24:42Ponzi realized that in theory, you could use those strong U. S.

24:46dollars to buy reply coupons in Italy for cheap.

24:50Then redeem them in the United States for an even higher value.

24:54This is in the business referred to as arbitrage.

24:58A genuine gap in the economy.

25:00Buy for a penny, sell for two.

25:04It's work and the profits aren't massive.

25:07But if you do it enough, it all adds up.

25:12Buy low, sell high.

25:13Keep going and find a way to climb up the social ladder.

25:19Hearing it said out loud, Ponzi's scheme makes sense.

25:22Order the coupons, wait for delivery, sell the coupons, profit.

25:27The cheapest you could buy in IRC would be from Spain or Italy and they cost about one penny.

25:35But those same coupons sold in the U. S.

25:37would be five cents.

25:39In theory, a 500% return on investment if you assume you could magically teleport the stamps across the Atlantic.

25:48In reality, the logistics of getting all those stamps from there to here would have totally destroyed the profit margin.

25:55Oh, and post-war restrictions made it nearly impossible to wire money into Europe on a regular basis.

26:01And mail delays and customs would have rendered the IRCs useless by the time they got to the U. S.

26:07, even if you could buy them at the cheaper price.

26:09Just to give you context, even if we allowed for modern jet travel and international shipping, the Ponzi scheme still doesn't work.

26:16But let's say it did, even if you could buy the cheap IRCs in Europe and get them to Boston, the post office didn't honor buying them back in bulk for cash.

26:26Which means you'd have to find a legal way to sell them.

26:30The point is, the whole plan sucked.

26:32But, and I mean this sincerely, who cares?

26:36You don't need it to be smart.

26:40All you need is for people to believe this is smart. Let's be clear.

26:44This was a scam from the jump.

26:47Ponzi promised his friends in Boston that he could double their investment in 90 days.

26:52All he needed was the capital to get his first round of international reply coupons.

26:56Now, in legitimate circles, nowhere could you find rates anywhere near these returns.

27:01But Charles knew this was advertising.

27:03Yes, he'd be out of pocket on the returns.

27:07But word would spread.

27:09Eventually, doubling these investments isn't going to hit his bottom line at all.

27:15He's there to make cash, period.

27:17Why not bring some friends along for the ride as things get started?

27:22So he starts off small. January 1920.

27:25The Securities Exchange Company, yes, he did name his scheme with the initials SEC, opens for business.

27:34And alongside selling international reply coupons, he offers a simple pitch.

27:39Invest with Charles Ponzi, and he'd double your money in 90 days. Need returns faster?

27:46Eh, could you deal with 50% return in just 45 days instead?

27:51In his first month, 18 people give him $1,800.

27:55And when they come back one month later, Ponzi pays them.

28:00In full, with interest.

28:02The coupons, after all, they're a sure hit.

28:05Why would he not be able to pay his investors right off the bat? Right?

28:11Except for the little thing that the plan was never going to work, and he knew it.

28:17So he used the money from the next batch of investors to pay off the second wave.

28:22And when word spreads that this little Italian guy in Boston is delivering 50% returns, the floodgates open.

28:27People lined up outside of his office.

28:30And in our quest to understand how this name became synonymous with cons, we get to the last of our suspects. One more who.

28:39Because there isn't just who's selling. There's who's buying.

28:43Those people that are lining up for this scheme, they're not just the Italian immigrants.

28:50They weren't just the Irish either. It was everyone.

28:54Cabbies, policemen, dock workers, clerks, even lawyers and bankers. Everyone wanted in.

29:00I mean, why wouldn't you?

29:03Every time one investor got paid, they'd tell ten more.

29:10And every time a skeptic called it impossible, Ponzi smiled and pulled out the cash.

29:15By the summer of 1920, Ponzi clears nearly a quarter million a day. Think about that.

29:22$250,000 a day in 1920s money.

29:26Ponzi sure as hell thought about it.

29:31He bought a mansion outside the city, a custom car, the finest one he could buy.

29:39He hired a butler to take care of him and the wife. Oh, Rose.

29:43He promised her a long-awaited honeymoon in Italy with all the bells and whistles to go along with it.

29:49Only Charles had one thing he needed to spend that money on first.

29:53His mother had spent so much of her life hoping and waiting that the Ponzi name would be returned to the status she remembered.

30:04The status that she thought, no, she knew the Ponzi name deserved.

30:08Charles wanted to show her that he'd made it, that the poor boy from Lugo, in a matter of just a few months, had found his way to millions.

30:20He was, without doubt, the richest man in Boston.

30:24His name was in newspapers in and out of the city.

30:30It's as if he had been born at the start of that year.

30:34The old Charles Ponzi was gone, and he wanted to prove that to the only voice in his life that still mattered.

30:40So that month, less than half a year into the business, Charles brought his mother over from Italy.

30:46The Doña Ponzi arrived into her kingdom.

30:49There were cracks, tiny ones, barely visible at first.

30:55Just a few questions.

30:58That's a lot of money.

31:00All that money from selling stamps.

31:03Nobody, not the public, not the regulators, not even Ponzi himself, could quite explain how all of this worked at this scale.

31:14Because after all, if he was really trading reply coupons, he'd have to be moving millions of them across borders every week, which, well, I mean, logistically, no.

31:25But by this point, it doesn't matter, because Ponzi had something more valuable than stamps or arbitrage or grit or hard work or a chip on his shoulder. He had faith.

31:39And not just in himself.

31:41He had the faith from people who needed to believe that there was a way out of their small lives.

31:49Faith from the investors who thought they'd finally found a sure thing.

31:53Faith from a city that wanted to see one of its own beat the system.

31:58For a few months, Charles Ponzi wasn't a criminal.

32:01He was a celebrity.

32:03And if he'd held on a little bit longer, he might have been the face of the roaring 20s.

32:11The newspapers called him a financial wizard.

32:13Photographers chased him through the streets.

32:16He posed for pictures in tailored suits and talked about giving back to the community.

32:21He built the illusion he'd always wanted.

32:23A man admired, envied, trusted.

32:26And as long as the crowd kept believing, the show could go on forever.

32:32But the thing about a con this simple, this blunt, this stupid.

32:41Is that the clock is always counting down, the match had been lit, the wind was blowing and the world was about to watch it burn.

32:54The who would soon realize they weren't taking advantage of a complicated world, they were the ones being taken advantage of.

33:03By the summer of 1920, the questions started.

33:06If Ponzi's really making this fortune on international reply coupons, where where do they keep them?

33:18How many do you keep in stock?

33:21How are you moving so many of them so fast?

33:24When folks asked to see his operation, Ponzi brushed them off.

33:28He told him it was complicated. You wouldn't understand.

33:31This is about as obvious a red flag as you could fly, but not to Ponzi or to his believers.

33:38The complaints, those are just idiots who didn't realize that they could make all this money yet.

33:45When one newspaper called him a fraud, he sued for libel and won half a million dollars in damages. That's a lot.

33:54Half a million dollars, a lot of money.

33:57If the court said he was honest, what more proof could anyone need?

34:01For a few weeks, the lines outside of his office grew even longer.

34:05The deposits bigger, the crowd louder.

34:07But the press didn't stop.

34:08They brought in Clarence Barron, publisher of The Wall Street Journal and one of the first true financial journalists in America.

34:19Barron ran the numbers and came to a simple conclusion.

34:22If Ponzi's story were true, he would need to move more reply coupons than existed on the planet.

34:29There simply wasn't enough paper in circulation to make these profits possible.

34:33Barron printed his findings and the public started to panic.

34:38At first, Ponzi tried to ride out the storm.

34:42He invited reporters to his office, gave him coffee, smiled for photos, told him his critics were just jealous.

34:50But once people start asking for their money back, the clock starts ticking louder.

34:55The first few withdrawals were fine, then came dozens, then hundreds.

35:01Within days, there was a full blown run on his company, a mob of angry investors outside of his office demanding to be repaid.

35:13Ponzi did what he always did best.

35:15He performed, smiled, shook hands, made promises.

35:18And for a while longer, it worked.

35:21He dipped into his reserves, paid out cash on the spot.

35:28Each time he did, the crowd relaxed. For a moment.

35:32But reality rises like the sun, no matter how much you wish to live in darkness.

35:38Spurred into action by the Barron report, Massachusetts Bank Commissioner Joseph Allen orders an audit and the truth comes out.

35:47There were no coupon trades, no international network, no secret warehouse of profits waiting to be redeemed.

35:53Ponzi owed millions of dollars, far more than he held.

35:58Forty thousand investors wiped out in less than a year.

36:03The who were humiliated.

36:06And then Ponzi went to jail again, he gets deported, works for Mussolini during World War Two, match made in heaven there.

36:25Keeps setting up dumb schemes, keeps getting busted.

36:29He dies in Brazil without a penny to his name.

36:34Wait, hold on, that's the end of the story?

36:38No, no, no, no.

36:41That can't be right. What's the lesson?

36:44There's supposed to be a great man, a great story, a great reason.

36:49We call it a Ponzi scheme.

36:52If everything about the Ponzi scheme is so forgettable, why is the phrase so memorable?

36:59I mean, it's certainly not Ponzi, certainly not the scheme. No.

37:06No, that's the point, isn't it? It isn't Ponzi.

37:12It isn't the scheme.

37:14There is no there there.

37:19The Ponzi scheme is not the subject.

37:24The subject is the 40,000 suckers who fell for it.

37:30It's the newspapers that wrote about him so glowingly right up until the wheels fell off.

37:37It's the city that so desperately wanted to see an underdog succeed and to be that underdog that they made a truly stupid crook into a folk hero.

37:49Right before Ponzi goes on trial, the bank, Washington Mutual, ran a newspaper ad imploring readers headline, Don't Be Ponzi'd.

38:00That is about as explicit an agreement that you're going to find that the humiliation of the city of Boston is so unpleasant, you should open a savings account just to be sure you aren't one of those suckers.

38:20Just to give context on how deep that psychic wound was.

38:26The most famous Ponzi scheme of our modern era was perpetrated by Bernie Madoff, and it also had around 40,000 victims.

38:36And even though Madoff took billions instead of millions, it took him 17 years to do it.

38:43And nobody on the street knew his name until he went to prison because Madoff wasn't a folk hero for a dejected town.

38:52He wasn't a financial windfall for working class people looking for a break.

38:57The driving force that made the words Ponzi scheme the definition of a scam wasn't Ponzi or the scheme.

39:06It was the enduring legacy of the humiliation of Boston.

39:10That time, that place, that unique combination of belief being publicly sacrificed by such a simple scam and all in such a frenzy, such a short amount of time.

39:27That was a memorable lesson that needed to be remembered.

39:32That is why it became an unforgettable name.

39:36Because no matter where you are, no matter who you're talking to, ain't nobody going to tell you you're wrong if you say that the Ponzi scheme might just be the world's greatest con.

39:52This episode of World's Greatest Con was written by Will Sattelberg and me, Brian Brushwood, your humble host.

40:17The show is executive produced by Justin Robert Young, production and research by Dog & Pony Show Audio in Austin, Texas.

40:25Credit to Ponzi scheme, the true story of a financial legend by Mitchell Zukoff, which, along with contemporary news articles, retrospectives and archived video made for the bulk of our research.

40:49Of course, you've got questions and we want to answer as many as we can.

40:53So hit us up at world's greatest con at gmail. com.