In December, 1919 Charles Ponzi established The Securities Exchange Company in Boston. Investors were promised a 50% return in 90 days. Ponzi claimed that because of currency devaluations in Europe, he could buy postal coupons for a penny in Europe and exchange them in the U.S. for four cents worth of U.S. postage stamps. There is no evidence that Ponzi made any investments in postal coupons. In May, 1920, he opened an account at the Hanover Trust Co. — the bank which became his willing accomplice by hiding the truth of Ponzi’s activities from state bank regulators. By midsummer 1920, reports by early investors of their 50% return spread like wildfire. Ponzi’s operation expanded throughout New England, New York and New Jersey and it is estimated that he was receiving new deposits of $1 million per week — $11 million today’s dollars. More on MarketWatch here.
