About 90 years ago, a man named Charles Ponzi had a potentially money-making idea. The original plan was not only seemingly economically promising, but also apparently legal. It involved purchasing postal coupons in the aftermath of World War I. By purchasing the coupons at a discount in Italy and reselling them in the United States, there was a potential for a profit. Had that plan worked as planned, we would likely have never heard of Charles Ponzi.
To set his plan in motion, he borrowed money and sent it to relatives in Italy to purchase the coupons. But it turned out that redeeming the coupons for a profit was not feasible. That did not slow Ponzi down, instead he simply found new investors to pay off the original investors. This system, now known as a “Ponzi Scheme” resulted Charles Ponzi being federally charged with 86 counts of mail fraud for which he served three and a half years in prison. Despite the inherent flaws, not to mention illegality, of Ponzi schemes, allegations of these schemes still turn up regularly.
This week federal prosecutors announced that an Atlanta businessman has been sentenced to eight years in prison after pleading guilty to an alleged Ponzi scheme. The businessman had initially been charged with nine counts of mail fraud and five counts of wire fraud. The maximum potential sentence for these counts is 20 years each. A far cry from the three and a half years Ponzi faced for 86 counts of mail fraud.
While the basics of the Ponzi scheme have changed little over the last 90 years, the federal penalties are substantially more severe.
Source: Atlanta Journal Constitution, “Atlanta exec gets 8 years for Ponzi,” Christopher Seward,
Feb. 7, 2012