ABSTRACT
In the long history of financial frauds, probably no one is as famous or as infamous as Charles Ponzi. He is responsible for the term “Ponzi scheme,” a pyramid scheme in which early investors are paid high interest rates or large returns with funds from later investors. Less known is the fact that what ended up as a gigantic pyramid scheme started out as an ostensibly legitimate way to make money via arbitrage in postal coupons. Over the course of a few months in 1920 Ponzi received more than $10 million from investors (around $100 million in 2007 dollars) before his scheme finally collapsed during several weeks of adverse publicity.
