Speaker 1 Kevin is very quick to think negative things about people. Even when he talks about his best friend, he always tells you about his faults. And if somebody hasn’t got any faults, he invents them

Presenter

Thanks for that, Trudy. So, where did the Ponzi 

scheme get its name? 

Trudy

It’s named after an Italian migrant called 

Charles Ponzi – he wasn’t the first person to do 

something like this, but his scheme was 

certainly one of the biggest. Ponzi arrived in the

USA in 1903, but it wasn’t until 1919 that he set 

up his scheme. Before that, he had already 

been to prison twice: the first time in Canada for

forging a cheque, and the second in the USA 

for helping to smuggle Italian immigrants across

the border.

Presenter

Tell us about Ponzi’s scheme, Trudy. How did it

work?

Trudy

It started when Ponzi received a letter from a 

company in Spain. The letter contained an 

International Reply Coupon that covered the 

cost of the stamps he would have to buy to 

send a reply. Ponzi noticed that the reply 

coupon cost less in Spain than the stamps 

would cost in the USA and he realised he could 

make money out of this. He began sending 

money to his friends and family in Europe to 

buy reply coupons which they would send back 

to him to exchange for stamps. He would then 

sell the stamps for a profit.