While Ponzi wasn't the first to operate such a scheme, he was the most notorious and his name became synonymous with this type of fraud.
Here's a breakdown:
* Early 1920s: Ponzi promised investors a 50% return on their money in just 45 days by buying and selling international postal reply coupons.
* The scheme: He used new investors' money to pay off earlier investors, creating the illusion of high returns and attracting more people.
* The collapse: When the scheme was exposed, Ponzi was arrested and sentenced to prison.
While Ponzi's scheme was unique in its use of postal reply coupons, the underlying principle of using new money to pay off old investors has been around for much longer.
Therefore, it's more accurate to say that Ponzi schemes have a long history, but the term itself stems from Charles Ponzi's infamous scheme in the 1920s.