Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi known as Charles Ponzi or Charles Ponci, Carlo or Charles P. Bianchi was an Italian swindler that became popular in the early 20s in the United States for a money scheme that could provide investors 50% gain in 45 days and 100% gain in 90 days.
He was selling discounted foreign postal coupons promising large returns. In reality he did no investments but he was paying the first clients with the money coming from the later ones.
In about 6 months he managed to extend his activity from Boston to the entire United States having several employees running the operation.
It is believed that he had ideas of doing some investments but he never had the time or the capacity to do any so the only thing that he was doing was paying earlier clients with money coming from the newer ones. Meanwhile he was running a luxury life.
Everything collapsed in the summer of 1920 when the press managed to show the scam. Six banks went bankrupt and investors could get back as little as 30% of their investment.
This was not the fist time in history that this type of scheme was invented. The first recorded instances of this sort of investment scam that were recorded were done by Adele Spitzeder in Germany and Sarah Howe in the United states but the magnitude of the activity of Charles Ponzi managed to link forever this type of scheme to his name.
Characteristics of a Ponzi scheme, which is very different from a pyramid scheme, is first that it is normally run by a single very charismatic person. It promised a very high return and investors are promised to never lose money. The person running the scheme is typically having a luxury lifestyle to show to the investors how life can be.
The crash was in this case caused by a loss of confidence that was initiated by a press campaign, people started asking back the money and not investing anymore causing the sharp and quick collapse of the scheme.
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