It all began in America in the 1920s, when an Italian-born swindler devised a fabulous-sounding money spinning venture, offering high interest payments to potential investors. Charles Ponzi promised the community of South Boston that he would give them a 100 percent return on their money in just 90 days. Mr. Ponzi claimed that he could pay such a high rate of return because he could earn 400 percent by trading and redeeming postal reply coupons.
The plan appeared feasible as early investors received their extraordinarily high interest payments. This was a dream come true for anyone wanting to make a fast buck from home. All those who joined initially were paid as promised and as the word spread, more and more people began investing their hard-earned money in this scheme. As the inflows of money began to increase, it didn't take Ponzi long before realizing that there was no legitimate way to provide this type of return and he quickly began paying off those who had invested in his plan early with the new funds flowing in. Thus, while in theory, Ponzi had convinced the investors that he was redeeming the stamps and was making huge profits, in practice; *redeeming-the-stamps* was only a cover-up story for Ponzi. Ponzi's scheme was inherently fraudulent and therefore had to fail. When later recruits did not sign in numbers large enough to pay off the earlier investors, there was no way for Ponzi to deliver on his promises. Eventually his scheme went bust bringing ruin to thousands of people. In the end, Charles Ponzi owed investors over $6 million, an enormous sum of money for that time. He was convicted of fraud in both state and federal court and had to serve ten years in prison. Charles Ponzi thus gave birth to a scheme that is now widely referred to as the Ponzi scheme, in short a fraudulent scheme that requires an ever-increasing flow of money from future investors to pay off the previous investors. Pyramid schemes and Multi level marketing schemes are simply Ponzi schemes in disguise, frauds on the investors. In the true sense of borrowing from Peter to pay Paul, such schemes are nothing but scams wherein the initial investors are paid exceptional dividends from the deposits of the growing number of new investors. The ones who may end up making money are the select few who are at the top of the pyramid while all those who are at the bottom will eventually end up losing their investments. A couple of years back, one company 'Salient Online' closed shop and escaped with crores of rupees after duping thousands of Goans with a similar kind of a scheme. Sadly, investment-frauds like these have been masquerading as money- spinning ventures for ages while our Government prefers to go into a deep slumber like Kumbhakaran. Instead of waiting for things to happen, the Government must wake up and make things happen. It must clamp down and legislate against all such frauds so that the naïve and gullible investors do not lose their hard-owned money. Isn't this the least that the Government owes to its citizens? Cheers Sandeep (This is a slightly modified take on what I had written during the "Salient online" fraud)
