A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation. Today, Metro Jacksonville briefly highlights the life of the early 20th century's most notorious swindler, the guy that gave the Ponzi scheme its name: Jacksonville's one-time sign-painter Charles Ponzi.
Ponzi Returns To Jacksonville
Interestion of Springfields Main and 8th Street, during Charles Ponzi's era in Jacksonville. Ponzi and wife Rosa Marie, resided five blocks south (background of image) of this traffic signal. State Archives of Florida, Florida Memory, http://floridamemory.com/items/show/52832
Shortly after his release in November 1924, he was indicted on 22 charges of larceny by the State of Massachusetts and sentenced to an additional seven to nine years as "a common and notorious thief." During an appeal of the state conviction, he was released on bail and fled the state with his eyes on Florida.
During his stay in federal prison, Florida had become a real estate moneymaking dream for speculators. In Miami alone, land values had increased 560 percent between 1921 and 1926. Looking to make quick cash, under the alias of Charles Borelli, he and his wife, arrived in Jacksonville on September 28, 1925, residing on the 1300 block of Main Street in Springfield. At the time, Jacksonville was rapidly growing and had recently become Florida's first city with a population exceeding 100,000.
The Borelli alias would not last long because his ego could not stand the anonymity. With his true identity known, he then announced plans to recoup his fortune through the subdivision of real estate to repay all investors from his previous scheme. With his wife and Mr. and Mrs. Calcadonio Alviati, he opened the Charpon ("CHAR"-les "PON"-zi) Land Syndicate. Advertising nationally, Charpon Land Syndicate would sell of lots near Jacksonville at an affordable cost of $10 each.
Charpon Land Syndicate's strategy was based on a plan to sell ten million small lots of property around rapidly growing Jacksonville. Financed by a few remaining friends, Ponzi's Jacksonville scheme began with him acquiring 100 acres of land, much of it being underwater, at $16 an acre with a goal of subdividing each acre into 23 lots, which would be sold for $10 dollars each. While he advertised the property as being near Jacksonville, it was actually 65 miles west in rural Columbia County. Under this scenario, Ponzi would profit 500% off his initial investment. In addition, he would sell shares in his company to investors focused on profits than land. To lure investors, he offered a 200% profit within 60 days, which was significantly greater than his infamous Securities Exchange Company returns.
His syndicate purchased, at $16 an acre, 100 acres of land in Columbia County. It had been designated the Rosa Maria tract. Each acre would be subdivided into 23 lots. With a $10 price per lot, Ponzi would yield $214 profit per acre. Ponzi claimed that under his pyramiding plan, an initial $10 investment would yield $5,300,000 in two years. And, of course, pictures of the land revealed that some of the lots were under water.http://www.mark-knutson.com/ponzi/images/ponzi.pdf
He named his first acquired tract, the Rose Maria, after his wife. Soon, two additional tracts were acquired and named in honor of his parents, Oreste and Imelde. He made his first sale on November 9, 1925, six weeks after arriving in Jacksonville. Ponzi had already collected $7,000 from investors by the time Florida officials shut down his company and issued a warrant for his arrest for failing to file proper papers and selling certificates of indebtedness without permission. In February 1926, he was indicted by a Duval County grand jury, charged with violating Florida trust and securities laws and sentenced to a year of hard labor at the Florida State Penitentiary in Raiford on April 26, 1926.
Escaping Jacksonville on the next page.