The Bridgeport times and evening farmer., 1920-07-31
BURLESON STOPS
MONEY ORDER
SCHEME OF P0NzI

Washington. July s1-Postmaster-
General Burleson's order making the
rates for conversion of international
money orders correspond more nearly
to actual foreign exchange rates has
spoiled the game that was so success
fully worked by Charles Ponzi, who
is styled the postage stamp king"
according to foreign exchange ex-
perts who admit that his scheme was
within the law.
There are Just two ways by which
the postal coupon inancier could
have amassed millions of dollars in
so short time. One would be the
taking in of 50 of money from fresh
clients for every single dollar return
ed with SO per cent. interest, and the
other would be the grasp of the adj
vantage of cashing money orders in
European currency at the fixed pos
tai rates, which were. on a pre-war
basis, while the actual European cur
rencies were heavily deprecated.
The first way, a "get rich quick
scheme" which has taken many forms
in the past, probably was not followed
in the Ponzi case and there is no rea-
son to suspect that he paid out
moneys from new sums which were
pouring IN. In fact, the method
which he could have followed, and
probably did follow, was a simple
matter, once the requisite number of
names was obtained, and the names
were easily provided by the hosts of
people who lent their money and re-
ceived their principal with interest at
so per cent.
Here is the legitimate method, or
at least the one which appeared to
violate no law. Mr.. Ponzi could take
$1,000 and buy lire, for example, in
the open market at the rate of Z lire
to the dollar, receiving 1900 lire in
the form of check, which he mailed
to friends in Italy. At the same
time he could mail to his friends a
list of names from the card index on
which he recorded the borrowings
from individuals and ask them to buy
and remit to him international postal
orders to the order of individuals to
the amount of IT, 900 lire. When the
lender called for his money at the
end of forty-five days Mr.. Ponzi
could ask him to endorse the money
order, and then he, or his agent
could go to the post office, and for
each money order could get dollars
at the rate of about 5.25 to the dol
lar. Then the transaction would be
closed
In return for the original $1,000
Mr.. Ponzi would have 1900 lire di-
vided by 5.25 lire to the dollar, OF
s3,23S. In other words, there would
be a profit of s2,23S, less expenses
Or probably $4,000 net. Out of this
he would merely have to pay inter
est at the rate of so per cent. pei
annum for one-eighth of a year, OF
| SIPS, leaving a clean profit on Dor
rowed money of s1,S75. Thus il
| would be possible on a business OF
| only $4,000 a day to make $18,750
and the foreign exchange expert SAID
| that the average daily business
| might have exceeded this sum.
| The only limitation to the size Of
the business was the number OF
names to be used for remittances Of
| International postal orders back te
| the United States. Happily for Mr.
| Ponzi there were sufficient number;
of persons attracted by so per cent
| interest to provide names for his bus
mess with a margin to spare.
The scheme could have been work
| ed with any country with which the
United States had postal money or
der ARA ngements, although the
grea test profit was in the most de
preciated European currency.
| In order of size of depreciation, the
| Ira stood at the head of the list
| barring the enemy countries. Mex
| came the franc, and there was prac
! t1cally no country in Europe wher,
! the dollar did not command a pre-
| MUM as expressed in terms of tn
/ foreign currency; but the fixed pos
! tai rates for redemption of money or
, ders were left for more than a yea
| at figures which left no premium il
| the dollar, representing practically tn
( parity of exchange.