The Original Ponzi Scheme

In the summer of 1920, William H. McMasters, one of Boston’s top publicists, was in a pickle. A new client, a dapper and charming Italian immigrant named Charles Ponzi, was raking in millions on promises to pay investors 50 percent interest in 45 days.

As fate would have it, Mr. McMasters decided that Ponzi was indeed a fraud and wrote a newspaper exposé in The Boston Post. The front-page article declaring that Ponzi was insolvent and had used incoming deposits to pay off earlier investors proved instrumental in unmasking him as history’s most infamous swindler — at least until Bernard L. Madoff came along.

Mr. McMasters remained convinced of his service to humanity — “I do not anticipate that another Charles Ponzi will ever appear in the financial world,” he wrote.

Now that bittersweet narrative, so far known only in fragments, has emerged, offering insights into Ponzi’s downfall, the machinations of the press, and one momentous week that rocked the financial world nearly 90 years ago.