The man who exposed the very first Ponzi scheme

The man who exposed the very first Ponzi scheme
William H. McMasters.
"Possibly the most remarkable part of the story
is that McMasters wrote the expose on Ponzi 
only 10 days after Ponzi hired him."

From a story in Fraud Magazine, celebrating the press agent who in 1920 exposed his own employer, Charles Ponzi, as a swindler:

William H. McMasters… was Ponzi’s publicist for just a short time before he realized his client was a fraudster. McMasters then wrote a scathing expose for The Boston Post that led to Ponzi’s ultimate downfall. The newspaper received the 1921 Pulitzer Prize for its Ponzi coverage…

Ponzi was dashing – he wore an expensive suit and was incredibly charming and confident. He outlined his plan for a massive financial empire. He purportedly sent money overseas to be exchanged for local currency, and then his contacts bought postal coupons and mailed them to Ponzi, who exchanged them for stamps, which businesses bought in bulk for a reduced price. The bottom line was he was raking in hundreds of thousands of dollars a month from investors with the promise of a 50-percent return rate on their money within 90 days.

McMasters’ suspicions began as early as the very first meeting because the rate of return seemed a little too fantastic, but he was honest about his prospects. "I was not averse to having a millionaire for a client, especially one who evidently wanted to spend money lavishly," McMasters wrote in a 1949 accounting of the story.

The man who exposed the very first Ponzi scheme
"Declares Ponzi is now hopelessly insolvent"
said the front-page headlines in "The Boston Post"

As his newly hired publicist, McMasters scored Ponzi an interview with The Boston Post (which then had the largest circulation in New England) shortly after his first meeting with Ponzi. The front-page story the next day drew investors like flies to honey. A line formed at Ponzi’s office at 6 a.m., and he collected more than $3 million (US $34 million in today’s dollars) in just one day. McMasters recalled Ponzi swaggering among the crowd, reassuring them that his staff would help them all.

The story spread like wildfire to "the front page of practically every newspaper in the United States," wrote McMasters. People could not get their money to Ponzi fast enough.

But Ponzi’s numbers bothered McMasters. How could it possibly be true for Ponzi to give the returns he was promising? The answer, of course, was that he couldn’t.

Read more: The Man Who Time (Almost) Forgot. William H. McMasters Finally Gets His Due for Exposing Ponzi. During the ACFE’s 22nd Annual Fraud Conference and Exhibition, the 2011 Cliff Robertson Sentinel Award went to William H. McMasters, the Boston publicist who, in 1920, helped take down the most notorious pyramid schemer of them all: Charles Ponzi. Fraud Magazine>>
– Fraud Magazine>>

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