Lou Pearlman and the Boy Band Ponzi Scam | 25

The 1920s were a time when people were after easy money…people flocked to the stock market, buying up shares in small companies with borrowed money…and for a while, returns were good. But this go-go atmosphere also attracted swindlers and con artists…Carlo was one of them…he arrived in the U.S. From Italy in 1903 with $2.50 in his pocket…he’d boarded the ship with more, but Carlo had lost most of it gambling. He eventually made his way to Montreal where, as a bank teller, he made connections with many new Italian immigrants…the bank had been paying very high interest…these interest payments were covered by the profits from real estate investments…except that they weren’t. All payments were funded through new deposits from new customers…when the flow of new customers stopped, the interest payments dried up, clients demanded their money, and the bank failed…the owner ran off to Mexico with whatever money was left. But Carlo was intrigued…by 1920, he was in New York running a company that promised to double investors’ money in 90 days…and if you were a ground-floor investor, that’s exactly what happened…and you were paid promptly. By mid-1920, Carlo’s company made millions…investors clamored give him money, handing over their life savings and mortgaging their houses…but then several people got suspicious…how could Carlo keep offering such amazing returns? He couldn’t…the profits could only keep coming if there were new investors…by July 1920, it all started to collapse…the debts were huge…six banks involved in Carlo’s plot failed…at least $20 million—more than $300 million in today’s money—just disappeared. When he went to prison, Carlo was booked under his assumed name: Charles Ponzi…this kind of fraud is now known as a “Ponzi scheme”. The world is full of scam artists, many of whom think that they can avoid the mistakes of Charles Ponzi…but the math and the finances never work…Ponzi schemes always fail. They’ve been tried with stocks, currency trading, beauty products from south Africa, the planting of teak trees in India, church donations, fake loans—even (believe it or not), ant farming in China…and of course, there was Bernie Madoff’s investment club that fleeced people of at least $65 billion. There’s also one Ponzi scheme that involved a couple of groups that legitimately sold tens of millions of CDs…but behind it all was a financial scam. This is “Uncharted: Crime and Mayhem in the Music Industry” …and this is the wild story of the Lou Pearlman and the great boy band Ponzi scheme. Learn more about your ad choices. Visit megaphone.fm/adchoices