The Logbook: The Ponzi scheme before Charles Ponzi

Most people have heard of Charles Ponzi, the namesake behind the infamous Ponzi scheme. However, the concept of the Ponzi scheme was not invited by Charles Ponzi himself. Before Ponzi ran his scheme — costing investors over $20 million — there was another individual who some have cited as the inspiration for Ponzi, his name was William “520 percent” Miller.

Our story starts in 1899, New York. William Miller was 21 years old, and struggling to take care of a family. The story goes that one day Miller explained to a group of men in his bible studies class that he had access to insider tips through some of his Wall Street brokerage connections. Miller then proposed that with a minimum investment of $10, he would guarantee both the potential loss of the original investment amount and a weekly dividend of 10%. At $10 this would mean, his investors would get $1 a week or $52 a year. At a non-compounded annual rate of return, Miller was promising 520% to his investors. This promise led to investors giving him the nickname: William “520 percent” Miller.