scheme An idea to trade IRCs Ponzi set up a small office at 27 School Street, Boston, in the summer of 1919 attempting to sell business ideas to contacts in Europe. He received a letter from a company in Spain asking about the advertising catalog which included an international reply coupon (IRC), leading Ponzi to find a weakness in the system which, at least in principle, gave him an opportunity to make money. Postal reply coupons allowed a person in one country to pay for the postage of a reply to a correspondent in another country. IRCs were priced at the cost of postage in the country of purchase, but could be exchanged for stamps to cover the cost of postage in the country where redeemed; if these values were different, there was a potential profit. Inflation after World War I had greatly decreased the cost of postage in Italy expressed in U.S. dollars, so that an IRC could be bought cheaply in Italy and exchanged for U.S. stamps of higher value, which could then be sold. Ponzi claimed that the net profit on these transactions, after expenses and exchange rates, was in excess of 400%. This was a form of arbitrage, or profiting by buying an asset at a lower price in one market and immediately selling it in a market where the price is higher, which was (and is) legal. Seeing an opportunity, Ponzi quit his job as a translator to set his IRC scheme in motion, but needed a large capital outlay to buy IRCs at lower performing European currencies. He first tried to borrow money from several banks, including the Hanover Trust Company, but they were not convinced, and its manager, Chmielinski, turned him down. Subsequently, Ponzi set up a stock company to raise money from the public. He also went to several of his friends in Boston and promised that he would double their investment in 90 days. Ponzi later increased this to 45 days at 50% interest, thus doubling investments in three months, in an environment when banks were paying only 5% annual interest. The great returns available from postal reply coupons, he explained to them, made such incredible profits easy. Some people invested and were paid off as promised, receiving $750 interest on initial investments of $1,250. Securities Exchange Company In January 1920, Ponzi started his own company, the "Securities Exchange Company", to