Jasper Tizzy and Charles Ponzi

Here is an article I wrote for SL Trader magazine on when Jasper Tizzys bank collapsed- I went to his main branch to find a mob of angy investors literally tearing down The Bank!

With all the dodgy banks about at the time offering impossible interest rates- I tried to warn investors by publishing the Charles Ponzi article (below) three months in a row- but no one even noticed.  In the end, a mixture of greed and foolishness forced LL to ban banks in SL- and I think it was the right thing, if only to protect people from there own stupidity.

(Note- You can open up the images to full size by clicking on them in the Gallery Section).


A bank paying out >20% APR interest- its too good to be true!  On 18th September thousands of investors learnt that it was indeed too good to be true when Jasper Tizzy and his millions of investors deposits at the Bank went AWOL.

Already reeling from the Ginko collapse a month earlier the SL financial scene first hit the panic buttons when the VSTEX boss posted a press release to the effect that JT had left SL and his 3 VSTEX listed stocks (CGI, AVC and KFM) had been delisted.

As hundreds of angry investors swarmed The Bank! Branches only to be denied their precious Lindens from empty ATM’s- the SL blogs and forums began to fire up with speculation about this scandal and disbelief that greedy depositors had failed to learn from the Ginko scandal and had been fooled by the same Ponzi trick twice!



Angry mob tears down The Bank!

Within days- and an angry mob was literally tearing down The Bank! Main branch in Talyn, where one resident had put up a wanted poster showing a snapshot of Jasper Tizzys real-life photograph snapped at the Second Life conference.

Jasper Tizzy started out as a mall owner- and within months had launched a dodgy IPO on the WSE on the back of unrealistic account books.  His main source of income were the millions of Lindens deposited in his Bank on the back of outrageous interest rates.

He built up a massive real estate empire- and threw away money like confetti on a range of flawed business enterprises, but it was all using his Bank deposit liabilities- and his vast land holdings (which were mostly unrented) became a large tier fee drag adding to a colossal burn rate that sealed an early end to his Ponzi. 

In recent months, Jasper found that he could get some easy cash by setting up cash shell companies via his WSE born enterprise- Atlas Venture Capital.  Hed find a fall guy with a business idea conceived on a post-it note (it would seem), then sell shares at a 50% discount at s clandestine pre-IPO meeting.

He’d launch the company on an exchange using the pre-IPO funds as cash in hand- then float what was essentially a mafia-style front company to gullible investors using the SL stock exchanges as his money printing vehicle.

Despite Jaspers stock exchange abuse- its seems that he may have been more a naive financial idiot than an out and out con-man.  Was his offer of RL Mastercards via his SL Bank branches the final stage of a pre-planned 8 month scam- or was he fooled by World Wide Connect- the unknown company which sold Jasper the “Lindens on a Mastercard” joke in the first place?



Charles Ponzi (1882-1949)

Ginko bank has been accused of being a Ponzi scheme on the many SL blogs- but what is a Ponzi scheme and who was Charles Ponzi?  Virtual Trader magazine tells the story….


The Ponzi Scheme

Charles Ponzi was Americas greatest con man, and his Ponzi scheme still lives on half a century later in the form of the many get rich quick, pyramid and chain letter type frauds which still proliferate today.

Any Ponzi type scheme is an investment offer which promises impossible returns on the basis of a made up yet non-specific investment strategy such as “global currency arbitrage”, “hedge futures trading” or “gambling insider knowledge”.  As a flock of foolish investors buy into the scheme- the Ponzi operator receives large amounts of cash- but while on the surface all seems good, with an ever increasing number of greed driven investors piling in- in reality, the Ponzi scheme is merely taking on more and more debt it can never repay.

Ponzi schemes always end when either 1.  The con- man runs off with all the money 2.  The authorities intervene and arrest the con-man or 3.  The interest on withdrawals exceeds new deposits.  It is possible that SL provides an artificial environment where, unusually, a Ponzi scheme can operate until ending 3- the statistical inevitability of any Ponzi scheme- may be reached.


Charles Ponzi

Charles Ponzi was a Boston based Italian immigrant who’s now legendary Ponzi scheme was the culmination of a decade as a professional fraudster for which he had already served several jail terms.  His scheme was based upon postal reply coupons- each coupon allowed the purchase of 2 dollars worth of stamps in the US for every 1 dollar purchase in Europe- and on this basis he lured his prey.  In reality- this scheme was a failure- as because the stamps were a penny item- the overheads of shipping them over exceeded any profits.

This didn’t stop Ponzi from leafleting out adverts offering a 100% return in 90 days- he took on staff and set up the Securities and Exchange Company.  Within a month- an initial handful of investors had swarmed into 30,000USD of deposits.  The deposits were being placed at such a rate that it was easy to repay the 33% monthy interest- and as the word spread, his deposits grew to millions of USD- with many people, engulfed with avarice,  compelled to mortgage their houses and sell their wedding rings to join the investing frenzy created by the impossible returns.

Rather than be spooked by the overwhelming debt he was creating for himself- Charles Ponzi lived the life of a tycoon- garnished in the most expensive jewelry and buying up a host of mansions and businesses- but with every deposit made- he was in reality sinking deeper and deeper into debt.

Alerted by a conscientious whistleblower, James McMasters, who later lampooned Ponzi as a “financial idiot”,  Federal agents raided Ponzis headquarters on August 10th 1920- where they found no magical Arbitrage schemes- but a company that was 15m USD in debt.  Charles Ponzi was sentenced to a total of 14 years in prison after which he was deported back to his native Italy.  Spending the remainder of his life in poverty, he never showed any remorse for his actions that had left thousands of Americans in ruins due to their own greed.

Last edited by wendenxeno (2008-04-22 18:29:30)