In 1899 Charles Ponzi immigrate to the USA from Italy and took up menial jobs, always being fired for theft.
He then moved to Canada and worked for a bank where he forged signatures on cheques; for this he got 3 years in Jail.

In 1920 Ponzi was back in the USA and working in the Postal system where he discovered a (legal) discrepancy; he could buy a 'Postal reply coupon' in Europe for a penny (1 cent) and then cash it in for a Nickel (5 cents) in the USA.  A 400% profit margin is nothing to sneeze at.
NOTE - I have read claims that coupons were redeemed for a Dime (10 cents) making it a 900% profit.  I make no claim on wether it was a Nickel or a Dime.

Ponzi realised that there was no way of making this work full time as the rules of the day stated that you could not redeem more than ten at a time.

So Ponzi changed his angle and decided to do it another way - by getting others to invest in him!
So he told his friends that he could increase their money by 50% in 90 days by using his system; so they invested in him - and three months later he paid them back with 50% interest with his own money, there was never any coupons bought or sold during this time.

So they all returned and re-invested with Ponzi, but they also told their friends and family about this great system so Ponzi was given thousands of dollars to invest.  As the story of this investment spread more and more people gave Ponzi money, with this new influx of money he was able to pay back the earlier investors with the promised interest.
As long as new investors came into the scheme then Ponzi could keep going.  It also helped that when people received there investment back they simply re-invested!

At the peak of the scheme Ponzi was pulling in over 1 million dollars a week, not bad money for the 1920's.
The downfall started from some investigative Journalism; this led to the District attorney getting involved and Ponzi being charged.  This also pushed Ponzi into bankruptcy.

So what does Charles Ponzi have to do with today's scams?

Well, these schemes don't go by the name of 'Ponzi scheme', they go by another name - a Pyramid scheme. 

Yep, if someone invites you into a Pyramid scheme then you're about to get shafted unless you are one of the first to participate (the people at the end are the one's that get shafted).

These schemes are going on all over the world and almost daily another one is starting; courts are full of people that run these schemes.
The biggest break that authorities get is the greediness of the promoters of these schemes, they simply don't know when to skip out of town.  If you want to run a scam successfully then you need to know when to run with the money!

In 1997 the Government of Albania lost most of its money to a Pyramid scheme so don't think only dumb individuals get caught up in it.
I have read that 1.69 billion dollars was swindled from the country but the article doesn't state which currency!!  (I work in Australian dollars, most of the world works in US dollars but this is a story from Albania, so go figure).

I've been on the Internet since 1996 where Pyramid schemes were big in 1998 and then again in 2001 (based on the amount of spam email I receive, which is about 80 per day).  These schemes appear daily on major forum boards.