Danielle Manouvrier, right, an alleged victim of financial adviser Earl Jones, protests outside the Montreal courthouse during Jones's bankruptcy hearing in Montreal in July. (Graham Hughes/Canadian Press)

Very few social concepts have survived from 90 years ago.

These days, most Canadians do not dance the Charleston, dress like a flapper or swig bathtub gin.

But mention the term "Ponzi scheme" and ears perk up.

Indeed, this investor gambit, which made its first appearance in 1920, has made an unfortunate comeback during the current recession.

In fact, however, many of the schemes exposed during the recent financial crisis had been in existence for decades.

But only as credit dried up in 2008 did these investor gimmicks fail.

New twist on an old favourite

The most infamous name connected with the recent wave of such scandals is Bernie Madoff, currently serving a prison term after being convicted of defrauding investors out of $50 billion US over a 17-year period.

Gary Sorenson, seen in a photo posted online by the World Investment News, is accused in an Alberta Ponzi case.

Canada, however, has not been immune from the return of the Ponzi gambit.

In September, two Alberta men were charged with ripping off investors to the tune of $100 million between 1998 and 2008.

In Quebec, investment adviser Earl Jones reportedly bilked investors out of $50 million, while another Montreal adviser, Themistokles Papadopoulos, is accused of cheating clients out of $86 million.

Ironically, the staying power of the Ponzi scheme might be an odd homage to the cleverness of immigrants coming to North America.

"Ponzi" refers to Carlo — or Charles — Ponzi, who was born in 1882 in Italy and ended up in the United States at the turn of the century.

Always a fast-talker, Ponzi did a stretch in an Atlanta prison for forgery and other crimes, and was released in 1911.

The scam takes shape

Once again a free man, Ponzi hit upon the idea of using foreign exchange markets to make money on international reply coupons, a kind of postage-paid reply envelope popular after the First World War, when different postal systems varied in their reliability.

Bernard Madoff, on his way to Manhattan federal court on March 12, 2009, was at the centre of the biggest financial scandal in the current recession. (Louis Lanzano/Associated Press)

Ponzi promised investors astronomical returns if they invested in his company.

The postwar period was a time when people speculated on penny stocks, land in under-populated Florida and housing in Texas. So Charles Ponzi's promise of untold riches from investing in the global postal service did not seem that unusual.

In fact, however, Ponzi's investment scheme did not have any underlying economic foundation.

His company always had too little cash to pay off all investors at once, a precarious situation which Ponzi could handle as long as new people were willing to hand over cash.

And that is what makes the gambit so alluring for the scam artist — its simplicity.

Essentially, in a Ponzi scheme, investors are unwittingly playing a game of financial musical chairs.

Whether run by Madoff or Jones in 2008 or Ponzi in 1920, these pyramid schemes involve taking money from new investors and passing some of that same cash as payouts to existing clients.

Easy to understand, harder to uncover

Everyone continues to make money unless clients demand refunds or market regulators uncover the fraud.

As long as the person running the scheme maintains a stellar reputation, and continues to pay investors who have bought in to the scheme, they may be able to keep government authorities from digging too deeply into their company's financial circumstances.

In addition, they need investors to suspend the usual financial understanding that more profitable investments usually face a higher level of risk.

In the case of Madoff, Alan Stanford and other modern Ponzi schemers, the fall came as investors started cashing out of their companies to cover other financial losses brought on by the deepening worldwide recession.

'I had given them the best show that was ever staged in their territory since the landing of the Pilgrims.'—Charles Ponzi

In the case of Charles Ponzi, investors panicked after news reports appeared uncovering Ponzi's unsavory involvement in a Montreal bankruptcy.

By 1921, Ponzi was in jail.

When he was released a few years later, he was unrepentant.

"I had given them the best show that was ever staged in their territory since the landing of the Pilgrims," Ponzi reportedly said.

Whether practiced by Dona Branca, who set up a fake bank in Portugal in the 1970s or boy-band manager Lou Pearlman in the 1990s, the Ponzi scheme's ease of operation plus its promise of unreal rates of return ensures that this is one fad of the 1920s that's unlikely to fade away.