CFE – Financial Transactions and Fraud Schemes — Question 83

Which of the following is NOT a distinguishing feature of a Ponzi scheme?

Answer options

• A. Participants are paid based on the number of new investors they recruit.
• B. Promoters of Ponzi schemes engage in little or no valid commerce or investments.
• C. Participants believe that they are making a legitimate investment.
• D. Promoters of Ponzi schemes promise investors uncommonly high returns

Correct answer: C

Explanation

Option C is correct because participants in Ponzi schemes are often misled into thinking they are making a legitimate investment, whereas the other options accurately describe characteristics of Ponzi schemes. Options A, B, and D highlight the deceptive nature and operational tactics of Ponzi schemes, which rely on new investor funds rather than actual investments.