How is the confidence element established in a Ponzi scheme?
A) By investing in prime bonds.
B) By issuing notarized certificates.
C) By paying returns to investors initially.
D) By returning money to all investors.

Question

Quizplus · Accepted Answer

In a Ponzi scheme, the confidence element is established by paying returns to investors initially. The scheme operator will pay early investors from the contributions of newer investors, creating a false impression of success and profitability. This creates confidence among investors, leading to more investments and hence, allowing the scheme to continue.

How Is the Confidence Element Established in a Ponzi Scheme