In 2006, QXQ opened their doors to finance home mortgages. One of the easiest loans for potential homeowners to obtain was called a stated income loan. These loans were money in the bank to QXQ because people just had to fill in the forms with their current salary, there was little documentation required, and everybody won. The buyers got their house and QXQ got paid.
-Andrew works for QXQ as an investor. He only takes clients that have at least $500,000 to invest. He has been touting this new hedge fund that he himself has invested in. It is promising 20 percent returns every year. He just signed up the Jones family. If this scenario is too good to be true, what will likely happen to the Jones's money

Question

Quizplus · Accepted Answer

The scenario suggests that the hedge fund being touted by Andrew may not be legitimate, and is likely a scheme to defraud investors. Therefore, it is probable that the Jones's money, along with other investors' money, will be used to pay previous investors in a typical Ponzi scheme fashion.

In 2006, QXQ Opened Their Doors to Finance Home Mortgages