The illegal and unethical practice of providing old (or early) investors above-average returns on their investment with funds raised from new (or late) investors in the absence of any real business operation to generate profits is referred to as the _____.

Question

Quizplus · Accepted Answer

This description accurately matches the definition of a Ponzi scheme, which is a fraudulent investment scheme where returns are paid to early investors using the capital of new investors, rather than through profits generated by a legitimate business. This ultimately leads to a collapse of the scheme when there are not enough new investors to pay off the returns promised to earlier investors. The other options listed are also forms of financial fraud but do not match the given scenario as closely as a Ponzi scheme.

The Illegal and Unethical Practice of Providing Old (Or Early)