Heidi decided to make extra money by offering to do investments for her friends for a fee. She actually did no investing, but used the funds from new friends to pay off earlier enrollees. This worked well for a while, but her scheme came to light when her supply of new friends came to an end. She is guilty of which of the following practices?

A Ponzi scheme is an investment swindle in which high profits are promised from fictitious sources and early investors are paid off with funds raised from later ones.

Question

Business

Dante Lam

8 July, 00:15

Heidi decided to make extra money by offering to do investments for her friends for a fee. She actually did no investing, but used the funds from new friends to pay off earlier enrollees. This worked well for a while, but her scheme came to light when her supply of new friends came to an end. She is guilty of which of the following practices?

A Ponzi scheme is an investment swindle in which high profits are promised from fictitious sources and early investors are paid off with funds raised from later ones.

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Answers (1)

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Valerie Wilkins · Answer 1

operating a ponzi scheme

Explanation:

Based on the scenario being described within the question it can be said that in this situation she is guilty of operating a ponzi scheme. This is a type of fraud in which an individual new entrants are promised huge returns on their investments and older clients are paid off by the money generated from newer investors. This continues to occur until the creators gather enough money for themselves and take off causing the entire scheme to fall and everyone to lose their money.