Bart has been a successful financial advisor for more than 10 years. During that time, he has generated returns that have never been less than 5% annually. He does not advertise but that has not stopped investors from opening new accounts with his firm. It turns out that Bart has been taking the deposits of new investors, keeping a portion for himself, and sending the rest to earlier investors. Bart is running a (n) :

Question

Aurora Harrell

Business

24 November, 18:56

Bart has been a successful financial advisor for more than 10 years. During that time, he has generated returns that have never been less than 5% annually. He does not advertise but that has not stopped investors from opening new accounts with his firm. It turns out that Bart has been taking the deposits of new investors, keeping a portion for himself, and sending the rest to earlier investors. Bart is running a (n) :

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Kc · Answer 1

Bart is running a (n) : A Ponzi scheme.

Explanation:

A scheme through which the investors are lured and the earlier investors will be paid with the profits that are obtained with the funds of the more recent investors. It is a kind of fraud. An investment scheme which is fake in nature is this scheme. In this scheme the investors will be giving their funds to the portfolio manager.

When they need to pay interest to them, the money obtained by the more recent investors will be given to them. In the given example, Bart is involving in the activities of taking the investments made by the new investors and keeping a portion of money with him and returns the rest to the early investors. Bart is running a (n) : A Ponzi scheme.