graph TD;
	    A[New Investors] -->|Invests $100| B[Scheme Operator]
	    B -->|Pays $70| C[Early Investors]
	    B -->|Keeps $30| D[Operater’s Pocket]
	    C -->|Recruits more| A
	    B -->|Scheme collapses| E[Losses for New Investors]

## What is the primary way a Ponzi scheme maintains the illusion of profitability? - [ ] By offering real and profitable business ventures - [x] By paying early investors with the money of new investors - [ ] By investing in secret gold mines - [ ] By magically transforming rocks into cash > **Explanation:** A Ponzi scheme pays earlier investors with the money collected from new investors, not with actual profits from investments! ## How does a Ponzi scheme collapse? - [x] When there aren't enough new investors to pay old investors - [ ] When the operator decides to quit - [ ] When everyone realizes it’s a scam - [ ] When people stop spreading the word > **Explanation:** It collapses when the flow of new money slows down, making it financially impossible to pay earlier backers. ## What should you do if you suspect an investment opportunity is a Ponzi scheme? - [ ] Invest even more money just to be safe - [ ] Spread the word to confuse others - [x] Report it to authorities - [ ] Start a pyramid scheme instead > **Explanation:** Reporting to authorities can help stop others from losing money in an ongoing scam! ## Which of the following is a hallmark of Ponzi schemes? - [ ] They provoke laughter from investors - [x] They promise high returns with little risk - [ ] They involve only stocks and bonds - [ ] They are always registered with the SEC > **Explanation:** Ponzi schemes often promise unrealistic returns with little to no risk to lure in unsuspecting investors! ## What is one difference between a Ponzi scheme and a pyramid scheme? - [ ] They’re both illegal - [x] Ponzi schemes are run by a single operator, while pyramid schemes rely on a multi-tier recruitment of members - [ ] Ponzi schemes pay pensions - [ ] They only differ based on the operator’s hair color > **Explanation:** Ponzi schemes usually have a single operator who enjoys the profits directly, while pyramid schemes involve multiple tiers of recruited members! ## If you become aware of a Ponzi scheme, what’s a smart step? - [ ] Laugh it off; it’s too late now - [x] Inform others and report it - [ ] Invest a little to help the situation - [ ] Send an anonymous letter to the scammer that you're onto them > **Explanation:** Alerting authorities and others can prevent more people from losing money to the scheme! ## In what decade did Charles Ponzi become notorious for his scheme? - [ ] 1880s - [ ] 1970s - [x] 1920s - [ ] 2010s > **Explanation:** Charles Ponzi became infamous in the 1920s with his promise of soaring returns, leveraging international postal reply coupons! ## What's the moral of the story regarding Ponzi schemes? - [ ] Never trust your mother-in-law with investments - [ ] High returns are usually legit - [x] If it sounds too good to be true, it probably is! - [ ] Always gamble your savings! > **Explanation:** Smart investing is often about caution; if it sounds suspiciously great, it's probably a Ponzi scheme catering on your naivety! ## What typically happens to the operator of a Ponzi scheme? - [x] They face criminal charges - [ ] They become a stock market guru - [ ] They host a talk show about financial management - [ ] They travel the world in a luxury yacht funded by fraud > **Explanation:** Most operators get tangled in legal issues once the scheme is discovered, despite their apparent luxurious lives earlier! ## How do Ponzi schemes usually sustain interest? - [ ] Glittering ads on Instagram - [ ] Friend’s recommendations - [x] Word-of-mouth claims of profits from happy investors - [ ] Free pizza for new sign-ups! > **Explanation:** Relaying stories of profits mouths-to-ears drives new investments, like a game of telephone gone wrong!