Consumer Fraud
"Maria, a successful restaurateur, has been informed of an unusually attractive investment opportunity by a recent acquaintance and decides to invest in it. Several months and a couple of underwhelming payments later, Maria grows frustrated with the diminishing disbursements and attempts to withdraw her money. After several weeks of delay, she realizes that the promoter seems to have vanished, along with her investment. Maria is the victim of which of the following fraudulent ploys? A. An illegal pyramid B. A fly and buy scheme C. A Ponzi scheme D. A dog and pony scam
" A Ponzi scheme
"What is the primary difference between a Ponzi scheme and a pyramid scheme? A. All pyramid schemes are legal, whereas all Ponzi schemes are illegal. B. A Ponzi scheme is promoted by encouraging victim members to recruit new members. C. In a pyramid scheme, old investors are paid with money from new investors. D. A pyramid scheme promotes itself as a pyramid, whereas a Ponzi scheme promotes itself as an investment opportunity.
" A pyramid scheme promotes itself as a pyramid, whereas a Ponzi scheme promotes itself as an investment opportunity.
"A confidence scheme designed to part victims from their money by falsely promising the future delivery of a product or service in exchange for an upfront payment is called a(n): A. Bait and switch B. Home-based business scheme C. Scavenger scheme D. Advance-fee swindle
" Advance-fee swindle
"The type of fraud that targets groups of people who have some social connection, such as neighborhoods of racial minorities or immigrant groups, is known as: A. Consolation B. Affinity fraud C. Reloading D. None of the above
" Affinity fraud
"Glenn has just inherited a large amount of money from a deceased relative. Several weeks later, a colleague of Glenn's suggests an investment in a security that is certain to generate returns of 20% every six months. Glenn is intrigued, but also worried that it might be a Ponzi scheme. Which of the following actions should Glenn take before investing? A. Ensure that he can comprehend the details and strategy of the investment B. Find out if the financial manager is licensed and if the security is registered C. Determine if the investment's returns have been abnormally consistent D. All of the above
" All of the above
"In a grandparent scheme targeting the elderly, which of the following is a way to confirm if a caller is the grandparent's actual grandchild? A. Hang up the phone and contact the grandchild directly B. Ask the caller questions only the grandchild would know C. Ask relatives if they know of any issues with the grandchild D. All of the above
" All of the above
"Which of the following are signs that a multilevel marketing organization's activities might be illegal? A. The organization spends more time promoting its distributor levels than its product lines B. The organization offers participants large payments for each new recruit C. The organization recruits distributors into a pyramid-style compensation plan D. All of the above
" All of the above
"Which of the following schemes are often used by fraudsters to take advantage of the elderly? A. Homeownership schemes B. Sweepstake and prize schemes C. Work-at-home schemes D. All of the above
" All of the above
"Which of the following is NOT considered to be a red flag of a Ponzi scheme? A. A financial manager who puts an unusual amount of pressure on investors to act immediately B. An investment that has a history of inconsistent returns coinciding with fluctuations in financial markets C. An investment that promises extremely high or short-term returns with little risk involved D. A financial manager who manages, administers, and retains custody of the investment funds
" An investment that has a history of inconsistent returns coinciding with fluctuations in financial markets
"A Ponzi scheme can best be described as an illegal business structure that might offer merchandise or services but generates almost all of its revenues from the relentless recruitment of new members. A. True B. False
" FALSE
"All organizations with a pyramid structure are illegal. A. True B. False
" FALSE
"Telemarketing schemes target individuals, not businesses. A. True B. False
" FALSE
"Victims of consumer fraud are more likely to be organizations or businesses rather than individuals. A. True B. False
" FALSE
"Which of the following statements is TRUE with regard to factoring companies? A. Factoring groups buy credit card receipts from telemarketing operations at a discount. B. Factoring companies in Asian and European countries tend to charge more for their services than factoring companies in other countries. C. Factoring companies approach banks on a telemarketer's behalf in order to secure credit card processing services. D. Factoring is illegal in all jurisdictions.
" Factoring groups buy credit card receipts from telemarketing operations at a discount.
"In a/an _____________ scheme, the company that initially conned a consumer contacts that consumer and offers to help retrieve the lost money. However, the investigation requires an upfront fee and the consumer is swindled again. A. Double-hustle B. Advance-fee C. Scavenger D. Retrieval
" Scavenger
"A Ponzi scheme can be characterized as an ostensibly legitimate, yet ultimately fraudulent, investment opportunity wherein the promoter pays previous investors with money gained from new victims. A. True B. False
" TRUE
"A favored device of phony charities is to send school-age children door to door to say that they are raising money for antidrug programs or for a group that takes underprivileged kids on trips. A. True B. False
" TRUE
"A financial fund operator who insists that investors continually reinvest their profits, rather than take payouts, is a red flag of a Ponzi scheme. A. True B. False
" TRUE
"A pyramid scheme is designed to pay off its earliest investors. A. True B. False
" TRUE
"A pyramid scheme is promoted by encouraging victim investors to recruit new members. The more members recruited, the higher the investor rises in the ranks of the enterprise, and the more money the investor is supposed to make. A. True B. False
" TRUE
"Advance-fee swindles, debt consolidation schemes, and diploma mills are all examples of consumer fraud schemes. A. True B. False
" TRUE
"Automatic debit program schemes occur when fraudsters obtain a consumer's bank account information and then use this information to draft money from the consumer's bank account without that person's consent. A. True B. False
" TRUE
"In a take-the-money-and-run scheme, fraudsters lure potential victims using fake vacation rental listings or websites advertising properties that do not actually exist. A. True B. False
" TRUE
"In credit repair scams, the fraudster promises to "erase" or "doctor" an applicant's credit history, but in reality there is no way to erase bad credit. A. True B. False
" TRUE
"Not every company that runs its business using a pyramid structure is operating an illegal pyramid scheme. A. True B. False
" TRUE
"Real estate scams are easily recognized, as there is almost always an element of time pressure or ""now-or-never"" pitch from the perpetrator. A. True B. False
" TRUE
"The most common giveaway scheme, in which a postcard arrives in the mail telling the recipient he has already won a prize such as a luxurious vacation or cash, is known as: A. The ""Fly and Buy"" B. The ""Bait and Switch"" C. The ""1-in-5"" D. None of the above
" The "1-in-5"
"Unscrupulous debt consolidation schemes include each of the following EXCEPT: A. The debt consolidation company writes a letter to the debtor's creditors and arranges a payment plan. B. The debt consolidation company charges an upfront processing fee and then disappears. C. The debt consolidation company guarantees the debtor will receive a loan or credit card regardless of the debtor's credit ratings. D. The debt consolidation company collects payments, but does not appropriately forward them.
" The debt consolidation company writes a letter to the debtor's creditors and arranges a payment plan.