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. A Ponzi scheme
• B. An illegal pyramid
• C. A fly and buy scheme
• D. A dog and pony scam

Answer: (A)

A Ponzi scheme works by paying returns to earlier investors using funds from new investors, not from real investment profits. In Maria’s case, she was lured by an attractive opportunity, received only a few small payments after several months, and then the promoter vanished with her money. That pattern—initial, illusory payouts followed by a disappearance and a collapse once new money stops flowing—is the hallmark of a Ponzi scheme. Legitimate investments generate profits from real business activity, whereas Ponzi schemes depend on a constant inflow of new funds to keep paying earlier investors.

The other options don’t fit this scenario as precisely. An illegal pyramid relies on recruiting more participants to sustain payments, but the story centers on a single promoter and disappearing funds rather than a recruitment network. Fly-by-night and dog-and-pony scams describe broad frauds that rely on flashy or deceptive presentation rather than an ongoing scheme to extract and redistribute investor funds.