Page 206 - CAPE Financial Services Syllabus Macmillan_Neat

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02269020/CAPE/KMS 2016 SPEC

FINANCIAL SERVICES STUDIES

UNIT 2 - PAPER 02

KEY AND MARK SCHEME

5. (a) Description of the chronological evolution of Artie
Sandorf's Ponzi scheme

- Artie Sandorf owned three very successful financial
operations; including a brokerage firm, a trading firm and
an investment advisory firm.

- Investors in Artie's investment fund had requested $8
billion in withdrawals and he did not possess the cash to
pay them.

- The advisory firm was about to collapse
- The investment fund was a highly kept secret and was only

known to Artie and his friends, that it was a Ponzi scheme.
- The Ponzi scheme was in operation for 15 years.
- Ponzi had promised to double the money of investors within

forty-five or ninety days if they invested in a scheme only
he knew how to manage.
- Artie deposited the client's money in his own bank account.
As more clients invested during the year, Artie's bank
account increased significantly.
- When Artie wrote the cheques for investors, he increased
the amount.
1 mark each for any 6 steps listed in the correct order

(b) Evaluate the reasons why sophisticated investors trust

Artie Sandorf with their funds.

- Investors are drawn to successful investing and was at
the forefront of the record of stock trading.

- People were drawn in by Artie's personality - he was
quiet, yet charismatic and did not boast about his
financial success.

- He was flushed with cash
- The investment fund was attractive to investors.

For any 3 reasons, 1 mark for stating the reason, and 1 mark
for the explanation.