High-Yield Investment Program (HYIP)
What Is a High-Yield Investment Program (HYIP)?
A high-yield investment program (HYIP) is a fraudulent investment scheme that implies to deliver exceptionally high returns on investment.
HYIPs frequently publicize yields of over 100% each year to draw in casualties and routinely utilize new investors' money to pay off more established investors. They are totally unrelated to a real high-yield bond investment, which offers higher than investment-grade interest rates.
Understanding a High-Yield Investment Program (HYIP)
HYIPs are Ponzi schemes, and the coordinators aim to take the money invested. In a Ponzi scheme, money from new investors is taken to pay returns to laid out investors. Money isn't invested and no genuine underlying returns are procured; new money is just used to pay individuals who entered the scam sooner than they.
However this brand of Ponzi scheme has existed since the mid twentieth century, the expansion of digital communications technology has made it a lot simpler for con craftsmen to operate such scams. Typically, an operator will make a website to draw in clueless investors, promising extremely high returns yet staying dubious about the underlying management of the investment fund, how the money is to be invested, or where the fund is found.
These funds normally include the supposed trading or issuance of "prime" bank financial instruments and may incorporate references to prime European or prime world bank instruments. Consequently, this scam is otherwise called the "prime bank scam."
HYIP operators will regularly utilize social media, including Facebook, Twitter, or YouTube, to appeal to casualties and make the illusion of social consensus encompassing the authenticity of these programs.
Instructions to Spot a HYIP
The Securities and Exchange Commission (SEC) prompts that there are several warning signs that investors can use to help try not to be defrauded by HYIP scams. These incorporate excessive guaranteed returns, fictitious financial instruments, extreme secrecy, claims that the investments are an exclusive opportunity, and unnecessary complexity encompassing the investments.
Culprits of HYIPs use secrecy and a lack of transaction transparency to conceal the way that there are no real underlying investments. The best weapon against getting sucked into a HYIP is to ask a ton of inquiries and utilize common sense. Assuming an investment's return sounds too great to be true, it presumably is.
High-Yield Investment Program (HYIP) Example
An illustration of a HYIP was ZeekRewards, run by Paul Burks and shut down by the SEC in August 2012.
ZeekRewards offered investors the opportunity to share in the profits of a penny auction website, Zeekler, at returns of 125%. Investors were urged to let their returns compound and to increase their returns by enrolling new individuals. Investors were required to pay a month to month subscription fee of $10 to $99 and make an initial investment of up to $10,000.
The SEC found that around 98% of the funds dispensed were paid out of the pockets of new investors and that ZeekRewards was a $900 million Ponzi scheme. Burks was fined $244 million and condemned to 176 months in jail.
Highlights
- HYIPs, frequently known as "prime bank scams," commonly include the supposed trading or issuance of "prime" bank financial instruments and may incorporate references to prime European or prime world bank instruments.
- Warning indications of a HYIP incorporate excessive guaranteed returns, fictitious financial instruments, extreme secrecy, claims that the investments are an exclusive opportunity, and unreasonable complexity encompassing the investments.
- A high-yield investment program (HYIP) is a fraudulent investment scheme that implies to deliver uncommonly high returns, in excess of 100%, on investment.
- Most HYIPs are Ponzi schemes where the coordinators take money from new investors to pay returns to laid out investors.
