Hyip Investment Scams

How high-yield investment programs (HYIP) work

Returns of 45% per month? Or perhaps 6% per day? A guaranteed revenue stream that’s safe from market fluctuation, with the return of the initial investment guaranteed?

If this sounds like a fantastic investment, you’re right – it does. If it also sounds too good to be true, alas, you’re right again. However, promises and guarantees of outrageous returns like those listed above are common among high-yield investment programs. These scams lure investors with promises of astronomical returns while providing virtually no detail about the underlying management, investment method, or types of financial instruments used. In truth, all HYIP are scams of the Ponzi variety. Investors who are lured into the HYIP deposit money. This money is used to pay off previous investors, and of course a percentage is kept by the HYIP scammers.

The HYIP continues until the flow of new funds dries up – or until investors wise up and try to withdraw their funds. That’s when the HYIP crashes, its website goes down, the customer service emails go unanswered and the phone line rings and rings (or is disconnected).

HYIP scams are becoming increasingly common thanks to the combination of secure e-gold-type payments and affiliate marketing. This article discusses how to recognize HYIP scams and how to avoid them. How to spot a HYIP scam HYIP promotion is remarkably similar to other types of financial scams. The following list of red flags applies for HYIP as well as for any other type of program that solicits your money.

– Promises of above-market returns without risk The typical HYIP offers returns ranging from 1% per day to 45% per month. Although there are legitimate investments that can make a several percent move per day (during particularly volatile periods, individual stocks can rise or fall 30% in a single day!) there is simply no legitimate investment that can offer returns this high on a regular basis.

– Promises preservation of capital plus high returns Preservation of capital means that your initial investment is safe. Therefore, all interest you are paid is sheer profit. In fact, your capital is far from safe. However, HYIP scams have learned that by promising that your original investment will be preserved they can convince most investors to leave their money parked within the HYIP until it crashes. This keeps the scam running, and making the scammers money, longer.

– Registered offshore, in the Caribbean (or, less frequently, emerging markets) The island nations of the Caribbean (most notoriously, Barbados, Antigua, the Seychelles, and the Bahamas) have notoriously lax banking laws. These nations allow financial operations that would be shut down instantly in any of the G20 nations. HYIP front companies are almost universally registered in the Caribbean. Sometimes, HYIP operations are run out of emerging nations like Hungary, Bulgaria, Estonia and Egypt.

– Little or no information regarding type of investment Most HYIP scams claim to be hedge funds. That’s because almost no one really knows what a hedge fund is, and even legitimate hedge funds are completely opaque and only lightly regulated. Other HYIPs claim to make money based on foreign exchange (forex) trading. Again, they actually have no real investment. All payments are taken from deposits made by new investors.

– Promoted by “review-type” affiliate website HYIP scams need a constant influx of new investors, and new funds, in order to survive. For this reason they are promoted by a huge network of affiliate websites with names like HYIPinvestor, HYIPexplorer, hotHYIPs, etc. The sole purpose of these websites is to promote HYIPs. The website owner makes a few dollars for every investor he sends to the HYIP. Of course, the owner of the website is wise to the HYIP scam and will keep her money safe in an FDIC-insured, US bank account while referring her visitors to the HYIP website to be fleeced.

– Accepts secured payment only HYIP scams would collapse if investors had quick and easy access to their money. Therefore, HYIPs require investors to fund their accounts with some form of secured payment. HYIPs do not accept Paypal or credit card payments. Instead, they insist on e-gold type payments that are non-reversible and do not allow the investor the option of a chargeback or otherwise freezing the initial payment.

Have you been taken in by an HYIP scam?

If you have fallen for one of the many HYIP scams online, the first thing you should do is try to retrieve your money. If the program refuses your request, threaten to report the program to the United States Securities and Exchange Commission (SEC). Even though most HYIPs are registered and established outside the United States, the threat of federal investigation still carries quite a bit of weight. Besides, the HYIP will wither and die without new investors and the bad publicity that comes with a federal investigation will certainly diminish the HYIP’s appeal.

Regardless of whether or not you’re able to recoup your investment, you shouldreport the HYIP to the SEC soon as possible. Include all correspondence and records you have and request an investigation. Stay away from HYIPs and any type of investment that makes similar promises. Don’t let your desire for an above-market-average return compromise your financial wellbeing. The world is full of people who will take every dollar out of your bank account without the slightest pang of guilt. It’s ultimately up to you to protect yourself, and your money, from HYIPs and similar investment scams.