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HYIPs are high-risk investment programs that collect money from investors to invest in high-yield markets. However, many HYIPs are fraudulent Ponzi schemes that use new investors’ money to pay off existing ones. Fake HYIPs often make false claims and use financial jargon incorrectly. It’s important to research and verify the legitimacy of a HYIP before investing. Examples of HYIP scams include OSGold and PIPS.
HYIP stands for High Yield Investment Program and is a way for people to invest money in high-yield, high-risk markets that they wouldn’t normally be able to do on their own, usually because they don’t have the initial investment funds. A HYIP collects investors’ money together and uses the funds to invest in these markets; investors receive a portion of the return on their investments over a set period of time. Most HYIPs pay daily, weekly or monthly interest on the Internet. While some HYIPs are sound investment vehicles, the majority are actually a form of Ponzi scheme.
Fraudulent HYIPs
A ponzi scheme is a fraudulent investment strategy that promises investors high returns with little or no risk. The scheme works by using money from new investors to pay off existing investors; the criminal is always looking for new people to join to keep the cycle going. Investors are unaware that the money isn’t actually being invested; instead, it is used for the criminal’s personal use and to pay investors just enough to avoid detection. Eventually the money runs out and the scheme is discovered. An HYIP can easily be a Ponzi scheme because investors have no guarantee that the funds will actually be invested.
Fraudulent HYIPs often have common similarities: many make false claims about secret banking systems and alternative financial networks, and most have websites that use financial jargon incorrectly and include fake testimonials, among other things, to convince investors that they are a valid company. In many fraudulent cases, investors not only never pay any interest returns, but they never see their original investment again. Fake HYIPs have become common enough that the Federal Bureau of Investigation (FBI) has issued warnings regarding the claims made in these fraudulent programs.
Examples of fake HYIPs
Perhaps the most widely heard HYIP scam is OSGold, a company founded by David Reed in 2001 that has reportedly stolen more than $250 million United States Dollars (USD) from investors. Another large-scale scam is known as the PIPS or People in Profit System scam. Started in 2004 by Bryan and Sharon Marsden, this fake HYIP required investors to pay an initial investment of $450 USD over a 180-day interest period, for which they were promised a return of 2% per day.
Tips for investing in HYIPs
When considering investing in a HYIP, it’s best to do a diligent research first. Any legitimate security sold to the public must be registered with the Security and Exchange Commission (SEC). If it is a reputable investment program, it will be searchable through the SEC.
Other things to consider include: whether the claims sound good to be true and how the people running the program generate the high-yield returns that are promised. If HYIP proponents can’t or won’t explain how the returns are made, it might be best to avoid investing in the program.
Smart Asset.
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