What is a high-yield investment program (HYIP)?
A high-yield investment program (HYIP) is a scam that promises substantial returns. To attract investors, HYIPs typically offer returns above 100% per year. They often pay out long-term investors with new money. These scams don’t require money. HYIPs are not the same as high-yield bonds, which have more excellent interest rates than investment-grade bonds.
Knowing a High-Yield Investment Program
HYIPs are Ponzi scams. Such methods fool investors into taking their money. More experienced investors receive “returns” from new investors in a Ponzi scheme. There are no investments or rewards.
Internet use
Ponzi schemes have existed since the early 20th century, but internet communications have made them simpler for con artists to run.
Operators usually use social media and websites to attract unwary investors with significant rewards. However, investment details are unclear. Investors will not learn about the investment fund’s management, strategy, or location.
These scams often include the claimed trade or issue of “prime” bank financial securities, such as prime European or World Bank instruments. Thus, the “prime bank scam.”
How to spot HYIPs
The Securities and Exchange Commission (SEC) lists warning indicators to protect investors against HYIP fraud. Excessive promised returns, bogus financial tools, high secrecy, exclusive investment promises, and excessive complexity are examples.
Secrets and a lack of transaction openness let HYIP operators disguise the lack of actual investments. Asking plenty of questions and using common sense is the best way to avoid HYIP losses. Investment returns that seem too good to be true usually are.
HYIP operators utilize Facebook, X (previously Twitter), and YouTube to attract investors and create the appearance of social agreement on their authenticity.
Sample High-Yield Investment Program
The SEC shut down Paul Burks’ HYIP ZeekRewards in August 2012.
Investors might earn 125% from the penny auction website Zeekler through ZeekRewards. We urged investors to compound their gains and acquire new members. Monthly subscription fees were $10 to $99, and initial investments were up to $10,000.
The U.S. District Court deemed ZeekRewards a $900 million internet Ponzi scam in 2017. About 98% of the money released came from new investors. Burks received 176 months in jail and a $244 million fine.
Does anyone profit from HYIPs?
The scam organizers profit from investment money. The organizers may pay early investors with money from subsequent investors. However, organizers never invest investor money.
Another famous HYIP?
The financial industry and Bernie Madoff’s victims are well aware of and remember his 2008 Ponzi scheme, which did not use the Internet. His word-of-mouth investment scheme featured secrecy, tempting profits, a lack of fund information, and phony transaction records.
A high-yield investment?
High-yield investments are usually corporate bonds from low-credit companies. These are actual investments, not HYIPs. They provide greater yields than investment-grade corporate bonds to compensate investors for the higher risk of the credit ratings. Junk bonds are high-yield.
Bottom Line
High-yield investment programs (HYIPs) are Ponzi scams. Some call them Prime Bank investment frauds because their organizers publicize supposed investments.
HYIPs employ social media, appealing websites, and traditional ways of communication to attract investors seeking high returns. Many guarantee returns above 100%.
To recognize and avoid HYIPs, ask specific questions concerning an investment and notice if you don’t get suitable answers. Look outside the program for relevant information. To check operator registration, contact the SEC. Consult your financial advisor or brokerage business about the program. Applying common sense to know whether a high yield is illegal is essential.
Conclusion
- HYIPs are fraudulent investment schemes that offer huge returns, frequently over 100%.
- Most HYIPs are Ponzi scams that use new investors’ money to pay old investors.
- Many “prime bank scams,” or HYIPs, trade or issue “prime” financial securities.
- They may mention central European or World Bank instruments.
- Excessive promised returns, bogus financial instruments, severe secrecy, exclusive opportunity promises, and excessive investment complexity are HYIP warning indicators.
