A high-yield investment program (HYIP) is a misleading reinvestment scam that promises investors huge profits on their deposits throughout the investing world.
High-yield investment programs (HYIPs) sometimes offer rates of higher than a hundred percent annually to attract clients. They frequently utilize the funds of incoming clients to repay the investment of previous participants. These should not be mistaken with a real high-yield bond investment that pays borrowing costs more than those offered by investment-grade bonds.
What is a High-Yield Investment Program (HYIP?)
HYIPs are Ponzi scams, and the organizers’ primary goal is to loot the funds that investors have put into the program. A Ponzi scheme is a kind of investment plan in which capital from early participants is used to repay profits to existing participants. Because no actual core profits are made, or wealth is invested, the additional fund is simply utilized to compensate those who joined the fraud sooner than they did.
Despite this particular kind of Shell game having been around since the late twentieth century, the expansion of online telecommunications capabilities has rendered it much simpler for scammers to run these frauds. Typically, an administrator would construct a webpage to attract naive clients by guaranteeing exceptionally significant profits while keeping ambiguous regarding the actual administration of the investing group, how the funds will be spent, and where the budget is really situated.
Such investments are often associated with the claimed trade or issue of “prime” financial institution investment products. They often make specific mention of prime Western or prime international bank financial products, among other things. As a result, the “prime bank scam” is another name for this particular fraud.
According to the Federal Trade Commission, high Yield Investment Program administrators will often utilize social media platforms like Instagram, Facebook pages, and video-sharing social media platforms to solicit targets and establish a sense of collective agreement around the legality of their schemes.
How to Identify a High Yield Investment Program
According to the Securities Exchange Commission (SEC), many telltale indicators venture capitalists may look out for to prevent from becoming a target of a high-yield investment program (HYIP) scam, according to the Securities Exchange Commission (SEC). Among them are excessively high promised profits, false investment products, high confidentiality, assertions that the securities are unique, and overly complicated financial structures.
The culprits of high-yield investment programs (HYIPs) exploit confidentiality and a complete absence of transactional disclosure to conceal the knowledge that the underpinning holdings are not actual. The most excellent defense against being lured into a High-Yield Investment Program is to demand a lot of inquiries and utilize rational thinking while making your decision to invest. If a yield on a venture seems too perfect to be genuine, it almost certainly is.
A Real-Life Case of a High-Yield Investment program
A real-life case of a high investment program was ZeekRewards, which was operated by Paul Burks and was closed off by the Commission in Aug of 2012.
ZeekRewards provided shareholders with the option to participate in the earnings of an online penny auction, Zeekler, with yields of up to one hundred and twenty-five percent on their initial investment. Shareholders were urged to allow their gains to accumulate and to boost their earnings by attracting fresh members to respective organizations. Participants needed to deposit a monthly membership charge of Ten USD to Ninety Nine USD and deposit an initial commitment of up to $10k to participate.
According to its findings, the Commission determined that about Ninety-eight percent of the cash dispersed was compensated out of the wallets of incoming participants and that ZeekRewards constituted a $0.9 billion Ponzi scam. He was penalized $245 million and convicted to 177 months in jail due to his actions.
Summary
The term “high-yield investment program” (HYIP) refers to an illegal financial scam that promises investors huge profits on their money, sometimes more than a hundred percent. The majority of high yield investment programs (HYIPs) are Ponzi scams, in which the organizers extract funds from incoming participants to provide rewards to existing participants.
High-yield investment programs, commonly called “prime bank scams,” generally feature the supposed trade or issue of “prime” bank financial products, with allusions to prime EU or prime international bank instruments being used as a starting point. Enormous promised profits, faulty economic products, great confidentiality, assertions that the trades are a fantastic prospect, and a substantial amount of intricacy around the assets are all cautionary indications of a high-yield investment program (HYIP).
