If you have heard of the HYIP or high-yield investment program, you should know the dangers of investing in one. It is a fraudulent scheme claiming to offer incredibly high returns when you invest in it. HYIPs are unregistered investments and run by people without licenses. This is why they are usually frauds and you could get duped in the process.
The hallmark of such scams is the guarantee of unbelievably high returns with practically zero risk for the investor. So, a HYIP site typically guarantees yearly, monthly, or weekly returns of almost 40% and more. Some of the scams use the words “prime bank” program. You will find that the scammers use social media channels, like Twitter, Facebook, and YouTube, for promoting these scams. The idea is to create an image of social consensus about legitimacy of the schemes. They encourage investors to use their social media accounts to share data about the HYIP site. So, if you have been approached to invest in an HYIP, be extremely cautious about it because you may get scammed.
How HYIPs work:
The High-Yield Investment Program will offer you guarantees of more than 100% returns annually. This is a ploy to entice unsuspecting investors to invest in these projects. They simply use the new investors’ deposits to pay off their previous investors. They are not anything like the high-yield bond investments that guarantee better than investment-grade interest rate. These are Ponzi schemes where organizers are only interested in siphoning funds.
This type of scam had been around since the beginning of the 20th century, but has recently become even more sophisticated due to digitalization. Digitalization innovations have made it easy for scammers to cheat people. The operator of such sites will make attractive promises of huge returns to investors but they do not clearly state how the investment funds will be managed. You do not get to know how funds will be invested or where they are kept.
According to the Securities and Exchange Commission/SEC, these fraud schemes include the purported trading and issuance of the “prime” bank financial instruments. In 2010, the FINRA had warned investors that the con artists who create the HYIPs are big experts at using social media handles to tempt investors. To prevent getting caught up in such scams, we have come up with the best crypto exchanges – Business2Community, so that traders and investors can find the best exchange to trade without trapping any fraud. The investors encourage the use of electronic payment systems as these are easily accessible instead of regular merchant accounts. Some HYIPs have started their own digital currencies like V-Money, Storm Pay, and Standard Reserve. Some of the operators have chosen to start these schemes in nations with poor fraud laws. They usually host their sites with a web hosting company offering “anonymous hosting”. The same site is then used to receive money transfers from those keen to participate in this scheme.
You will also find some smart investors trying to make a quick buck by investing in these HYIPs at the initial stages and then cashing out even before the scheme collapses. They do this to make profits from those who have entered the scheme later on. This is pure gambling because if you happen to be late in cashing out, you lose all your money. To avoid this, some investors have started using “tracker sites” that list the existing schemes and their existing state.
According to the SEC, such schemes can be detected because there are many warning signs. These are excessive guaranteed returns, extreme secrecy, fake financial instruments, and undue complexities surrounding investments. The lack of transparency should tell you that the underlying investments are not legit.