HYIP stands for High Yield Investment Programs and is a get rich quick scheme. HYIP’s promise from 1% up to 200% a day of the total invested amount. If you invested in the 200% a day program 1$ you would get 2$ the next day, 4$ the second, 8$ on the third and so on… if you left all your money in the program without taking anything out. This method is called compounding. Of course this just doesn’t work as well as written and advertised. At all times you are risking you own money and when you actually make a profit, it is at the expense of someone else’s loss. So as you see, we have some moral issues here. We can categorize HYIP’s into three categories with approximate percentage:
a) Scams 80%
b) Games 15%
c) Legit 5%
98% of all online HYIP’s are either pyramid schemes or Ponzi schemes.
What is a Ponzi Scheme ?
Ponzi Scheme is named after Charles Ponzi who defrauded 10.000 investors for 9.500.000$ with this scheme. It certainly was not last and neither the first time this method was put to use, but still the scheme was named after this famous and quite genius criminal. Mr. Ponzi was an Italian immigrant and came from a wealthy family. In the early years of his life he never had to work, his family would pay him for trips and other spendings. At the age of 21 when he first entered the US, Charles Ponzi was left with 2,5$ due to his wealthy living style and no work. He then faced the reality and worked for 15 years many low paying jobs and also was sentenced to prison a few times, because of his strong love for money. In 1920’s Ponzi put this method into use. He claimed he found a loop hole in international trading of postal coupons and promised to return you 150% in 45 days. Explanation to his investors was he was buying some sort of stamps which were worth one cent in Spain, and the sold them in the US for 6 cents. This as well as some other stories and rumors he spread around of course only was a cover for his genius scam. Behind the scene he was just using the later investors money for payouts of the first investors. What he needed was fresh flow of money and the scheme would work constantly until he would run out of new investors. Lets look at an example. Joe invests in Ponzi 1000$, one day later also Maria gives 2000$ to invest in his “business”. Ponzi pays the profit to Joe with Maria’s money and Maria gets paid by money of a later investor. That is how the scheme works, stealing from one to pay the other. And those investors who were actually paid, spread the word how quickly they doubled their money, and thus guarantee the flow of new investors. Ponzi’s criminal financial carrier went from 0 to almost 10 million dollars in 6 months when it was put to an end by the authorities.
These HYIP’s are run by people who’s only intention is to steal your money. Most of these scams are Ponzi schemes. Every day hundreds of new ones appear across the globe. A very famous online scam was profits4investing.com, happened in 2005. During the time of the internet fraud, their conduct resulted in $684,388.74 in losses to 9,756 victims. Money never was invested, but same as in the Ponzi scheme was used for personal use and some to pay the first investors from the money of later ones to create a false belief that the program is legitimate.
In the United States a Ponzi Scheme is illegal, but that does not go for all the countries of the world. So some people are placing Ponzi Games to play with investors. Their explanation of the Game is accurate and promises high paying figures, but closes when a certain percentage of payouts has been reached. Usually this is about 90%. The remaining 10% go into the pockets of program owner. This means if the total invested amount into such a game is 10.000 dollars and 9.000 dollars already were paid to the previous investors the program will close. First investors will leave with a profit, those who come too late with a loss. It all is part of the game. Usually when such a period ends, a new game starts all over again.
Some HYIP’s are legitimate, but the thing is you almost never will know and recognize whether the program is real or not. High profits in such legitimate HYIP’s are possible because of forex or stocks trading, real estate, paper trading or any other means of investment with high ROI (return on investment).
The default method of payment used to finance and invest in todays HYIP’s is eGold.
Growth of HYIP’s is supported by human greed. Every HYIP promises a percentage or actual sum of money for each new customer you refer to the program. This creates a sea of affiliates who are trying to get a huge
underline of new referrals. At such a high amount of offered HYIP’s today it is quite hard to get people interested in the program you advertise, so some have decided to split 50/50 of the percentage to their each individual referral. For example if you refer somebody who invests 100$ in the program and the administrator promises 10% for each investment of your direct referral, you get 10$. You split this 10$ in half with your referral, so you get 5$ and your referral partner the other 5$. This makes joining a new HYIP program even more tempting and getting referrals easier.
Some people join games as well as scams regardless of the results or ethics of such behaviour. They play by going in and out quickly, hoping they will get a profit before the HYIP program is over. Some do succeed and make constant profit at playing such games, however by doing so, they are actually taking money from other investors and at the same time support scammers to make new HYIP schemes. As such they are no better than the scammers themselves, as they are aware to be part of the scam and still continue investing and supporting it for their own short time profit.
If it looks to good to be true it probably is.