What is Hyip?

What is Hyip?

A high-yield investment program (HYIP) is a type of Ponzi scheme, which is an investment scam that promises an unsustainably high return on investment by paying previous investors with the money invested by newcomers.

What is Hyip overview

HYIP operators generally set up a website offering an "investment program" with returns as high as 45% per month or 6% a day that discloses little or no detail about the underlying management, location, or other aspects of how money is to be invested because no money is invested. They often use vague explanations, asserting little more than that they do different types of trading on various stock markets or exchanges to generate the returns they purport. The SEC has said the following on the matter: "These fraudulent schemes involve the purported issuance, trading, or use of so-called 'prime' bank, 'prime' European bank or 'prime' world bank financial instruments, or other 'high yield investment programs.' ('HYIP's) The fraud artists... seek to mislead investors by suggesting that well regarded and financially sound institutions participate in these bogus programs."

HYIPs collect large sums of money for the operators by using the classic Ponzi scheme method of using second- and third-tier investments to pay principal and interest back to the first-tier investors. This is continued for the first several tiers, generating positive word-of-mouth advertising for the scheme using a variety of dedicated forums. HYIPs may also mirror pyramid schemes by offering current investors incentive commissions, for example 9% of current investment, to recruit new investors. Some HYIP promoters, aware of the negative connotations of the term, have begun to use other terms such as "HYIP game" or "HYROL" (High Yield Return On Loan) as well.

The introduction of e-currencies in the late 1990s made it easier for HYIPs to operate on the Internet and across international boundaries, and to accept large numbers of small payments. HYIPs usually accept payments only by digital currency.

What is Hyip Mechanics

Though Ponzis and HYIP schemes have thrived and multiplied since at least the early 1900s, the combination of the Internet and Electronic money has played an important role in the rapid growth of HYIPs in the first decade of the 21st century.

The use of digital payments systems has made it much easier for operators of such websites to accept payments from people worldwide. Electronic money systems are generally accepted by HYIP operators because they are more accessible to operators than traditional merchant accounts. Several digital currency companies responded by taking measures to discourage their system from being used for HYIPs. Some HYIP operators opened their own digital currency companies that eventually folded; these companies include Standard Reserve, OSGold, INTGold, EvoCash. StormPay was started in the same way in 2002, but has remained in business even though the HYIP that it was created to serve was shut down by the State of Tennessee.

Some HYIPs have incorporated in countries with lax fraud laws to secure immunity from investor laws in other countries. The operators have been known to host their website with a web host that offers "anonymous hosting". They will use this website to accept transactions from participants in the scheme. The HYIP scam may also create sites which employ spamdexing or other adversarial information retrieval techniques in order to attract potential victims by creating an impression that the company has done no wrong.

What is Hyip Examples

The largest documented HYIP scam was OSGold, founded as an e-gold imitation in 2001 by David Reed. OSGold folded in 2002. According to a lawsuit filed in U.S. District Court in early 2005, the operators of OSGold may have made off with USD $250 million. CNet reported that "at the height of its popularity, the OSGold currency boasted more than 60,000 accounts created by people drawn to promises of "high yield" investments that would provide guaranteed monthly returns of 30 percent to 45 percent."

The second largest documented HYIP was PIPS (People in Profit System or Pure Investors). The investment scheme was started by Bryan Marsden in early 2004 and spanned more than 20 countries. PIPS was investigated by Bank Negara Malaysia in 2005 which resulted in Marsden and his wife being charged in a Malaysian court with 97 counts of money laundering more than 77 million RM, equivalent to $20 million. Even after these charges were brought forth, many of Marsden's followers and investors continued to support him and believe they would see their money in the future.

Some Ponzi schemes promise yields that appear realistic and as such are not considered "high-yield investment programs."

Bernard Madoff's alleged Ponzi scheme offered yields of only 5% per year, for example.

Other HYIPs that have been shut down due to legal action include:

* Ginsystem Inc. (Singapore) - Commercial Affairs Department of Singapore retrieved 2007-07-01

* IT4US (United States)

* PlexPay (Norway) - HegnarOnline, in Norwegian

* Solidinvestment (United States)

Source: Wikipedia

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