WARNING be careful in investing in HYIP (High Yield Investment Program)

WARNING be careful in investing in HYIP (High Yield Investment Program)

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HYIP stands for High Yield Investment Program, which we could translate as a high yield investment program. It is programs that offer yields incredible, such as 45% per month or 6% daily (even I have seen out there any offering 13,000% annual!).

Some characteristics of companies that manage these types of programs are:

• They have no financial license to capture funds, hiding behind behind the image of a broker to sell a fictitious security image.

• They do not tend to be audited by any independent entity.

• They impose a blockade of removal of the initial capital for several months with strong penalties for premature withdrawal.

• They usually have a structure of referrals, to encourage rapid growth. This is another aspect that differentiates them from the official instruments in which a structure of this type would be converting in practice to each participant in a financial adviser without a license.

The growth of such programs has been spectacular in the last ten years, mainly thanks to the introduction of the e-currencies (electronic currency), which has allowed them to skip any legislation and operate without borders. For this reason, most of the HYIPs accept payments via E-gold (researched by the FBI in 2006 for its relation with money laundering), EvoCash, E-Bullion, NetPay, GoldMoney, StormPay or v among others.

Of course, on the website of these investment programmes no detail about the company investment policy; is not how much they will tell us that it invest in Forex. The reality is that the money will never be reversed (if not, ask a trackrecord to any enterprise of this kind ;-)).

The stark reality

In fact, the vast majority of HYIPs operate as Ponzi schemes. This type of schemes are called thus by Charles Ponzi, an Italian who emigrated to the United States in 1903 and which, although it was not the inventor of the scheme, achieved a notoriety by capital who came to capture.

The operation of a Ponzi scheme is as follows:

• An excellent investment program is marketed through forums and web pages, with which it is possible to achieve extraordinary returns. For this purpose use terms that sound very good but that really do not say anything, such as "arbitration in foreign currency", "future coverage", "offshore investments" or similar. In general it's products marketed by entities or individuals based in tax havens, outside the supervision of the regulatory bodies, in order to attract customers with scarce financial culture (hence the minimum of input are very low).

• In the absence of a prior trackrecord, just a few investors lured by the promised yields would dare to contribute funds, usually small amounts. Be sure that passed the time investors first receive the promised performance. This encourages investors to put more money and, through word of mouth, other investors are also involved in the program. Each time gets more money and euphoria is huge, all are getting high returns.

• But the sad reality is that yields the first investors get are being paid with the money of new investors coming, and not benefits derived from investments. Thus, when investor D invests his money in a HYIP, that money is used to pay investors A, B and C. When investors X, and and Z put their money, is used to pay the rest, from the investor A investor W.

• The reason that the scheme works so well at the beginning is because first investors - those who apparently receive promised yields - normally reinvested the money obtained, so that the HYIP "managers" do not have to make too many payments. They are simply limited to send excerpts to customers with money you have in the account (and of course no detail of the operations). Also tries to minimize the withdrawal of funds by offering new plans in which the money must be deposited more time to achieve certain profitability (for example, 50% per month if we keep one year investment).

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Obviously the story cannot end well and sooner or later breaks the tragedy going on any of these three things:

1. The "managers" go away with all the money;

2. The scheme is colaps to slow down the rate at which become new investors and "managers" begin to have problems to pay fabulous returns he had promised (also a snowball effect take place because, again through the mouth to) (mouth, everyone will try to withdraw their money);

3. Regulatory authorities uncover fraud to examine accounts and find that there has been financial transactions of any kind.
   Signals that they warn that the failure of the scheme is imminent are almost always the same: lengthen deadlines for blocking of capital, creating even more profitable new products, change of jurisdiction or broker, etc.

This type of schemes combine occasionally with pyramid schemes in which are themselves investors in the HYIP that try to attract new customers with a promise to obtain commissions for this reason.

A less common variant is the of rebalance income among clients: I know that Barcelona was working during a time a program of investment in coffee Futures (exotic product = success secured ;-)) which open positions contrary in the same future with each of the halves of the accounts. Then each month simply losses is going through and earnings between accounts as "managers" earned money based on commissions.

If are not yet convinced that the HYIPs are in a 99.99% fraud here are some documented cases:

• The largest fraud in HYIP that has occurred to date was OSGold. Created in 2001 by David Reed, this HYIP lasted not much more than one year but it allowed to capture its creator some 60,000 accounts by adding a capital of 250 million dollars, with the promise of monthly performance between 30% and 45%.

• Another famous case was that of PIPS (People in Profit System or Pure Investors). Created in 2004 by Bryan Marsden got raise capital capital of 20 million dollars in 20 countries. Interestingly when the Malaysian Justice filed charges against him and his spouse for money-laundering, many of the investors of the program supported him believing that they would see their money, a behavior similar to the abductees Stockholm syndrome and is It is common to find in the forums about HYIPs.

Nor is it that we can rely much of the websites that claim to HYIP Monitor to determine if they are reliable or not. It is usually websites that charge a fee to appoint or promote the HYIP, which sometimes is reinvested in the HYIP to see if payments are received or not of such a program and determine if it is a hoax or not. Of course, there are moral hazard in the sense that there are incentives to the web and the HYIP are working together (even it is usual the HYIP to pay for clicks to your page); and, of course, to the HYIP costs you nothing pay profitability promised only to the webmaster so you promote him.

Conclusion

It is clear that the business of the HYIPs are in greed and ego to lack of knowledge of many people about financial issues. But think about it coldly: If someone wins those returns with this so secret technique, what would want to share it with you? Will you really the life in which you and others invest 100 euros in your business to then distribute part of its millionaires benefits? Accurate, it makes no sense.