An HYIP is an abbreviation for a high yield investment program and is a type of Ponzi scheme. This is most of the time an investment scam promising unbelievably high returns on investments. This is accomplished by paying the older investors with funds invested by the newer investors in the scheme.
The Mechanics Of HYIP’s
An HYIP is usually set up as a website and offers a high return investment program. The rate of return is usually one percent every day. On average there are very few details disclosed about how the money is actually invested. The U.S. Securities and Exchange Commission has declared this type of investment as fraudulent. They claim investors are being mislead by bogus programs and that social media is being used to create the illusion that the program is legitimate. Ponzi schemes started early in the 1900’s since websites made it much easier to accept payments on a worldwide basis. A standard merchant account does not have the accessibility of an electronic money system. Some HYIP’s are established with their own company for handling digital currency. One specific company called StormPay was established in 2002 yet managed to remain in business even after the state of Tennessee shut down their HYIP. Often an HYIP will be established in a country specifically because their tax fraud laws are lenient. This gives the operator immunity from other countries laws regarding investors. The websites used often offer anonymous hosting and will continuously accept transactions coming from the people investing in the scheme. Some investors believe if they invest early enough in a HYIP they will see a healthy return and be able to cash out before the HYIP collapses and damages the later entrants in the scheme. This is a highly risky gamble since bad timing may cost the investor to lose all the funds they contributed to the scheme. Some investors use specific sites known as tracker sites that have a current listing of schemes and their status, like the hyip monitor. There is no evidence that definitely shows these sites enable an investor to make more money with the use of these sites.
The U.S. Securities and Exchange Commission
The U.S. Securities and Exchange Commission filed a complain in August of 2012 against Paul Burks and Zeek Rewards. The North Carolina complaint alleged an investment opportunity was offered through Zeek Rewards promising the investors they would share in the company’s profits and earn returns. The profits were supposed to amount to 1.5 percent daily. Investors in the company were given encouragement to let their funds compound to increase their rate of return. The U.S. Securities and Exchange Commission contended this was a pyramid scheme. There was a subscription fee for new members of $10 to $99 U.S. dollars with the initial investment requirement set at $10,000. The U.S. Securities and Exchange Commission stated only 1 percent of the company’s actual income was disbursed and alleged that Zeek Rewards was a Ponzi scheme worth $600 million that affected one million investors. Paul Burks was required to pay the U.S. Securities and Exchange Commission four million dollars and cooperate in their investigation. He was imprisoned for 14 years and eight months.
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