Most HYIPs Are Ponzi Scams
Most HYIPs are Ponzi scams. HYIP stands for “hybrid asset installation program”. A high yield investment plan (HYIP) is usually a fraudulent investment plan that purports to bring unusually high returns, usually in excess of 100%. Most HYIPs are Ponzi scams in which the organizers take supposedly private money from new investors, promising to return them with high profits, to pay previous investors with supposedly private money, and then return the money to these investors, again with claims of extremely high returns.
These schemes typically call for investments from new investors using loans and credit cards. A high-yield investment program is used as an “incomplete” business model. The venture is marketed to potential investors through exaggerated testimonials and claims of outrageous high returns. Many HYIP companies operate their businesses in names similar to well-known high-street lenders such as Wachovia or Bank of America, or investment firms like Scottrade or Schwab.
HYIP companies typically require new investors to obtain either a loan or equity line from a primary investment, i.e., a prime bank financial instrument. The purpose of this is to disguise the nature of the high-interest financing required by the companies. Most HYIPs that use “investment grade” commercial real estate loans and notes as collateral are registered investment companies (ROIs). Their business models are heavily based on those used by high-yield investment programs.
Most high-yield investment programs have been deceptively structured in order to attract new investors using the most attractive financial products available. Investors in HYIP companies may be uninformed of the risks and costs associated with these types of financing programs and may invest more money than necessary. HYIPs typically do not provide any type of standard asset protection or retirement benefits, as most high-yield investment programs do. High-yield investments offer very low initial returns but carry significant and dangerous risks.
Most HYIPs that use a service are insolvent and do not have the assets, funding, or resources to sustain them during periods of time when they are not generating high-yielding investments. In many cases, there are no assets or other tangible assets for the servicing company to secure the loan or debt obligations of the high-rollers. Investors in many high yield investment programs, especially HYIPs, often become locked into long-term contracts for credit or equity which severely limits their options if the company goes bankrupt or is unable to maintain its financial obligations. These contracts often force the high-roller to accept unreasonably high returns at the expense of poor or no returns at all in the future.
Most HYIPs, like all high yield investment programs, are scams. HYIP programs are designed by high-roller brokers who disguise themselves as experts on financial instruments who have actually experienced financial consultants and investment planners who seek to take advantage of the gullible investor’s lack of knowledge and expertise to persuade them to invest in high-yielding schemes. HYIP brokers use jargon and complex language to convince potential customers that investing in a ship is safe and advisable. The goal of an HYIP broker is to convince the uninformed investor that investing in high yield investment programs will yield great results, when in fact it is a complete waste of time and money. Most HYIP programs are nothing but high yield vanity projects which are designed to run counter to investor interests and the requirements of the US federal government.