Make 40% a Month! The Rise of HYIP Scams

Have you ever heard of High Yield Investment Programs or HYIPs? Scamadviser.com helps nearly 3 million consumers every month to check if a website is legit or not. Each day we receive hundreds of emails from consumers who got scammed and need help. Some of the most common complaints we receive are about so-called High Yield Investment Programs or HYIP sites.

What are HYIPs?

HYIPs are comparable to Pyramid or Ponzi schemes meaning that the money of newer investors is used to pay the older ones and, of course, the owner of the scheme.

Some HYIPs claim to be investment companies, mainly from the UK and London specifically. One reason behind this is that it is extremely easy to set up a fake company in the UK as it costs only £12, takes just 24 hours and requires no documentation to be submitted for verification. This process is completely online so the scammers can be located anywhere in the world. 

Their websites look professional with glossy marketing videos, high-end social media profiles, a core team of technical and financial savvy, experienced managers.

Other operators are quite open in that they are an HYIP, stating information such as

• How many days they have been operating,
• the interest rates they promise for different programs (from 1% to 300% a day which any investor should know is ridiculous)
• and the number of participants (which may be true or a complete lie).

HYIP operators typically use social media to appeal to victims and create the illusion of social consensus surrounding the legitimacy of these programs. On Scamadviser.com we know a HYIP is active when we suddenly receive tens to hundreds of very positive customer reviews for a new website in one or two days. These reviews are either paid for by the HYIP site or written by small investors trying to convince others to join.

In the end, there rarely is a real company behind the HYIP scheme, although their owners try to convince visitors otherwise.

How big is the HYIP market?

Nobody knows how big the HYIP market is. Several websites, so-called HYIP monitors, keep track of the thousands of HYIP sites and if they are still paying out. Investors-Protect.com reports about 20 new websites are added every day.

The most popular HYIP program in recent years may have been BitConnect. BitConnect was launched on the 15th of February 2016 where users traded Bitcoin for BitConnect Coins (BCC) and were promised high returns of up to 40% a month. If you kept your money in BitConnect, you would make a huge daily profit. The BitConnect coin rose in value from $0.17 at the start to $463 in December 2017 while dropping to $0.40 in March 2019. At its peak, the market value of BitConnect was $2.6 billion.

How to recognize HYIPs?

BitConnect was very open in its model, which offered more interest as you put in more money. The visual they used on their own site should have triggered investors that BitConnect may be a Pyramid scheme.

Most low-end HYIPs are set-up by one individual (called Admin) and are in general easy to recognize. They:

• Offer unsustainable high interests, often paid daily
• Which are usually guaranteed and promoted as “secure, guaranteed income”
• Require secrecy, stating they are exclusive (but are openly communicated)
• Are vague in what they actually invest (and if they do it is usually in crypto, forex or gold)
• Use technical terms or refer to fictitious software or financial instruments

However, the high-end HYIPs are more elaborate and may have an entire team working on it from developers, designers, social media experts to online marketers. To determine if they are a scam, checking company registration papers is usually not enough. These papers (often from the UK) usually turn out to be legit but of very young companies. Checking the background of the board on Linkedin and Google Image search usually quickly shows the profiles are fake and the images used from people completely not related to the company.

Companies offering financial services must be registered with the financial regulator of the country, such as the SEC in the USA or the FCA in the UK. If a company is not registered with such an entity, it is likely to not be legitimate.

Who wins? Who loses? 

While HYIPs are clearly scams, people keep investing in HYIPs, massively! We often get questions asking which HYIPs are safe. When we answer that none are reliable as they are all Ponzi schemes, we get denials or remarks that they are “still paying out”. The fact that the Admin of the website may at any time stop paying out is not considered relevant.

In the end, it is estimated that 80% of the investors lose all their money. These seem to be more men than women which is a confirmation of earlier research we did. HYIPs especially seem to hit poorer countries. If you check Google Trends you see that HYIP as a search term is mainly popular in developing African countries like Laos, Ivory Coast and Ghana and Asian countries like India, Pakistan, Bangladesh and Indonesia. “High-yield investment program” is more often searched in Eastern Europe (Estonia, Kyrgyzstan, Ukraine, and Russia).

However, while the emails we get from low-income countries state having lost $35, $150 or $200 (huge amounts considering), we also get cry-outs from American and Western European consumers having lost $3500, $15,000 or even $200,000 and more.

Investors-Protect.com summarizes HYIPs maybe best: “HYIPs are extremely risky […] they cannot be considered as an opportunity but a gamble game. If you don’t know what you are getting into, we strongly advise you to stop."

Sources:

• Interviews with several HYIP users and experts who prefer to remain anonymous.
• https://en.wikipedia.org/wiki/Bitconnect
• https://investors-protect.com