What are High Yield Investment Programs (HYIPs)?
A High Yield Investment Program (HYIP) is a type of investment scam. The name comes from the ‘high yields’ or enormous profits that are promised to investors, usually within a very short period of time. While they maintain a facade of being legitimate investment companies that make money by trading in commodities, stocks, foreign exchange, cryptocurrency and more, they are actually comparable to Pyramid or Ponzi schemes. This is because the only revenue stream for the company is the deposits made by ‘investors’. Money deposited by newer investors is used to pay the older ones and, of course, the owner of the company. Such schemes are considered fraudulent and illegal.
Some HYIPs claim to be investment companies, mainly from the UK and London specifically. Their websites look professional with glossy marketing videos, high-end social media profiles, a core team of technical and financial savvy, experienced managers. Some make every effort to conceal the fact that there is no real service being provided, while other operators are quite open about it.
To create an air of legitimacy, they provide information such as the number of days they have been operating, the interest rates they promise and the number of participants. All this information has a fair chance of being complete lies or half-truths). The profits for different programs range from 1% to 300% a day, which any active investor should know is ridiculous.
HYIP operators typically use social media to appeal to victims and create the illusion of support from many consumers. On Scamadviser.com, we know a HYIP is active when we suddenly receive tens to hundreds of 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 order to gain referral bonuses.
In the end, there rarely is a real company behind the HYIP scheme, although their owners try to convince visitors otherwise.
How to Recognize HYIPs
Most low-end HYIPs are set-up by one individual (called Admin) and are generally easy to recognize. They:
- Offer unsustainable high interests, often paid daily or weekly
- Are usually guaranteed and promoted as “secure, guaranteed income”
- Require secrecy, stating they are exclusive (but are openly communicated)
- Are vague in how they supposedly make money
- Usually claim to invest in crypto, forex or gold
- (Mis)Use technical terms and refer to fictitious software or financial instruments
High-end HYIPs are more elaborate and may have an entire team working on it from developers, designers, social media experts to online marketers. This makes them a bit more difficult to recognize as scams, but there are always lies that can be caught.
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 using dummy addresses. Checking the background of the board on Linkedin and Google Image search usually reveals that profiles are fake and the images used are of people completely unrelated to the company.
Who Wins? Who Loses?
It is estimated that 80% of the investors in HYIPs lose their investments. While HYIPs are clearly scams, people keep investing in them as the lure of quick returns is too tempting to pass up. 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.
InvestorsProtect 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."
How to Get Your Money Back From an HYIP?
That is unfortunately very often a big challenge. If you paid with a credit card or Paypal, please contact them to try to get your money back. HYIPs these days insist on receiving payments in cryptocurrencies. These are difficult to trace and nearly impossible to get back. Please visit the page How to Get Your Money Back From a Scam.
Related Articles
Read the following articles for more information about how you can stay safe from investment scams:
How to Identify Cryptocurrency Investment Scams
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