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History about HYIP Investment:
A high-yield investment program (HYIP) is a
type of Ponzi scheme, which is an investment scam that promises an
unsustainably high return on investment by paying previous investors
with the money invested by newcomers.
Overview
HYIP operators generally set up a website offering an "investment
program" with returns as high as 45% per month or 6% a day that
discloses little or no detail about the underlying management, location,
or other aspects of how money is to be invested because no money is
invested. They often use vague explanations, asserting little more than
that they do different types of trading on various stock markets or
exchanges to generate the returns they purport. The U.S. Securities and
Exchange Commission (SEC) has said the following on the matter: "These
fraudulent schemes involve the purported issuance, trading, or use of
so-called 'prime' bank, 'prime' European bank or 'prime' world bank
financial instruments, or other 'high yield investment programs.' ('HYIP's)
The fraud artists... seek to mislead investors by suggesting that well
regarded and financially sound institutions participate in these bogus
programs."
Mechanics
Though Ponzis and HYIP schemes have thrived and multiplied since at
least the early 1900s, the combination of the Internet and Electronic
money has played an important role in the rapid growth of HYIPs in the
first decade of the 21st century.
The use of digital payments systems has made it much easier for
operators of such websites to accept payments from people worldwide.
Electronic money systems are generally accepted by HYIP operators
because they are more accessible to operators than traditional merchant
accounts. Several digital currency companies responded by taking
measures to discourage their system from being used for HYIPs.
Some HYIP operators opened their own digital currency companies that
eventually folded; these companies include Standard Reserve, OSGold,
INTGold, EvoCash, and V-Money. StormPay was started in the same way in
2002, but has remained in business even though the HYIP that it was
created to serve was shut down by the State of Tennessee
Some HYIPs have incorporated in countries with lax fraud laws to secure
immunity from investor laws in other countries. The operators have been
known to host their website with a web host that offers "anonymous
hosting". They will use this website to accept transactions from
participants in the scheme.The HYIP scam may also create sites which
employ spamdexing or other adversarial information retrieval techniques
in order to attract potential victims by creating an impression that the
company has done no wrong.
Examples
The largest documented HYIP scam was OSGold, founded as an e-gold
imitation in 2001 by David Reed. OSGold folded in 2002. According to a
lawsuit filed in U.S. District Court in early 2005, the operators of
OSGold may have made off with USD $250 million. CNet reported that
"at the height of its popularity, the OSGold currency boasted more than
60,000 accounts created by people drawn to promises of "high yield"
investments that would provide guaranteed monthly returns of 30 percent
to 45 percent."
The second largest documented HYIP was PIPS (People in Profit System or
Pure Investors). The investment scheme was started by Bryan Marsden in
early 2004 and spanned more than 20 countries. PIPS was investigated by
Bank Negara Malaysia in 2005 which resulted in Marsden and his wife
being charged in a Malaysian court with 97 counts of money laundering
more than 77 million RM, equivalent to $20 million. Even after these
charges were brought forth, many of Marsden's followers and investors
continued to support him and believe they would see their money in the
future.
Some Ponzi schemes promise yields that appear realistic and as such are not considered "high-yield investment programs." Bernard Madoff's Ponzi scheme offered yields of only 5% per year,
