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HYIP Scams
A High Yield Investment Program, or HYIP, is a purported investment program normally offered via the Internet. HYIPs typically accept investments of $500 or less while promising high returns.
No HYIP has, as yet, survived for very long without turning out to be a scam. HYIPs are Ponzi schemes, in which new investors (usually unwittingly) provide the cash to pay a profit to existing investors, which they typically then withdraw leaving nothing to pay the new investor. This approach allows the scam to continue as long as new investors are found and (or) old investors leave their money in the scheme, known as compounding (because even higher profits are promised).
HYIPs are frequently advertised in HYIP monitors (see below), spam emails, forums, mailing lists and Google AdWords. People are typically given a commission (for example, 9% of invested funds) when they provide a referral of a new customer.
HYIPs typically are not based in places such as the United States, western Europe, or Japan - which have strong enforcement against unregistered investment opportunities. Most HYIPs disclose little or no detail about the underlying management, location, or other aspects of how money is to be invested, and relatively little information (other than asserting that they do various types of trading on various stock and other exchanges) on how they actually generate the returns they purport. They are sometimes presented with some form of an emotional appeal, appeals for faith, and promises that they will help investors achieve financial freedom.
The introduction of e-currencies has made it possible for HYIPs to operate on the internet and cross international boundaries, and to accept large numbers of small investments. HYIPs usually accept e-gold, e-bullion, INTGold, and until Feburary 2006, StormPay.
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