LET'S LEARNING ABOUT HYIP (Part I)

HYIPs are purported investment programs normally offered via the Internet. HYIPs typically accept investments of $100 or less while promising high returns. The introduction of e-currencies such as Liberty Reserve and StormPay (although almost all HYIPs do not use StormPay as of February 2006, see StormPay article for why) has made it easy for HYIPs to operate across international boundaries, and to accept large numbers of small investments.

No HYIP has, as yet, survived for very long without turning out to be a scam. Scam HYIPs are Ponzi schemes, in which new investors (usually unwittingly) provide the cash to pay a profit to existing investors, which they could 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 spam emails, forums or mailing lists, since 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 the United States, Europe, or Japan - countries that have strong laws against unregistered investment programs. HYIPs disclose little or no detail about the principals, management, location, or other aspects of whom is getting the money 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 their investment programs actually work.

The largest HYIP scam that has ever existed is PIPS (People in Profit System or Pure Investors). The investment scheme was started by an engineer, Bryan Marsden, in 2004 (according to the Wayback Machine record and spanned more than 20 countries in the world. PIPS is now being investigated by Bank Negara Malaysia.

According to a website HYIP Scam Search that maintains a database of HYIP scams daily, as at May of 2006, the total number of HYIP scams was approximately 3500. This is the total number of scams occurred from 2004 to 2006 and excluding scams not reported. About 5 new scams are reported every day. 89% of the scams preferred e-gold and liberty reserve as their online payment processors than others

source: naijainvestors.blogspot.com