SEC Issues Investor Alert Regarding High-Yield Investment Program Scams

As an investor, you want to maximize your returns. This is the whole point of investing, and the more your investments yield, the more comfortably you can live in retirement.

But, when investing, it is important to have realistic expectations. There are no guarantees, and while individual investments may occasionally outperform the market, there is no magic bullet that you can ride into your golden years.

Even if you know this, promises of “high yields” can still be very tempting.

Promoters know this, and they will use these promises to get your attention. “High-yield” investment promotions are prevalent online, and some individuals still promote these “investment opportunities” at in-person events as well. In the vast majority of cases, these promotions are scams, and if you invest, you will find yourself facing substantial losses.

SEC: “High-Yield Investment Programs Are Likely Scams”

Recently, the U.S. Securities and Exchange Commission (SEC) issued an Investor Alert warning of the risks associated with high-yield investment program scams. As the SEC plainly states, “Websites promoting High-Yield Investment Programs are likely scams.”

While there is no precise definition of “high yield,” most brokerage and advisory firms are able to grow their clients’ portfolios by around 5 to 10 percent per year. As a result, anything much above 10 percent can generally be considered high-yield. However, since promises of 15 percent (or even 20 percent) may not be enough to get investors’ attention, most promoters of high-yield investment scams will usually promise returns somewhere in the range of 30 to 40 percent. However, some scam artists may even claim to be able to consistently generate returns of 50 percent or more.

As the SEC states in its Investor Alert, “The hallmark of a high-yield investment program (HYIP) scam is the promise of incredible returns with little or no risk to the investor. If you come across an investment program that promises high returns with little or no risk, be aware that it is likely a fraud.” Even with just this brief statement, we can identify three major red flags for high-yield investment fraud schemes:

• Promised Returns – As we said in the introduction, there are no guarantees when investing. No legitimate stock broker or investment advisor will promise that your investments will generate a positive yield.
• “Incredible” Returns – Likewise, no legitimate stock broker or investment advisor will come anywhere close to suggesting that you will achieve “incredible” results. Legitimate brokers and advisors know what is realistic, and they want their clients to have realistic expectations.
• Little or No Risk – All investments carry risk. When you put your money in the market, there is not just a possibility that you will lose some of your money, but there is a possibility that you will lose everything. Anyone who tells you otherwise isn’t telling you the truth.

But there are many other red flags for fraudulent high-yield investment programs as well. Along with these issues, other signs that someone may be running a high-yield investment fraud scheme include the following:

• Direct Contact Via Email, Text or Social Media – Unless you already have a professional relationship, a legitimate broker or advisor will not contact you regarding unsolicited investment opportunities. If someone you don’t know contacts you about a high-yield investment program via email, text or social media, you are most likely the target of a scam.
• Limited Access to Information – Legitimate brokers and advisors will be more than happy to answer your questions and provide the issuer’s documentation for all investment opportunities. If you can’t obtain basic information about an individual or an investment, this is most likely a sign of fraud.
• Limited (or No) References – Similarly, if someone who contacts you is evasive when you ask for references, this is a red flag as well. Avoid relying solely on online reviews, as these can be fabricated (and they often are with high-yield investment program scams).
• Unprofessional Websites – Scam artists will often create fake websites to make them appear legitimate, and if you look at the SEC’s Investor Alert, you will see one fairly convincing example. However, there are usually telltale signs of fraud—such as poorly-written content, broken links and graphs purporting to show atypical returns.
• Lack of Registration – As the SEC explains, high-yield investment programs “typically involve unregistered offerings,” and “[m]any fraudulent investment schemes involve individuals who are not licensed or registered.” You can find out if an individual or investment program is registered using FINRA BrokerCheck or Investor.gov. If you cannot find registration information through one of these resources, do not let a promoter convince you that this is a mistake or that the system hasn’t been updated—because this almost certainly isn’t the case.

What To Do if You Lost Money in a High-Yield Investment Program

We have warned about high-yield investment programs previously as well, and we regularly hear from investors who have lost money in high-yield scams. If you have lost money in a high-yield investment program, you need to speak with an attorney as soon as possible. Even if the SEC is investigating, you will still need to take legal action to recover your investment losses—whether this means filing a securities fraud lawsuit or holding your broker accountable for recommending a fraudulent investment program in FINRA arbitration.

To prepare for your meeting with an attorney, you should collect any documentation you have available. If possible, you should also save screenshots of any relevant social media posts or web pages. Your attorney will provide a preliminary assessment based on the information you are able to provide, and then your attorney will explain what next steps are necessary to pursue any recovery options you may have available.

Speak with an Attorney at Zamansky LLC

Did you lose money in an investment after receiving promises of high yields? If so, we encourage you to contact us promptly for more information. To speak with an attorney at Zamansky LLC in confidence as soon as possible, call 212-742-1414 or request a free consultation online today.