High-yield investment programs (commonly known as “HYIPs”) have seen a recent surge in popularity, fueled by social media and savvy Internet marketing tactics. However, while these HYIPs often promise quick, substantial returns – in some cases as much as 100 percent per day – as the Financial Industry Regulatory Authority (FINRA) puts it, “virtually every HYIP we have seen bears hallmarks of fraud.”
Most HYIPs operate like Ponzi schemes, and they use flashy, attention-grabbing, and often aggressive marketing tactics to get individuals to “invest” in their “guaranteed” returns. However, in most cases these programs use new investors’ funds to repay earlier investors—while the operators keep most of the money for themselves. In some cases, investors have lost tens and even hundreds of millions of dollars by giving money to fraudulent HYIPs.
Warning Signs of High-Yield Investment Scams
The following are all potential warning signs that a high-yield investment program is a scam:
1. A Promise of Guaranteed Substantial Returns
Historically, even the best stocks have averaged returns of less than ten percent per year. How, then, do HYIPs offer 30, 60, and even 100 percent returns daily? The answer is: they can’t. If you see a promise of unrealistic returns, you are most likely looking at a scam.
2. No Information about Investment Strategy
Many HYIP operators seek to get individuals so excited about the possibility of unattainable returns that they simply sign up without doing their research. Unfortunately, this strategy often proves successful. If you cannot find any information about the program’s investment strategy on the company’s website (or, worse, if they won’t give you any information when you ask for it), the program may be a fraud.
3. No Information about the Company or its Founders
Understandably, most HYIP operators prefer to remain shrouded in secrecy. On the other hand, legitimate investment funds and fund managers should be more than willing to tell you about their experience and investment history. Companies that offer investment opportunities without sharing any information about themselves (in many cases not even an address) are in many cases operating fraudulent HYIPs.
4. No FINRA or SEC Registration
In almost all cases, individuals and companies that offer securities to U.S. residents must be registered with both FINRA and the Securities and Exchange Commission (SEC). You can check to see if the person or firm that is offering you an HYIP is registered using FINRA’s free BrokerCheck service.
5. You Are Required to Use E-Currency
These days, most HYIP scam artists require program “participants” to use some form of e-currency. Legitimate investment brokers will not require this. If you are asked to register an e-currency account as a condition to participating in an investment program, the program is probably an HYIP scam.
Have You Fallen Victim to a High-Yield Investment Scam? The Attorneys at Zamansky LLC May Be Able to Help
At Zamansky LLC, we help individuals recover their losses after falling victim to high-yield investment scams, high-yield bond losses, and other types of securities fraud. If you would like to speak with an attorney about your situation for free, call (212) 742-1414 or send us a message online today.