SECTION ONE
HYIP: The World Of Crime, Criminals and Fraud
DO HIGH YIELD INVESTMENT PROGRAMS (HYIP’s) EXIST?
1. Do HYIP’s Exist?
a. Alert! Yes. High Yield Investment Programs or HYIP’s do exist, but they only exist as fraudulent transactions.
b. There are thousands of them, and a worldwide sub-culture that is involved everyday in presenting programs to brokers and investors, all with the intention of extracting money from an investor that WILL BE LOST!
c. In another answer to this question, one may say that HYIP’s do not exist as they are all fraudulent. I have said it both ways, and both ways are true.
d. Small Investment HYIP’s.
§ Alert! These are transactions on the internet where the investment is under $10 million (and sometimes as low as $1 dollar), and the fraudsters promise a return of, for example, 1.5% per day or similar return. These are ALL Ponzi Schemes!
§ Alert! And they all pay! Yes! They ALL pay. But they only pay in order to get others to invest, because that is one of the key elements of a Ponzi Scheme. You cannot have a Ponzi Scheme without paying some of the investors to make a track record that can be used to solicit other investors.
§ However, in the end the Ponzi Scheme will fail and investors will lose their money.
§ THIS IS THE RULE: IF AN HYIP TYPE INVESTMENT IS PROMISING EXTRAORDINARY RETURNS AND THE AMOUNT OF THE INVESTMENT IS UNDER $10 MILLION, THE INVESTMENT IS A FRAUD. So please do not email me with questions about investment of these types that are under $10 million. They are frauds! Even the greediest idiot should be able to apply this rule!
e. INVESTOR ALERT! Fraudsters are using my name, my website, and book to induce investors to invest in their fraudulent schemes. I DO NOT publicly endorse any particular investments of any kind whatsoever. If you see my name or something I have written quoted with regard to making an investment, turn and run! Do NOT invest! If you see someone using my name to induce investments, please let me know.
WHAT DO HIGH YIELD INVESTMENT PROGRAMS (HYIP’s) LOOK LIKE?
1. In General
a. Generally, these investment programs involve the purchase and resale at a profit of Ten Year AA rated Medium Term Notes (MTN’s) with an annual interest payment of 7.5% which are instruments issued by banks.
b. The important caveat here is that these MTN’s are not available at a discount to 99.99% of the people who are promoting these programs.
2. Purchased At a Deep Discount.
a. The investor will be told that these AA rated MTN’s will be purchased at a deep discount, sometimes as much as 20 to 40% or more, and in reality this is NOT true or possible.
b. Alert! An AA rated bank does not have to deeply discount its securities.
c. Alert! According to the fraudsters, this deep discount is supposed to allow the investor to purchase the instruments, for instance, at a 20% discount and sell them at or near par for a 20% profit. This is nonsense. It is a sign of a fraud!
3. Huge Profits Are Earned.
a. The profit representations are so huge that they seem beyond belief…and they are! To hear that an investor can earn 50% a month or more over a 40 week trading period during a one year term is not unusual. Often the misrepresentation of profits is even more extravagant. Other transactions are represented to bring the investor 3 to 10 times his investment in 90 days. Look out for nonsense like this!
4. Tips For Spotting HYIP Fraud.
§ Investment is under $10 million. If the HYIP type investment is under $10 million, IT IS A FRAUD! Now, anyone (even internet HYIP investors) should be able to figure out this clue!
§ Multiple Investors. If it takes more than two persons to aggregate the minimum of $10 million or more, presume it is a fraud!
§ Federal Reserve. Any representation that the Federal Reserve, or any other
§ Commitment Holder. If there is a representation that the investor’s funds will have anything to do with a “commitment holder”, this is certain tip that there is a fraud, as the term “commitment holder” is solely a term created by fraudsters.
§ Humanitarian Purposes. Often the fraudsters will state that the law requires that some of the profits be utilized for charitable or humanitarian purposes. This is not true in private securities trading. This is a sign of a fraud in progress.
§ Leasing of Bank Guarantees, Letter of Credit or Lines of Credit. Leasing of any bank instrument to invest in a HYIP is a fraud and will not work. Do not pay any upfront leasing fee for these instruments. They cannot be used in any legitimate transaction without certain disclosures which happened to kill the deal. And they cannot be used in HYIP deals, because these deals are all fraudulent and thus will not generate any profits. These deals are also called “credit enhancement” transactions. Also read “Bank Guarantees In A Nutshell
5. No Risk. Usually the representation is that there is no risk for the investor. This risk is represented as being eliminated in some of the following ways:
§ The funds do not have to be moved from the investor’s account. This is pure nonsense. Try and buy something without taking your money out of your wallet. Investor’s bite on this nonsense over and over again…and these are supposedly smart people! This approach is made with an idea of a “bait and switch” wherein the investor will later be asked to either (i) allow a fraudster to be signatory in some manner on the investor’s account, (ii) or to put the money in a sub-account of the fraudster, (iii) or to use the funds as collateral in some slippery way.
§ Funds are Placed in Lawyer’s Trust Account. Lawyers are either in on the “con” or are innocent and get “conned” like everyone else. Lawyers lose HYIP funds everyday. Don’t do it!
§ Funds Are Guaranteed By Third Party. These guarantees are always worthless, and do not guarantee anything other than that the investor will lose his money. These guarantees are in the form of phony standby letters of credit, bank guarantees, corporate guarantees, trust guarantees, etc.
§ Funds Are Backed By Collateral Provided By Fraudster. Beware of this situation where fraudster represents that the investor’s funds are safe, because they are collateralized by gem stones, certificates of deposits that are either forgeries or issued by non-existent banks, safe keeping receipts, bank guarantees in the format of SWIFT messages (e.g. SWIFT 760) that are fraudulent, 108 bank guarantees, etc.
§ Other Fraudulent Representations of Safety. There are many other representations that fraudsters make as to the safety of investment, and they all cannot be detailed here.
§ Learn What You Need to Know. For the best information available anywhere on HYIP’s SERIOUSLY consider purchasing the book Lawyers’ Guide: High Yield Investment Programs and Ponzi Schemes. Book Info
§ Private Securities Trading. If you wish to learn about real trading transactions, increase your education by reading “The Misunderstood World of Private Securities Trading” It is available at this web site: CLICK
SECTION TWO
MAKING MONEY OR GOING TO JAIL: WHICH IS IT?
BROKERS AND INTERMEDIARIES
CAN HYIP BROKERS OPERATE LEGALLY?
- NO!
a. Now, what part of “No” do you not understand? It is impossible for HYIP brokers to present an HYIP opportunity in the United States to either an (i) assisting broker or (ii) a potential investor without committing a felony that calls for a substantial prison term.
- Booking a Trip To The Penitentiary for Brokers (Or The Best Advice You Will Ever Get!):
a. In order to induce an investor to participate in a HYIP, or a “buy/sell” deal, simply say to him one or more of the following “Inducement Misrepresentations” when you do not know of your own knowledge and due diligence if they are absolutely positively true (You cannot rely on what other brokers or fraudsters have told you or given to you to read, because your good faith” belief or pious intentions are not a defenses to prosecution.):
The Unlawful Inducement Misrepresentations
(“Inducing Misrepresentations” are statements made to induce an investor to invest in a HYIP)
§ Misrepresent or untruthfully imply that the transaction is “without risk” or involves “no risk”.
§ Misrepresent or untruthfully imply that the investor will make an extraordinary AND unrealistic amount of profit.
§ Misrepresent or untruthfully imply that you or the people you work with own or control securities (e.g. MTN’s) that are going to be bought and sold to generate the profits.
- Intermediaries Operating Lawfully
a. On the other hand, with the advice of a competent local lawyer (as there may be local “finder” laws with which one must comply...and expect legal fees in the $1,000 to $2,500 range.), “intermediaries” are in fact paid with the prospects of the finders becoming millionaires solely for an introduction (I emphasize “solely”, because that is all the “finders” lawfully can do.).
b. Finders cannot describe the transaction and particularly make any representations about the transaction (e.g. representation of the return on investment, and no finder should ever ask about the return) that would in any manner indicate that an offer is being made. The finder cannot advance to potential investors “selling points” of any kind. They only “introduce”...nothing more!
c. The finder can only deal with investor(s) who have a minimum of $10 million, and the finder cannot aggregate (combine) investors. [If the finder has no investor(s) with $10 million or more, then the finder is wasting his/her time.] Often this minimum is much higher, usually $100 million or more.
d. Finders earn “finders’ fees” at a much lower percentage of the profits than brokers in non-existent HYIP deals. But finder fees are paid and HYIP broker fees are not!!!!
e. Well prepared finder’s fee agreements spell out these restrictions and the compensation due to the finder.
f. Never operate without a finder’s fee agreement both for (i) the protection of the finder’s fee, and (ii) more important, protection of the finder from legal liability as an illegal broker and criminal co-conspirator.
g. BEWARE! How easy is this? It is not that easy! Here is the BIG problem: Even as a finder, one can work with and thereby conspire with people who commit frauds; e.g. other people that make the “Unlawful Inducement Misrepresentations” discussed above. So to operate as a finder one must deal with real investment situations that are legal. Consequently, even a finder must “know your customer” and know of the legality of the investment to avoid potential criminal and civil liability. The finder must get an education in what he/she is doing and perform due diligence for his own sake…not the sake of investors…but to protect himself from legal liability. Since a finder is not going to make any representations about the transaction what he finds in his due diligence shall NOT be relayed to the potential investor. It is up the investor to do the proper due diligence.
- An Important Personal Note on HYIP Intermediaries
¨ I have watched for over 20 years hundreds of brokers try and score the multi-million dollar HYIP victory, and I have never yet seen one single broker paid from the profits of a transaction (the reasons are obvious; see above on non-existence of HYIP’s).
¨ I have known many brokers who work at the HYIP business almost full time, using every bit of their cash to cover the substantial costs of working in this wicked business. They seek high commissions in their fruitless efforts, and they NEVER receive a dime from any profits (Profits are not generated!).
¨ And here is the really bad part: Their efforts are illegal and they never get a deal done and never will.
¨ Another thing that these ineffective brokers don’t understand is that when any commission is excessive, the principals are unlikely to honor their commitments to pay them because they do not consider them fair. So it is not only stupid to be an intermediary in HYIP deals because it is illegal, but the intermediaries structure the deal whereby no investor would pay the outrageous commission if the deal were legal.
¨ Here is the question I ask myself: Why are these brokers so hard headed and stupid? Their stupidity in not choosing the right situations and being too greedy usually gets them into (i) criminal trouble, (ii) they lose their house and car, and (iii) sadly they quite often lose their spouse and family. It is like the ravages of alcoholism or a drug habit.
SECTION THREE
More On Scamming
Ponzi Schemes, Bank Guarantees, and Standby Letters of Credit
What about high yield investment programs and “Ponzi Schemes”?
§ HYIP’s are the part and parcel of high yield investment programs. Funds are raised with the promise of profits from the performance of high yield investment programs, and the funds in fact are used (in some cases) in a Ponzi Scheme; i.e. the investments of some investors are used to pay profits to other investors, because with the proof of payment of profits the paid investors will bring in new investors. For more information see “Ponzi Schemes In A Nutshell”
Related Scams Using Bank Guarantees or Standby Letters of Credit
§ There are many frauds perpetrated with the use of purported bank guarantees and standby letters of credit schemes. For information on Bank Guarantees, see “Bank Guarantees In A Nutshell”. For information on Standby Letters of Credit see “Standby Letters of Credit In A Nutshell”.
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