High Yield Investments Plan

A High Yield Investment Plan (HYIP) is in its essence, an investment plan that promises unusually high profits, sometimes as high as 50% in return to an investor’s money. Even though such bogus investment plans that promise unbelievably high returns have existed for decades, the advancement of the internet and electronic money systems have caused such High Yield Investment Plans to grow and expand more rapidly than ever before. The internet has made it possible for a schemer to reach out to and accept payments from millions of unsuspecting investors all over the world. HYIPs are a form of Ponzi Scheme.

What is a Ponzi Scheme?

A Ponzi scheme is a scam investment plan that promises investors very high returns on investment. It was named after one of history’s most notorious swindlers, Charles Ponzi. A Ponzi scheme will use the ignorance of investors with little or no financial knowledge to trick them into the scheme. Initially a it will function marvelously, as money received form new investors can be used to pay interest to previous investors. This gives investors a genuine and solvent impression of scheme. As the public becomes more confident with the fund more people will invest more and more money in the scheme. Investors are also driven to reinvest any money made, making it unnecessary for the schemer to pay any interest, and instead, simply send the investor a ‘statement’ of their earnings. However, a Ponzi scheme will eventually collapse similarly to a bank run. Most of the time, the schemer will vanish with all the money just before the collapse. In certain cases, police and government officials will be able to track down bogus investment plans before the schemer is able to get away with the money. One such example is the People in Profit System (PIPS) also known as the Pure Investors, which was the second largest reported fraudulent HYIP in history. It was tracked down by Malaysian authorities in 2005, and the schemer Bryan Marsden and his wife were charged with $20 million of fraud. More recently, Bernard Madoff was convicted of $18 billion of fraud on the NASDAQ stock market, and sentenced to a 150 years imprisonment. But officials were unable to capture the largest HYIP fraud in history: David Reed, the founder of OSGold. Within one year he made a staggering $250 million and got away with it!

Who was Charles Ponzi?

Charles Ponzi, alias Charles Ponei, Charles P. Bianchi, Carl and Carlo, was an Italian, professional confidence trickster who carried out a large scale mail fraud in Boston, USA during the 1920’s. He arrived in the US with only $2.50 but in less than 20 years he acquired a wealth of $4.59 million in 2008 terms. His scheme eventually failed within a few years and Charles Ponzi spent a few years in prison and the rest of his life in exile. Thus, the term ‘Ponzi Scheme’ was coined.

Beware of Fraudulent HYIPs

To save yourself from financial ruin you must beware of possible fraudulent HYIPs. The US Securities and Exchange Commission gives the public some invaluable advice on recognizing possible financial scams.