Some Real Facts About Fraud in HYIP

Updated: 02/28/2007 16:16
Reprints/Permissions  Hyip Monitor
Certainly, on stock market it is possible to get much wealth very quickly; many HYIP projects give back high incomes and make investors happy, lucky and very, very rich. But human nature is so and we cannot change it, in other words, becoming richer investors cannot stop and look for new opportunities to bolster their portfolios. The problem is, some promised high-return opportunities are downright frauds.

"Yes, we know that", you can say undoubtedly. "There are so many articles about scam and fraud in HYIP investment at HYIPnews." Yes, you are completely right. But many investors think that the fraud is not serious and maybe they can lose a couple thousands dollars. It is bad because there is an opportunity to get much more.

However, the fraud becomes more serious and investors can lose everything. Yes, all your money. That's I write about some real facts of scam in HYIP to show how it could be serious for you, dear investors.

I start with Ponzi swindlers. This is an old scam named for Charles Ponzi, a swindler from the early 1900s who conned $10 million from investors by promising 40 percent returns. His scam has been copied by countless crooks. The formula is simple: Promise high returns to investors and use their money to pay previous investors.

Many investors have very different opinion about this type of investment. Some people say that Ponzi is a real opportunity to receive high yields. Another group of HYIPers point out that Ponzi investment is too risky because Ponzi scammers top the list of swindlers taking return-hungry investors to the cleaners, according to the latest look at the investment industry by the North American Securities Administrators Association.

"These schemes offer products and pitches that may sound tempting to many seniors who have seen their retirement accounts and income dwindle in recent years," says Ralph A. Lambiase, NASAA president and director of the Connecticut Division of Securities. "It pays to remember that if an investment opportunity sounds too good to be true, it usually is."

Ponzi scammers often blame government intervention for the failure of their system. In Mississippi last year, two Ponzi scammers pled guilty to a scheme that bilked 41 investors from four states out of $10.2 million. They told investors they were taking part in a money-trading program. The program never existed.

The second type of popular scam is senior investment fraud. Record-low investment rates, rising health care costs and an increased life expectancy have set seniors up as targets for con artists peddling investment fraud – like Ponzi scams, unregistered securities, promissory notes, charitable gift annuities and viatical settlements. Last year, Pennsylvania securities regulators shut down a Ponzi scheme that bilked $2 million from seniors’ pensions and IRAs.

Unscrupulous stockbrokers can also be great scammers. As share prices tumble, some brokers cut corners or resort to outright fraud, say state securities regulators. And investors who have grown more cautious and scrutinized their brokerage statements have discovered their financial adviser has been bilking them via unexplained fees, unauthorized trades or other irregularities.

Another real fact of fraud in America is affinity one. Taking advantage of the tendency of people to trust others with whom they share similarities, scammers use their victim's religious or ethnic identity to gain their trust and then steal their life savings. The techniques range from "gifting" programs at churches to foreign exchange scams.

Nobody can say that unlicensed individuals, such as independent insurance agents, selling securities could be serious fraudsters making you without any money. From Washington State to Florida, scam artists use high commissions to entice independent insurance agents into selling investments they may know little about. The person running the scam instructs the unlicensed sales force to promise high returns with little or no risk.

Investors approached by an independent agent should first call the state’s securities regulator and ask if the salesperson is licensed. Then ask whether the investment being offered is registered as well. If the answers are yes, the investors should be more comfortable about the product. But investors should review the product with the same healthy skepticism that they would any investment opportunity.

Internet fraud is one of the most famous types of scam. In November 2006, federal, state, local and foreign law-enforcement officials targeted Internet fraudsters during Operation Cyber Sweep. They identified more than 125,000 victims with estimated losses of more than $100 million and made 125 arrests. "The Internet has made it simple for a con artist to reach millions of potential victims at minimal cost," says Lambiase. "Many of the online scams regulators see today are merely new versions of schemes that have been fleecing off-line investors for years."

Variable annuities are also possible to lose your investments. As sales of variable annuities have risen, so have complaints from investors – most notably, the omission of disclosure about costly surrender charges and steep sales commissions.

According to the NASAA, variable annuities are often pitched to seniors through investment seminars - but regulators say these products are unsuitable for many retirees. Lambiase says variable annuities make sense only for consumers who can afford to have their investment locked up for 10 years or longer.

We see that too many investors became victims of scam. But the fact is that although investors know about fraud, they become victims again and again. Why? One fact can make us sleep excellently in the night, namely, the words of Lambiase such as "Our fight against fraud never stops because each year con artists discover new ways to fleece the public". Trust our government and be careful!


About the author

Nicole Berger has over seven years experience writing and editing for online and print media. She has held various editor and associate editor positions in some of forefront independent media publications. A consistently dependable team player, I thrive in a high-pressure environment, enjoy the challenges of meeting deadlines and managing a team, and am comfortable researching, writing and editing on a wide range of topics.
You May Also Like