High yield investment programs or HYIP is when the con artist and
his affiliates defraud investors through promises of return on
investment as high as 80 percent per day. These scams have been
proliferating in the Western World since the legendary exploits of Mr. Charles Ponzi
and his ilk. Usually, the blatantly unrealistic promises of income are
reinforced by claims of exclusivity, limited admissions and some kind
of secret formula that will allow unlimited profits to investors.
Of course, these HYIP's are just scams and many investors can
consider themselves lucky if they can escape with their jackets still
on their backs. While these artists and showmen of deceit convince the
prospective investor that the returns are generated through their
unparalleled skills at investment, peerless business acumen and
stratospheric level of intelligence, in fact the business model is very
simple and doesn’t depend on any kind of business acumen or investment
insight. All that these industrious individuals do is take the capital
which they receive as deposits from gullible new investors and
distribute it among the other victims of their schemes, disguising the
endless flow of investor funds into their fake investment program as
the return on investment generated by shrewd and skillful investment
practices.
So what they are doing is taking your money and giving it back to
you as yield on their investment programs. Doesn’t it sound insulting
to human intelligence that there have been so many people who have been
deceived by such an insultingly simple fraud scheme? It probably is,
but lack of intelligence certainly isn’t the real cause of the
gullibility suffered by the many victims of these schemes. As we
mentioned before on this website and you yourself have heard from many
others, human beings love to believe what they want to believe.
Although logic tells us not to trust in anything which we can’t
understand or have explained to us, we are prone to overestimate the
value of a promise that offers great returns for just a little
exertion.
The managers of HYIPs are intelligent people too. After all they are
artists, masters of their craft, who take great delight in destroying
the livelihood of innocent people, stealing their life savings and
leaving them like fleeced sheep in the middle of the icy landscape of
modern life. They know how to addict their clients to the fast returns
of the high yield investment programs by moderate, measured injections
of the venom. At the first stage, the victims are incredulous of the
offers made to them and will join the HYIP with very small sums, for
the sole purpose of testing if the managers of the fraud scheme will
return anything at all on their investments. Once the small sums
deposited come back with a very large profit, the initial insecurity of
the victim is also erased, albeit gradually. Slowly and slowly, the
small deposits keep building up, as $100s add up to $1,000s and $1,000s
to $10,000, until all caution is thrown to the wind and a bout of
limitless euphoria incapacitates the reasoning ability of the
“investor”. All the while, the managers of the HYIP program keep
promoting their beautiful scheme, using the testimonials of past
clients to prove the reliability of their impossible claims and if they
are successful which in many cases they are, they watch the funds at
their disposal balloon to outrageous amounts.
Often the earliest victims of the HYIP are those who are the
luckiest, but even that is illusory. As the managers pour the deposits
of their victims into a yield pool which they distribute to their older
members, those at the top of the pyramid will usually earn the highest
amounts due to their seniority in the structure. Those who are the
latest usually lose every penny that they deposit, as the scheme
collapses and the managers disappear among shades and winds along with
client money, leaving hot or cold air on which their victims can build
castles.
Of course, while the HYIP pays out well to the earliest victims,
they too will regret their gullibility as lawsuits, colloquially known
as clawbacks reclaim most of the distributed money as stolen deposits
of investors. The managers are winners in Hawaii, Tahiti, the Caribbean
Islands or somewhere similar by now, unless caught by law enforcement
agencies. Everyone else back at home are losers, their dreams
collapsing into a heap of subpoenas, unpaid bills, depression and
despair.
Eventually, the manner in which the clients are defrauded will
differ from case to case. In some, a pyramid or ponzi scheme will
progress as we outlined above, with the number of victims growing
through referrals and those at the top getting the highest share of the
purported investment income. In other cases, the clients funds are
misappropriated through mismanaged managed accounts and in other cases
the fraudster doesn’t worry so much about the finesse of his methods,
just pockets the deposits and runs away. Often, how they steal is
immaterial to the victims but knowledge of their methods could be
useful for law enforcement agencies as they attempt to bring the
thieves back to justice, with the hope that some of the stolen funds
will be regained.
We’ll examine the forex HYIP shortly, but let us mention that the
way to avoid the aftermath of financial ruin is to avoid the pink
dreams that cause the victims to be manipulated so easily by the
nonsensical promises of the fraudsters. There are some golden rules of
trading and investment in general and one who adheres to those with
determination and consistency will find himself invulnerable to HYIPs,
pyramids, ponzis and their many other varieties. Do not engage in an
activity which you don’t understand. Do not believe in something that
you can’t explain. If the promises that you’re told sound too good to
be true, do not risk your wealth and savings to chase them.
The forex variety is widespread these days. In the early days of
high yield investment programs the advertiser would be limited to a
geographical region due to the underdevelopment of international
communications. Many conmen and fraud artists are deeply appreciative
of the possibilities created by the spread of internet all over the
globe. Just like serious business people, they see new frontiers and
new profit potential that has been created by these new technologies.
Today with one click a Chinese farmer, an American retiree, a Russian
businessman can all be lured into the spider’s web and fleeced and
skinned is a source of great excitement to the scammers. They were
quick to exploit the possibilities of the internet age, with anonymity,
lack of regulation and transparency creating the most perfect
environment for the spread of their financial diseases. Visit our who to contact page if you have encountered any forex HYIPs and wish to report it.
In the forex HYIP program, the fraudster will usually claim
knowledge of some kind of secret formula which allows him to register
very high profits on a consistent basis. Since the claimed knowledge is
almost certainly non-existent, its nature can be anything from an
automated trading method, some kind of special and exclusive arbitrage
strategy, or less frequently, some proprietary combination of technical
indicators that allows the con artist to outperform professional
investors and large firms with great skill. What they say that they do
is irrelevant: Because in the vast majority of cases they do nothing
and just pay you back with your money, depending on your seniority in
the structure.
A fine, but somewhat anti-climactic sample of these interesting individuals was Joel Ward, who we also discussed in our forex managed account article.
Joel Ward started his career with $300,000 in client deposits at the
time of the launch of his Joel Nathan Fund in 2003. In just two years,
the amount he was managing had ballooned to $7 million, he was
interviewed and quoted on such reputable and credible news sources like
the Financial Times, Market Watch and the Wall Street Journal. As a
particularly spineless creation of Heaven, Joel Ward would even comment
on the irrational attitude of many investors to forex, how they saw the
business as a get-rich-quick scheme, how very high leverage was greatly
detrimental to a career and how hard he and his firm worked to educate
their clients on sensible investment practices and methods. He always
emphasized the importance of ethical conduct in the forex industry.
Ethical or not, Joel Ward was very effective in utilizing every
penny that was deposited with his firm towards the goal of maximizing
profits, but in his case the profits were only for himself. Eventually,
when his Joel Nathan Fund ran out of money, he emailed his investors
that “There are no funds left in JNF as all monies have been
misappropriated.” in this remarkably candid way, which could well be
regarded as a good example of high ethics in the forex fraud business.
The law sentenced him to nine years in prison for stealing $11 million
from his clients.
Later it was found that of the $15 million Joel Ward had acquired,
he had traded only $2 million, all of which he had lost in the market.
The real return on investment was provided by his Ponziesque use of
$3.7 million, which he had recycled to clients. The vast majority of
the remaining sum was used to finance his extravagant life style and
his purchase of the "Learn: Forex school", which he had used as a
source of recruitment for his business.
For the purpose of this article, we’re most interested in the Ponzi
distribution model of the HYIP scheme. The most important lesson that a
prospective trader will derive from the above is that it is not a good
idea to evaluate a forex scheme even on the base of the investment
returns: Unless there is first-hand knowledge of the trading practices
or a considerable degree of transparency about the firm itself, there
is no guarantee that a track record of purported profits in a HYIP is
based on actual profits that can be spent safely by an investor.
Indeed, we come back to our main principle which we discussed a couple
of paragraphs above: Do not believe in anything unless you can
duplicate the claimed performance by applying the same methods
yourself. Do not believe in anything that you do not understand. Do not
risk your savings on the basis of what you’re told by friends or
family, unless you are convinced that you know what you are doing.
In sum, a HYIP program is a bomb painted and decorated as a magic
apple. Instead of the massive and life-changing profits that you aim
at, you’ll end up suffering massive and destructive losses that will
ruin your dreams and confidence. If getting rich were so easy, everyone
would be millionaires. It is not a coincidence that the only place in
which everyone is a millionaire is Zimbabwe these days: Do not trust
illogical claims from charismatic individuals who promise profits from
a black box system. Do your own due diligence before choosing any
brokers or individuals who propose extravagant returns on any
investments. Start by visiting our recommended brokers page and also view the list of companies that have been disciplined by the NFA or the CFTC. http://www.forexfraud.com
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