High yield investment program
| I, the crown prince of Nigeria, offering you|
High yield investment programs have emerged as a sort of perfect crime of affinity fraud -- the idea is (as with all cons) gain the confidence of the gullible and desperate, strip them of their money in a completely off-the-books manner, and then run as far as you possibly can. The angle in this case is the old "international bankers" are holding out on the lumpenproletariat -- while they talk about hedge funds and mutual funds to the public, they're really hiding a complex web of trusts and investments with unbelievably high interest payments where all the real money is made.
What the rich don't want you to know is that there is a secret banking system that only they have access to. It operates outside your borders and can't be touched by your tax authorities, but there are a few people who know the secret, and they're more than willing to pool money from you and people you know to get you in on this secret. You see, these secret investments are like super-hedge funds that have an astonishingly high yield on principal invested in their programs, but anything smaller than mid-seven digits is small change as far as they're concerned. What you have to do, you see, is give the nice financial adviser in the business suit a big whack of cash, all wrapped up in aluminum foil and stuffed into paper bags, and then... what? You don't want to? You mean you don't want to be rich? Wimp.
In reality, they tend to be Ponzi schemes. In a non-Ponzi investment, the broker buys an investment, and it repays more than you put in, and the broker returns the excess to you (less commission); in a Ponzi scheme, you put money in, and then the broker/fraudster takes money from someone else to pay you, and then looks for even more customers to pay the person they've just ripped off, and so on until they run out of marks and it all collapses. Typical signs are guaranteed high rates of return, claims of urgency and limited opportunities, adverts on social media, extreme secrecy, little information on what you're investing in, and byzantine complexity, all to keep you confused long enough to take your money and other people's too.
One example was Paul Burks' ZeekRewards, which claimed to offer a fortune for people investing in a penny auction site. Investors were encouraged to recruit their friends, and to make investments on behalf of relatives (which allowed them to get around a $10,000 deposit limit - imposing a restriction and then giving people the secret to get around it is top HYIP tactics). In reality, 98% the money paid out came from the investments of others, rather than from the profits of the auction site, and Burks was sentenced to 14 years, 8 months in jail.
Another was OSGold, which claimed to allow people to make money by investing in a digital currency supposedly backed by gold. It promoted OSOpps, a high yield investment program, promising 30% return over 3 months and all deposits guaranteed. They claimed to be making money by foreign currency investments; in reality the money was laundered through a series of banks in the US, Mexico, Latvia, and via duffel bags, and disappeared. Eventually complaints from investors led to a run by investors in 2002 trying to get their money back, only to find it was nowhere to be found. David Copeland Reed was invested in 2009.
- Quatloos.com's page on high yield investment programs, including the infamous Omega scam in the late 1990s (which turned into the altogether more bizarre NESARA scam)
- High yield investment program, Investopedia
- ZeekRewards founder heads to trial for $900M scam, CBS News, July 4, 2016
- Arrest in Multi-Million-Dollar Internet “Gold-Unit” Ponzi Scheme, FBI New York Field Office, February 24, 2009