Several investment programmes touted over the Internet promise high returns for little or no risk. These investment programmes are also known as High Yield Investment Programs or HYIPs.
Many of these HYIPs offer attractive returns as high as 1% per trading day. When annualised, it is obvious that such returns far exceed the most generous yields offered by mainstream financial institutions operating in our financial markets. Operators of these HYIPs provide little or no detail about themselves at their websites. To attract investors, they require only a small amount of money to be deposited with them.
The promoters/operators of HYIPs tend to be vague about underlying financial instruments used in their investment programmes and about how such high returns can be sustained. Some might claim that their investment programme invests in complex financial instruments like prime bank instruments or private placement programmes. However, they do not give adequate explanation of how these financial instruments work. Instead, they assert that such financial instruments are the “best kept secret” in the banking industry and only available to a privileged few. The potential investor is informed that banks and regulators would deny the existence of such financial instruments. The potential investor may also be told that he is extremely fortunate that the operators are willing to share this golden opportunity with a complete stranger like him.
The truth is that all these claims are bogus. Despite having credible-sounding names, such financial instruments exist only as figments of the fraudster’s imagination. A number of these HYIPs operate as Ponzi scams. In a Ponzi scam, funds are collected from new investors and these funds are used to pay the returns promised to existing investors. Often there is little or no investment made by the HYIP operators. So long as there are fresh funds from new investors, the HYIP scam can be sustained. Obviously, such a HYIP cannot be sustained indefinitely and it will eventually collapse.
Be wary of HYIPs that promise extremely high returns. Remember, investment programmes that provide expectations of high returns are often also high risk in nature. A promise of unrealistic returns at little or no risk is a hallmark of a scam.
Operators of HYIPs often hide behind a veil of secrecy provided by the Internet. Beware of websites that do not provide an actual place of business as their business address. If a local address is provided, verify that the company is actually operating there. Exercise caution if the HYIP operator claims that its operations are based outside of Singapore. Be aware that fraudsters may use business centres here or elsewhere as a virtual office to create the impression that they are operating in a particular location when they are not. Current technology allows these fraudsters to use mail services, faxes and telephone calls that can be easily routed to another country.
If the HYIP is a scam operated from outside Singapore, it is likely that your monies cannot be recovered and it may be difficult to bring the perpetrators to justice.
Understand what you are getting into. This is your money – do not be afraid to ask questions. A genuine financial professional will usually be happy to explain in detail the investment programme he is marketing. Alarm bells should sound if the promoter/operator of a HYIP tries to maintain an air of secrecy around the underlying financial instruments they offer. Do not make a hasty decision. Do research to find out more about the HYIP that is being offered to you. Seek professional advice if necessary. The underlying financial instruments in the HYIP offered to you may be fictitious.
There have been cases where the promoters/operators of the HYIP claimed that their investment programme is backed by established institutions like the US Federal Reserve, the World Bank or the International Monetary Fund.
These institutions have international stature, which is why a fraudster would want to claim their involvement in the investment programme. Verify any such claims by checking with these institutions. Their contact details are easily available on their websites.
You may already have invested in a HYIP, and you recognise the warning signs listed above. However, you have been receiving returns on a regular basis or you may know friends who have invested and are happy with the returns they have received.
You may wonder whether we are being over-cautious, and causing you or your friends to lose out on a great investment opportunity.
The fact is that in many cases reported to police, the investors had initially believed that the HYIP was not a scam because they had received some returns. They realised that they had been defrauded only after the HYIP had collapsed. Payment of returns is a very persuasive tactic used to lure new investors and to induce existing investors to increase their stakes in the HYIP. If the HYIP is a Ponzi scam, the returns you receive are in fact funded by other investors.
If you recognize the warning signs listed above, or if you have any doubts about the legitimacy of your investment, do your own research into the investment now. Ask questions of the operators of the HYIP to clear any doubts you have. If you are still unsure about the HYIP, ask for the return of your capital. Unless your investment contract is for a specified time period, there is no reason why your investment cannot be refunded early, if the HYIP has no risk or low risk as claimed and it has been generating returns.
Many HYIPs claim to employ experts that will invest your monies in “financial instruments”. In Singapore, the trading of financial instruments like securities, leveraged foreign exchange and futures contracts are regulated by the Monetary Authority of Singapore (MAS). Persons carrying on such business are required to be licensed, or to fulfil certain criteria to be exempted from the licensing requirement.
To protect your interest, deal only with persons regulated by the MAS. The names of regulated persons in respect of the provision of financial services under the Acts administered by MAS are listed on the MAS website at:
http://www.mas.gov.sg
MAS also maintains an Investor Alert List maintained at:
http://www.moneysense.gov.sg/check_our_list/Consumer_Portal_IAL.html
The Investor Alert List contains a list of entities which are possibly conducting activities regulated by MAS without authorization. Please take note that the list is not exhaustive.
Please exercise due care when considering any investment and refrain from promoting HYIP to others unless you have verified their legitimacy. It is often too late to recover any monies by the time the HYIP collapses.
Always remember, if it sounds too good to be true, it most probably is.
If you have any information relating to dubious HYIPs and would like to report the matter, we would like to hear from you. To lodge a complaint, please click here.