Crowd Sourced Ponzi Schemes – Playing Russian Roulette With HYIPs

There are 'Dumb Ways to Die' and dumb ways to invest. Topping the list are HYIPs which are simply Ponzi

Dumb ways to die, and dumber ways to invest

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Too good to be true!

We’ve reported about our share of forex related HYIPs. High yield investment programs (HYIP) are Ponzi schemes promising insanely high returns, typically over 1% a day, with it not being uncommon to see 3-5% daily returns, and even others going even crazier and stating 100+% daily returns. Initial investments and profits are paid back by deposits from new investors. Schemes include low minimum deposit amounts with more attractive returns for larger accounts.  The fraud keeps taking place as long as new investors are found to deposit fresh funds into the program.

HYIP Riches - Wishful Thinking!
HYIP Riches – Wishful Thinking!

Forex related HYIPs are usually based on some sort magic trading strategy that can return world beating results and offers investors access to managed accounts. In our research of forex related Ponzi schemes, firms often posted fictional MetaTrader 4 reports on their websites showing the fraudulent gains. In addition, many of the firms providing these products create websites to resemble those of brokers and brandish some sort of license to add more ‘authority’ to their offering.

A few examples  www.capitalforex.biz forex-gains.com hourlyforex.com

In the world of HYIPs, forex related programs are one of the many different financial related investments being offered. Other programs revolve around real estate investment in emerging markets, loans, financial services, and stock trading schemes.  While websites will market the HYIPs as being managed by seasoned professionals or investing in hot products, this is no more than a scam to solicit new clients.

Crowd Sourced Russian Roulette

Although the returns are ‘too good to be true’ and many sites are being closed down by their ISPs, (we wrote about Pro Forex Union which has since closed down, also AltusHost has recently blocked a number of sites recently such as https://www.forex-trendz.com), the appeal of quick profits goes a long way in attracting customers. Meeting this demand are a number of HYIP review websites and forums. What can be described as ‘crowd sourced’ HYIP investing, these sites provide users the chance to comment and rate different programs to determine which ones are still paying out. Like a game of musical chairs, investors are looking for programs that they can enter and exit quickly before the Ponzi scheme folds.

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Among the sites, one of the interesting ones is HYIPexplorer. In order to monitor different programs, HYIPexploer claims to be a depositor in the Ponzi schemes and updates readers of whether various funds are paying out or not. The site rates the ROI of their investment, WHOIS details of the HYIP website, and reader reviews. Like a game of Russian roulette, HYIPexploer admits that HYIPs don’t survive very long, but “taking both the negative and positive aspects of High Yield Investments into consideration, the conclusion is; if done right, High Yield Investments can be extremely lucrative”. However, anyway you look at it, HYIPs are Ponzi schemes, and someone is going to lose their money, and probably a lot of it. So while investors may get lucky a few times, they are still playing against scammers out to defraud their customers. It’s probably also true that the majority of any HYIP review website are simply affiliates of the many programs and it is in their best interest to generate additional deposits to the so called ‘Platinum’ schemes that are still paying out.

Liberty Reserve falls, Perfect Money rises

One of the common denominators among HYIPs is that they were nearly all accepting Liberty Reserve at time the payment system was closed down and many firms still have the LR logo on display on their sites. The virtual currency system provided an anonymous payment solution without chargeback risk. The inclusion of Liberty Reserve as the payment gateway of choice for scammers fits into an answer a payment solution provider gave to Forex Magnates last month when asked how to evaluate the plethora of payment companies by saying “you can tell a lot about the trustworthiness of a company by who their clients are. If they are a solution for risky businesses, than they probably are too.”

PMWith Liberty Reserve being seized by US authorities, it provided a smoke screen for various HYIP providers and other dodgy financial services who were able to claim to customers that they couldn’t return funds as their accounts were closed. As a result, HYIP investors aren’t only at risk of a Ponzi risk blowing up, but of their payment account closing down as well.

As Liberty Reserve has left the scene, the gap has been filled by smaller competitors. Among the smaller players taking a more active role is Perfect Money. Similar to Liberty Reserve, Panamanian Perfect Money offers e-currency accounts that can be denominated in dollars, euros, or gold. The payment system also revolves around 3rd party exchangers that can be used to fund accounts. After funding, users can freely transfer e-currencies to other account holders with only a 0.5% fee. The low internal transfer fees are a main appeal of Perfect Money as well as other e-currencies.

With its feet planted in the world of fraudulent online businesses, Perfect Money has recently been making changes that on the surface appear to make it less vulnerable to meet the same fate at Liberty Reserve. This includes the termination of US based accounts as well as changing their Top Level Domain (TLD) name from .Com to .Is. The actions place Perfect Money farther away from US jurisdiction and the potential of being shut down or having their website confiscated. In any event, as a Liberty Reserve clone, there is little assurance that Perfect Money isn’t already being investigated by multiple governments, with account holders at risk of losing their funds.

Victor Masalov, Marketing Director at EXNESS
Victor Masalov, Marketing Director at EXNESS

In this regard, both brokers and payment gateway providers have stated to Forex Magnates that regulation and government involvement are a threat to alternative payment solutions. When asked about the future of such products after the Liberty Reserve scandal, Victor Masalov, Marketing Director at EXNESS, whose firm accepts and is familiar with various forms of electronic payments, said “unfortunately the age of e-payment systems (EPS) is near to be finished. Some systems will die, others will merge with banks so EPS should be seriously regulated if they want to be in business” In relation to providers involved in illegal activity and whether they will be stopped, Masalov added “I think so, the reason is that governments are now enough equipped with IT/finance specialists to catch them.”

Similarly, Tim Thompson, CEO of NOIREpay mentioned anti money laundering (AML) issues. When asked about firms like Perfect Money and whether they will be closed down, Thompson stated “It’s the business model that’s the issue. Anything that allows you to set up an account fast and easy with just an email and then transfer money will be open to abuse.” He added “Thresholds for AML usual kick in about $8k. So it becomes how many emails you have! You could have 1000 emails, transfer $2000 with each and slip below AML checks. Why else would someone use these anonymous methods?” Thompson concluded by saying “Of course there will be a lot of people who are genuine and not criminals. But criminals have an easy tool to use. It’s totally anonymous.”

Bottom Line

Coming back to the world of HYIPs. The bottom line is that HYIPs are fraudulent programs created to scam clients. In addition to the obvious Ponzi scheme taking place where the majority of investors and money will lose their money, there are additional risks that are growing. These include potential banning of HYIP sites by ISPs, closure of funding options such as another Liberty Reserve scandal, as well as the ‘pimping’ of the HYIP ‘winners’ by affiliate websites. Overall, HYIPs are a fool’s game and one that investors should be aware of their risks before even thinking of opening an account in.

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