Beware of HYIPs

Some people says, HYIP programs are totally scam. But why still people are investing huge money on HYIPs. First let us understand about what is this HYIP all about.

A high-yield investment program, HYIP, is a type of Ponzi scheme, which is an investment scam that promises unsustainably high return of investment by paying previous investors with the money invested by new investors.

Let us take a deep dive in to what is happening on the background of these HYIP sites offering fancy returns starting from 6% a day to 45% a month returns. Here are the steps behind every HYIP schemes:

1. Setup a website.
2. Setup an account in Liberty reserve.
3. Buy a script or a standard HYIP software which is hosted on the website purchased.
4. Setup the configuration in your website to receive funds in your liberty reserve from the website payment gateway system.
5. Similarly setup the configuration in your site to pay to the investors either automatically from the liberty reserve account or choose to pay manually based on the choice.
6. Subscribe to HYIP monitoring sites to include the newly created website in their list. The HYIP monitoring sites provides information to investors in Internet about the active condition of the websites registered with them.
7. So, if the website is not paying, the HYIP monitoring site will blacklist the website.

So, with all this setup and running, a beautiful website is running, but how people will know about this?
Hence, like in any business, the HYIP owners invest money in the beginning to advertise about their website with beautiful banners flashing in every corners of Internet.

I know, the question arising now in your mind is, how these HYIP companies manage to pay their investors? Let us take an example someone invest $10 with a return of 6% assured every day for 30 days, so on the 17th day, your money will be returned. On the 30th day you would have earned $18. Let us assume, there are 100 people investing like you daily in the same website every day. See the fund flow to the owner of the HYIP site:

Money earned till 30 days = $30000  ($10 x 100 people evryday x 30 days)
Money paid to investors till 30 days = $27900 (Calculated based on 6% return every day)
Money available on hands = $30000 - $27900 = $2100

Let us consider that the HYIP owner has spent about $600 for advertisement and website setup, etc.,so still $1500 is available. At this stage, if the HYIP owner decides to wind up, they still make a good income for doing nothing big..

Now who are the losers and who are the gainers? The 100 people who invested in the first day would have got their returs as promised and they would be the happiest people in the world. The next 100 people who invested on the second day would have received their payouts for 29 days and waiting for the last day due. Still they are happy because they got their money back and also got good returns from it. The list goes on like this and think about the investors who have invested on the last day. :-( They are the people who would have seen a black day and quite disappointed that their money is lost.

The funniest part here is if someone invested a huge money say $1000, they would be the most unhappies person and they cannot approach legel help also. HYIP is not supported by any legal bodies in any countries.

Beyond understanding all the risks, if you still want to invest your hard earned money on HYIP, be prepared for disappointments also.