A: Investment "trading programmes" with very high yieldsHigh yield investment program (HYIP) scams are currently being perpetrated by highly organized and relatively impressive fraudsters offering investment opportunities to individuals and corporations who either seek high yields on their investment(s) of money/assets. To those seeking high yields on their investments, fraudsters offer exorbitant yields that entice potential investors to invest their money. Many fraudsters offer HYIPs or the direct trading of bank and/or government-issued instruments (MTNs, BGs, LCs, SLCs, U.S. Treasuries, GNMAs, etc...) which they say are sanctioned by certain governmental bodies, such as the U.S. Federal Reserve (FED), U.S. Department of Treasury, International Monetary Fund (IMF), World Bank, etc., for the funding of humanitarian projects.
Often the deception is elaborate. Meetings are usually held in good hotels, fine restaurants, or airports, or even in offices located within bank buildings, with the fraudsters showing up in fancy cars, limousines or private airplanes. The fraudsters usually are well-dressed, accompanied by a partner/subordinate/bodyguard, and carry one or two mobile phones, which are constantly ringing during a meeting. Some fraudsters only operate via telephone and they exchange communications and documentation via fax and e-mail. These fraudsters discourage or continually cancel pre-arranged meetings for one reason or another. However just as often victims are encouraged either innocently or otherwise to enter such a schemes by those who are investors themselves or those attempting to seek recovery of money they have previously lost. Sometimes these investors are working with the fraudsters.
Those most at risk, as preferred targets of such fraudsters, include:
Individuals or corporations in possession of large cash balances or those in control of others cash such as a solicitor's client account.
Religious individuals, elderly people and charitable organizations who prefer to take people for their word or who are susceptible to a glib tongue.
Businessmen in financial trouble, and inexperienced/naive investors looking for a fast return.
The following are typical indicators of potential frauds.
Those who promote HYIPs usually ape the requirements of legitimate offshore hedge funds, by first stating that their principal requires that an application package, which will include a Letter of Intent (LOI), Proof of Funds (POF), copy of passport, information form, and confidentiality and/or non-circumvention/non-disclosure agreements. These are to be completed by investors and provided to them for delivery to the principal for the specific purpose of approving both the investors and their money/assets for participation in the proposed HYIP. In reality the fraudster wants to ensure his potential victim has money to be parted with whilst instilling in his victim the need for confidentiality.
Such promotors will sometimes require non-refundable up-front fees/deposits, purportedly to defray traveling and other expenses, supposedly incurred in the attempt to "facilitate" the investor's entry into such secretive "trading programmes".
All dealings will be through agents, facilitators, or program coordinators/managers and NOT with the principal who controls the investment program and whose identity will not be revealed for various reasons (travelling overseas, too busy, need for secrecy etc.). This curtails any ability to perform the most important aspect of any due-diligence research, counterparty risk analysis.
All correspondence/documentation will usually be transmitted only via fax or e-mail, and those who seek loans for funding projects or potential investors who are offered participation in HYIPs will not be able to verify those representations made by the fraudsters.
The deal involves complex and unusual financial instruments, or various highly unconventional or improper uses of legitimate instruments, such as US Treasuries, Treasury Bills, GNMAs, etc….
The fraudsters usually seek control of or access to investors' money or assets for investors' participation in HYIPs. They either require that the investors' money or assets be transferred to the fraudsters' account, or they insist on having signatory authority of the account(s) in which investors' money or assets is/are on deposit, or they require that the money or assets be transferred to a bank designated by the fraudsters and be deposited into a sub-account under the fraudsters' account. To get control of or access to investors' money/assets, the fraudsters insist that investors issue a mandate or power of attorney to them or to a third party who is friendly to the fraudsters allowing the fraudsters or their friend to negotiate, commit and/or use the investors' money/assets to "facilitate" trading. The investor is often initially told his funds would be a in "blocked fund account" to which only the investor has access. This may be the case at the early stage of the fraud but the fraudster will gain control/access as described above fairly quickly.
They will often fraudulently claim that the loans for funding projects or the opportunity for participation in HYIPs are made available only to select individuals/corporations and that they must "hurry up" as the opportunity will close soon.
They will usually fraudulently claim that the principal(s) to whom the fraudsters have direct access are commitment holders or agents licensed by the Federal Reserve (FED), or are agents for the U.S. Treasury Department. They also claim to have access to officials of International Monetary Fund (IMF), United Nations or World Bank who operate such trading program's. Frequently the victim is told that because the profits are so vast they are required by the aforementioned orgainsations to re-invest a part of their profits in charitable or humanitarian projects in remote parts of the world.
They will demand that everything must be kept secret and if the investor or any person associated with the investor ever tells anyone, he/she will be kicked out and never be able to participate in another such opportunity.