A high-yield investment program (HYIP) is a fraudulent investment scheme that purports to deliver extraordinarily high returns on investment.
HYIP often advertises yields of more than 100% per year in order to lure in victims and regularly uses new investors’ money to pay off older investors. They are not to be confused with a legitimate high-yield bond investment, which offers higher than investment-grade interest rates.
HYIPs are Ponzi schemes, and the organizers aim to steal the money invested. In a Ponzi scheme, money from new investors is taken to pay returns to established investors. Money is not invested and no actual underlying returns are earned; new money is just used to pay people who entered the scam earlier than they did.
Though this brand of Ponzi scheme has existed since the early 20th century, the proliferation of digital communications technology has made it much easier for con artists to operate such scams. Usually, an operator will create a website to lure in unsuspecting investors, promising very high returns but remaining vague about the underlying management of the investment fund, how the money is to be invested, or where the fund is located.
These funds typically involve the alleged trading or issuance of “prime” bank financial instruments and may include references to prime European or prime world bank instruments. For this reason, this scam is also known as the “prime bank scam.”