Beware of Ponzi Schemes
Hyip Fraud - Beware Of Ponzi Schemes
Charles Ponzi defrauded more than 40 thousand investors out of fifteen million dollars in Boston in the 1920's, by marketing them investment choices in postal reply coupons. His pitch was a high return, safe and sound investment. Although Ponzi's underlying intention of paying off the first round of investors with money provided by subsequent investors was not new, the notion was named after Ponzi. This fraud is widespread today and investors need to beware. Some reports describe Ponzi scheme frauds as frauds in that there are no underlying investments, such as postal reply coupons. This is generally not real as a multitude of Ponzi schemes experience some actual investment. They hold furthermore been heard portrayed as pyramid schemes, that is when the investor has the right to shoot in new investors and get an speculative end up with for bringing them in as well as the underlying investment. Although pyramid schemes are similar to Ponzi schemes, the Hyip Fraud strategy is different. Most Ponzi schemes do not use such a investors to market to new investors.
Over one hundred 40 Ponzi schemes got prosecuted in the out of ten ages in the US. The rate each fraud scheme defrauded investors ranged from the low millions to around a billion bucks in one scheme. Almost all of them had an actual purchase underlying the pitch. Some of the greater amounts of prevalent frauds were: affinity frauds, bonded promissory notes, hedge funds, payphone leasebacks, oil & gas, true estate, sub-prime or prime bank loans, and viatical settlements.
Although the possession underlying the Hyip Fraud scheme's pitch is different, the fraud has similar characteristics, which make it more effortless for the investor to identify. Each will have "sizzle" in its pitch.
An example is the chain of over 50 bonded promissory note schemes run through the decades, which all promised a guaranteed return and a bonding company guaranteeing payment of principal and interest. Even if the underlying speculation fails, the bonding association can pay. Tens of thousands of investors lost in the order of $500 million in these types of fraud schemes, because the bonding businesses were fakes and could not pay off when the funds collapsed.
A classic characteristic of a Ponzi scheme fraud is that it is not regulated nor has third party oversight, such as an independent auditor. Of the one hundred 40 frauds researched, the majority sell as an investment opportunity a fund tried by a purchase advisor. These finances have no mutual funds, nor were such securities registered amongst the Securities and Exchange Commission. Most had selling material, but didn't have private placement documents. Most were not audited and had no degree of oversight. Most did not provide investors banking statements and the sites that did, the data was more often than not falsified. The sites that were audited used auditors that either did not exist or got a portion of the Hyip Fraud. In one documented case Arthur Anderson was the auditor and finished up settling litigation investing in the money receiver for about $250 million. Even far respected supervision doesn't totally cover the investor.
A third characteristic of a Ponzi scheme fraud is an astronomical amount of return. This characteristic is monumental for attracting investors away from such assured investments as certificates of deposit, annuities, mutual funds and others. Greed is the basic driver enticing the investor to ignore the conventional safeguards he has from traditional investments. The bonded promissory notes frauds offered from 9.9% to more than 15% returns, when five year FDIC certain CD's were returning short of six percent. One hedge fund was touting takings of about 25 per cent just when the tech bubble burst. If it seems too decent to be true, it maybe is.
A fourth characteristic of a Hyip Fraud is an untraditional sales force. High commissions are dished out to draw re-sellers amidst existent client bases. Often independent securities and insurance salesmen, who own a customer base, are enticed into marketing the investment choices with minimal or no due diligence. Very few salesmen of these types of frauds have experienced been employed by perfect broker dealers or indemnity agencies. In some of these types of patterns the selling was finished internally by the fraudsters. The internet and boiler rooms have been used as widespread internal selling vehicles.
The upcoming pages presented to you, will help you see if these types of facets are present. You don't wish to become a victim of a Ponzi scheme fraud, of course not.
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