Commodities HYIPs – All Scams?

A HYIP, or ‘High Yield Investment Programme’ is a pervasive style of investment opportunity found on the internet. On the surface, a HYIP is a collective investment scheme, whereby individuals pool their funds together to be managed and redistributed by a professional manager. The common theme of HYIPs is that the manager usually aims for or promises very high returns, usually from speculation, arbitrage or insider trading in stocks, options, forex or commodities.

What actually happens, is the HYIP provider assumulates all the investments, and rakes some off for themself. While the HYIP is still growing in popularity, the HYIP will entertain requests for withdrawals, as this activity will further promote the HYIP. An investor who has made a withdrawal may even immeadiately re-invest when they realise that the system appears to be legitimately working. Eventually the cash pools will start to shrink, at which point the HYIP owners will shut down the website, steal all the remaining cash and ‘disappear’ from the face of the earth.

HYIPs are completely and absolutely scams, all of the time.

Note before we go any further, HYIPs shouldn’t be confused with ‘High Yield Portfolios’ (HYPs) which are simply equity portfolios constructed with high dividend paying stocks, an example of which can be found here.

Questionable Connections

Commodities HYIPs are unregulated and usually unauthorised. This means that schemes of their type do come under the remit of a regulator (such as the UK’s FSA) but the HYIPs stay under the radar and evade compliance. This means that they are impossible to find once they’ve disappeared, and they will have no internal controls that safeguard your cash.

HYIPs are also one of the biggest acceptors of digital gold – an online currency produced by several private companies. This is because digital gold is almost untraceable, and is therefore perfect to aid money laundering of the proceeds from the HYIP. Digital gold providers have come under attack for the illegitimate uses of their currency, and have usually taken steps to shut down the accounts of perpetrators, although this is a losing battle.

The Face of the HYIP Industry

The Array of Commodity HYIP Websites

A search for ‘High yield investment opportunities’ on the web will results in a massive set of results. You’ll find forums, review websites, sales websites and so on. It would appear that HYIPs have produced the same type of community as and consumer product! There appears to be no doubt that HYIPs are incredibly popular opportunities, however we’ll debunk this myth later (see ‘Deeper Underworking).

The Sales Pages

HYIPs are usually sold through the classic long, aggressive sales pitches already perfected by earlier forms of ‘get rich quick’ schemes years ago. To even the average web user, this is instantly a turn off and begins to raise suspicions. Without any of the conservativism legally required in official mutual fund prospectuses, HYIP providers will endlessly promise extremely high returns without any disclaimers.

The Deeper Underworking of the HYIP Networks

Affiliate Networks

The real driver of almost ALL of the web content dedicated to HYIPs are affiliates. HYIPs may be incredibly risky for investors victims, but they do tend to pay their affiliates on time. Affiliates are the virtual sales force of commodity HYIPs. These webmasters get paid commissions of up to 10% for guiding unlucky punters their way. Affiliates therefore have a great incentive to create fake blogs, fake reviews and fake testimonials on their ‘Trusted HYIP Review’ websites in order to guide web users to the jaws of the beast.

Even HYIP reviews claiming to identify scams may be a cheap trick to win your trust, in order to promote their own, equally dangerous HYIP.

Status: Paying!

A classic tool of affiliate networks are their ‘status’ reports on various HYIPs. Apparantly if investors are getting their money back, then they report this to the review website, who will update the HYIPs status as ‘paying’. Conversely, it would be expected that HYIPs that shutdown will be reported as ‘not paying’. In addition, HYIP review websites also seem to claim that they’ve put money into each and every HYIP, which I presume goes some way to reassuring investors.

This is a bit of a misnomer, and misleading at best. Even if the statuses were founded on real reports, the fact that a HYIP is paying out right now doesn’t make it a great investment – as you will be wanting your money back after a given period of time, when it is likely that the program will be running very low on funds.

The Grand Theatre

The whole concept of HYIPs and how they’re marketed is absolutely baffling. Here you have review portals that blatantly admit that many HYIPs stop paying out, and the HYIPs themselves make public that they pay large commissions for referals. With this in mind, it becomes clear that people still invest because of the excitement and legitimacy of the idea of ‘playing HYIPs’ as if they were a roulette wheel. I’ve seen blogs where people (impartially – there are no affiliate links) discuss their strategies for ‘beating’ HYIPs. It is obvious to me that if you hand your cash over to criminals on a daily basis, your long term expected returns aren’t fantastic.

Perhaps these adventurous fools have it right; commodity HYIPs should just be seen as a game, bet or wager. You should only put in what you would be happy losing, much like with a roulette wheel.

For genuine and recommended methods of investing in commodities, read how to invest in commodities and are commodities overpriced?

Simon OatesCommodities HYIPs – All Scams?