High Yield Investment Programs: Don’t be Fooled by Hype

By Elaine F. Marshall, Secretary of State

We have all seen it – the ad that pops up on your computer screen promising incredible rates of return in incredibly-short periods of time. High-yield investment programs (HYIPs) are often a variation on the all-too-common theme of Ponzi schemes.

For years con artists relied on word of mouth and some slickly-produced brochures to give their schemes a false sheen of legitimacy. Now they can build even more buzz in less time through social media, drawing in countless potential victims online.

No matter what technology is being used to market the scheme, some things never change. There are a few red-flag phrases that should put potential investors on guard:

“Guaranteed” High Returns. Higher rates of return often mean higher risk. If someone is promising you high monthly, weekly and even daily returns that are far more than you could get from any traditional FDIC-insured accounts or short-term CDs, be skeptical. If a deal sounds too good to be true, it very often is.

Referral Fees. Fraudulent HYIPs will frequently offer to pay “referral fees” to investors who bring in new investors. Sadly this often leads to friends unwittingly helping to scam friends.

Social Media. Many HYIPs use social media platforms such as Facebook and Twitter to spread word quickly and make it appear that everyone else is investing in a scheme. Just because an investment scheme has “gone viral” doesn’t mean it is a safe or legitimate investment. Don’t let yourself get lured by hype.

The Mysterious Business Model. This is when the people pitching the scheme gloss over most of the details regarding how profits are generated. Don’t be shy about asking questions. How will returns be made? Who are the company’s officers? If the person pitching the investment to you can’t answer those questions to your satisfaction, then I encourage you to put your hand on your wallet and walk away.

E-Currency Accounts. Promoters will sometimes require investors to open e-currency accounts in order to invest. These accounts are not licensed as money transmitters.

Affinity. Don’t trust someone pitching an investment deal simply because they share some common bond with you, whether you are members of the same church, or the same professional or civic group. Scam artists often spend weeks or months building bonds of trust in a group before they work up to promoting an investment scheme to you.


“Get in Early and Get Out Fast.”
 Many HYIPs advocate investing early and getting out early, but that is a classic mechanism of a Ponzi scheme.

The single most important thing you can do to protect your hard-earned money when potential investment scam artists come calling: Call the North Carolina Securities Hotline at 1-800-688-4507. Ask if the person offering you an investment opportunity is licensed to sell securities in North Carolina. Ask if the investment opportunity itself is registered. Ask about the disciplinary history of the person offering the investment. Registration is not a guarantee that the investment is safe, but a seller and investment not being registered is a very big warning sign. A call to the Secretary of State Securities Division can save your entire life savings, so I urge you to call us before you sign your money over on an investment offer.

You can also find more information on the Secretary of State’s website at www.sosnc.com. Look for the “Check Before You Write One” icon and click on “investment securities.”