Home SCC warns Virginians about potential dangers of high-yield investment programs

SCC warns Virginians about potential dangers of high-yield investment programs


economic-forecast-headerThe State Corporation Commission encourages Virginians to be wary of investment opportunities promising pie-in-the-sky returns with little or no risk. An example is high-yield investment programs, which are unregistered investments typically run by unregistered individuals. These opportunities, typically promoted on websites and through social media, are often nothing more than Ponzi schemes.

HYIPs promise very high returns to the investor with little or no risk. They generally offer little information about the HYIP operator and their trading strategy is vague or unclear. Many offer referral bonuses to current investors for bringing in new investors.

“High yield investment programs may be hazardous to your financial health,” said Ron Thomas, director of the SCC’s Division of Securities and Retail Franchising. “In the past, con artists relied on word of mouth to lure investors into these investments. Now they create buzz on the Internet and social media, quickly popularizing their schemes before the fraud is discovered,” he said.

“HYIPs combine elements of both Ponzi and traditional pyramid schemes into one ruse that can spread faster than ever before,” Thomas said. For example, in one recent HYIP, a company offered memberships that purported to provide investors with up to a 60 percent profit in 100 days. In less than a year, the company took in more than $10 million from investors. All investors’ funds were lost.

The SCC offers the following tips to help investors protect themselves from these scams:

  • Be wary of unsolicited investment opportunities offering unrealistic returns with little or no risk.
  • Contact the SCC’s Securities Division to make sure that both the seller and the investment are properly licensed and registered in Virginia.
  • Don’t believe the hype. Ignore high-pressure sales tactics, testimonials, and rankings regarding an HYIP.
  • Request written information about any investment and carefully review it or ask your financial adviser to evaluate it.
  • Quickly report any suspicion of investment fraud to your state securities regulator.

Investors with questions about high-yield investment programs should contact the SCC’s Division of Securities and Retail Franchising toll-free in Virginia at 1-800-552-7945 or in Richmond at (804) 371-9051 or e-mail the division at [email protected]. For additional information, visit the Securities Division’s website at www.scc.virginia.gov/srf or the NASAA website at www.nasaa.orgExternal Link logo.



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