To catch the tail of HYIP – reality or fiction?
To catch the tail of HYIP – reality or fiction?
http://ecommerce-journal.com/article...ity_or_fiction
February 28, 2008 - 2:47pm | author: Natalia
Quote:
There were a lot of articles written and even more words said about such a profitable business as HYIP. Taking a quick look back to the history of world economy you would find out that within the most difficult time periods for the country followed by economy deceleration, local currency devaluation and the tremendous cut off of jobs came the flourishing period of "fast-money" or "go-get" periods with the large number of investment pyramids known later as Ponzi schemes, extremely promoted and incredibly popular HYIP. The new born monster vacuuming the houses, fortunes, everything till the last penny - Ponzi scheme - was named after the first man who step into the history with the brilliant idea to build the "air castles" by the hands of the investors. We are talking about Charles Ponzi's who back in 1920 offered its investors a 50% return on their money in 45 days, or a doubling of their money in 90 days.
In February 1920, the inventor of the simple and brilliant investment project received $5,000 and in one month, the total investment funds stored in assets reached the mark $30,000.With the enlargement of the investment funds, Charles was actively "promoting" the investment project also through the wide spread number of hired employees who promised the high return on each penny invested. By May 1920, the" Ponzi & K" was able to gain $420,000 with the million-funds by July 1920. Don't forget we are talking about the 1920 when the only way of sending money were P2P payments or sending via post mail that might be considered nowadays as the analogue to wiring. Despite the failure in return of the promised high interest rates, and difficult situation caused by after-war period people were investing their last savings, some - pushed by the greed and avarice, other - by lost of hope to gain money by any other way, in the short period of time with the same high return. Running after illusory fortune that every time was disappearing as mirage in the desert they were filing bankruptcy, losing the houses, families and lives .. but Ponzi mechanism had no human face, had no pity to miserable, poor or homeless. Shortly after the rapid increase of the investment turnover, the clients of Ponzi filed the claim to place Charles under arrest with a Federal indictment citing 86 counts of fraud with over 17 thousand "accounts" behind". Later Ponzi was convicted with mail fraud and delusion of people. The investigators tried to figure out the potential storage of funds or, at least, the total amount of funds collected, however, without any noticeable success. The assets disappeared forever.
Ponzi case in early 1920th became not only the start for the further development of the different variety of Ponzi schemes with changeable names but with the unique gist of being a fraudulent investment operation that involves paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business. From the other hand it became the first public process showed the inability of the respective authorities to deal and to control the operation of HYIP. Even at present days the number of filled claims or lawsuits against HYIP is extremely low. We would distinguish several key -factors determining the weakness of the authorized bodies to properly supervise the duly operation of such companies. - Inability to update the existing regulations reflecting the constantly changeable circumstances of our life that may facilitate and welcome the appearance of the new HYIP after the shut down or disappearance of the previous HYIPs. It became even more difficult with the active HYIP propaganda and aggressive promotional campaigns in the internet or via multiple blogs and forums related to HYIP (amongst the most famous we would name talkgold.com, moneymakergroup.com, wwsnforums.com and many others monitoring and grading HYIPs). It reminds the soap bubbles, you break one, and another is already here...
- HYIP Intractability - if you would ever try to locate the headquarters of any of HYIP you would more likely spend your day for nothing as none of the stated "official" addresses would ever correspond to the reality. Some of the investors of Minvestement.com, Swisscash and etc claimed to travel across all the states to find out what was going on with their funds, the others were patiently waiting for the heavenly manna... Intractability may also relate to the difficulties to trace the history of the appearance of the HYIP web site as well as to determine the founders (sometimes the names are completely different, pictures posted on the web - to give the investor a personal touch, to ensure that there are people behind the pitiless machine that would take your money and disappear in the borderless ocean of internet - have nothing in common with real people involved). If you are an active user of blogs and forums related to HYIP you may figure out at least the active e-mail to address you concerns or requests.
- Poor content and security level. Keeping in mind it is always difficult to determine the point when HYIP founders would run away with your money became even more complex due to poor security level of stored sensitive data base that causes the constant fear of investors that site would be shut down due to mass DDoS attacks but it might also cause the lick of ID and credit card information.
- Even if you would be that lucky and you would be one of those investors who can claim the return of the invested money due to the Motion submitted by Receiver you would be able to gain only the net invested amount money but again in one condition: if the investigators would be able to find the funds of HYIP! Usually the founders of the HYIP promising the high interest rate available for the withdrawal on the daily base are foggy in specifying the investment projects that shall ensure the high revenues and, as a result, the high interest paid back to its investors. The most common used investment portfolio - the oil-field development, the real estate development in the South Africa, Asian region, or in merging markets in general, but as you do understand nobody ever saw neither the report of HYIP sent to investors neither read the audit report nor even having the name of the audit company that might at least state that behind the "funds" stored on the users' accounts there are actual funds.
Today we will not cite famous HYIP that we have already overviewed such as Minvestement.com or Swisscash, we would consider submitted Motions against 12DailyPro and related to it Motion against StormPay.
On November 16, 2007 Security and Exchange Commission has filed the Motion with the Eastern Division - Riverside Courthouse of the US District Court, located 3470 Twelfth st., riverside, CA 92501 seeking approval of procedures related to the processing of investors' claims of 12Daily Pro (12DP). Any investor of 12DP as well as any one else who would like to get a closer look on the Motion may login to the Receiver's site http://www.tlennonfor12dailypro.com/. Let us remind you that 12Dp was one of the autsurf sites that had an opened account with StormPay, company founded in October 2002 by John R. McConnell, Jr. and the CEO Steve Girsky as an electronic money auction payment processor run by StormPay Incorporated that allowed anyone with an e-mail address to buy or sell StormPay Auction items after opening an online account. Despite the fact the authorities of StormPay rejected naming themselves as 3rd party processor, however, the main features applicable to 3rd party processors as PayPal are too obvious to deny. By February 2, 2006, the e-market society was shacked by the decision of StormPay to abolish other payment processors advertised on the web of StormPay. The second major step was suspension or freeze of numerous StormPay accounts, assumed as belonged to administrators of autosurf sites. By February 5, StormPay had informed the accountholders about its intention to close the accounts associated with major Ponzi schemes. Such tough closures and account suspension were followed by numerous mass DDoS attach caused the sensitive losses due to the inability of proper site operation. The first to file the claim was autosurf 12DP, soon announced to be a Ponzi scheme and the lawsuit was ordered to cease and desist.
Not it was the turn of the 12DP investors to start legal actions against it. The investors of 12DP had to register and to claim in the amount of investments and deposits to 12DP deducting all the interest received from 12DP in accordance with the history of transactions over their accounts. Provided the user had numerous accounts the payment due had to represent the aggregated sum of money. If the investor's total assets invested were less the interest received than this investor had no right to claim the return of funds. All the claims had to be submitted prior January 31, 2008 as it was stated by the Receiver Thomas F. Lennon on its web site set as above. Prior the submit of the Motion all investors had to receive an e-mail information how to access the account and take appropriate steps to determine the claim amount. After January 31 2008 the court had to approve the Motion and, in case, of its approval all investors were going to receive the new notification setting up the Claims Bar Date as a deadline when the investors have to reconfirm the amount of claim stated before. Any objections to the motions were allowed to be brought not later than November 26, 2007, in other words within 10 days from the Motion submit of the Court.
Usually the procedure of filing the Motion allows to determine the total amount of claim, however, as practice shows, we had not seen so far any amounts claimed as return of the closed HYIP exceeding $5 mln dollars due to two main reasons: partly because it's hard to locate all investors, some of them were later accused for money-laundering activities; partly because it is hard to present a sufficient proof of the amounts invested and interest received if the HYIP was closed by the investigators of the SEC in complexity with the precedent DDoS, sometimes organized by the founders of HYIP as well.
As the second step in the case SEC against 12DP was filled Motion against StormPay (case #CV 06-01018-SGL (PLAx) for order lifting restrictions on funds turned over by StormPay mad Legends bank (its bank) setting the hearings on March 3, 2008 at 10:000 am before the Eastern Division - Riverside Courthouse of the US District Court, located 3470 Twelfth st., Riverside, CA 92501. basing on the preliminary agreement between the defendants and SEC, Plaintiff, StormPay had agreed to pay $6 million to Receiver (Thomas f. Lennon) with $5 mln held on the segregated account subject to further order of Court.
Amongst other open cases against HYIP we would mention the civil action SEC v. CEP Holdings, Inc. D/B/A Colonendparenthesis.net, Trevor Reed, Clayton Kimbrell and Colon End Parenthesis Trust, LLC, Civil Action No. 5:07-CV-00256-BO (EDNC, July 9, 2007)
In July 11, 2007 SEC announced the filing of a complaint seeking emergency relief in the United States District Court for the Eastern District of North Carolina against CEP Holdings, Inc. d/b/a www.colonendparenthesis.net (CEP), Colon End Parenthesis Trust, LLC (CEP Trust), and its owners and operators, Trevor Reed (Reed) and Clayton Kimbrell (Kimbrell). The Commission alleges that since approximately November 2005, Reed and Kimbrell, through CEP, sold about $12 million worth of securities in unregistered transactions to approximately 5,000 investors, promising high returns of 2% on daily basis withdrawal.
Basing on the Commission allegation Reed and Kimbrell solicited investors to buy CEP memberships' with $20 being a minimum amount of investment (general start up for any Ponzi - can vary from $15 to 30) through CEP's Internet website. On the homepage of this site, CEP claimed that investors could make the "% of an auto-surf without surfing." To be able to invest into CEP, the investors had to open and fund an account at CEP Trust, obviously owned and controlled by Reed and Kimbrell (reminds the Swiss Cash scheme and Swiss Mutual fund, isn't it?). As it was announced by the founders of CEP the investments would be used in funding safe "brick and mortar" type businesses, such as travel agencies and real estate. However, in the reality the money were invested in other HYIP, online schemes, including auto-surf programs. As you may expect there were no records founded or financial records stating any inflow or outflow into the CEP Trust.
Basing on the all documents performed the defendants, Reed, Kimbrell, and CEP were called as violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 hereunder. The Complaint further alleges that CEP Trust aided and abetted violations of Section 10(b) of the Exchange Act and Rule 10b-5 hereunder. As the result, the Court subsequently entered an order freezing the defendants' assets, appointing a receiver for the defendants, imposing preliminary injunctions against the defendants for future violations of the antifraud provision of the federal securities laws, and providing other relief.
As usual instead of conclusion, no one would stop your "investing hand" but let us reminf you a winged HYIP phrase: "Don't invest more than you can handle to loose".
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Natalia, reporter of Ecommerce Journal
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02-29-2008, 03:08 PM
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