Ponzi Scheme - This derives its name from a remarkable man with a long criminal career in the early 20th century. The term is used to describe pyramid type situations where an enterprise, promising a legitimate opportunity, actually pays the investors from the recruitment of new investors, rather than the actual operation of the REAL business.
The original Ponzi Scheme was quite elementary compared to the many sophisticated versions that have been patterned after it. Many of the later schemes have seemed totally legitimate in the face of intense scrutiny and have subsequently, in some cases, been uncovered and shut down.
Others appear, defraud investors, and disappear without a trace. That brings us to the HYIP you see on the internet today. The most notable of these are called Auto-Surf programs and the most notable of these was called 12 Daily Pro. It is alledged that this program was a Ponzi Scheme that defrauded over 300,000 people worldwide out of over $50 Million dollars. On Febuary 27, 2006 it was shut down and an official investigation commenced.
People hear the stories about vast sums made online and they are ready to believe that there is an easy way for them to do it too, but any program promising double digit returns for nothing but an investment should raise a red flag. Most of these programs are very vaque about where the money goes and more importantly, where it comes from. Some claim to invest in the Forex Market, E-Currency, or some obscure "off-shore" venture.
The best advice is to thoroughly check out the company BEFORE investing anything and if you can't verify the background, DON'T DO IT!
There are legitimate and proven ways to generate a great income online, but they do take some effort. If you can follow a simple, proven, step-by-step system, you can start to develop a stable growing internet income. If a HYIP sounds to good to be true and you are not careful, you could find yourself in the middle of the next big modern day Ponzi Scheme.
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