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How to Spot a Scam
|Types of Scam|-|How to Spot a Scam|-|Investor Suggestion|
Types of Scam
Ponzi scam
The most common type of scam is the Ponzi scam. The concept is simple; a HYIP starts up claiming to pay 10% after 10 days (or some variation of the payout). The first user invests into the scheme and waits 10 days for the returns, during that time some other investors join up. The 10% that is owed to the first investor is paid out from the principal of the later investors. The program expands until there are not enough new investors to sustain the promised payout. At this point the HYIP closes and all out the money that has been invested into the scheme disappears along with the admins and every thing associated with the program.
Doublers
A doubler is another simple concept. An investor invests a set amount, ($1, $2.50, $5, $10, $25, $50, etc) into a list. When 2 more investors buy into the same list, they pay the investor at the top of that list with their investment money. The name at the top of the list is removed and the whole list is shuffles up. As you can see the list doubles in size until you would need the whole world investing (and then some) before every one gets paid.
Multi Level Marketing (MLM)
If you've heard of Amway then you have heard of an MLM before. MLMs will mean you will have to either convince someone to signup underneath you, or sell someone a product (that is over priced and usually of average quality). I have heard or some people making money from MLMs, but only because they have a website that draws a lot of traffic.
How to Spot a Scam
There are numerous HYIPs out there, and a majority of them are scams, so how do you find which one are scams and which ones are legitimate. Below is a list of things to do that will eliminate a majority of scams.
- Go to HYIP Forums
- Do a 'whois' search
- Check if the HYIP is hosted by a free web hosting site
- When was it registered
- See what the HYIPs contact details are like
- Test the contact details
- Read over the website and see if it has any thing that looks suspicious or bad engrish
- Know what the HYIP does to make its money
- Returns that are too good to be true usually are
- Watch out for HYIPs with very high referral commission
- How long does the HYIP hold your principal for?
- Always do a test spend and withdrawal
1. Go to HYIP forums
The first thing to do is go to a HYIP forum (e.g. http://www.hyipdiscussion.com/) and look up the HYIP that you are interested in. Read everything that the users have to say, but usually take what the veterans (500+ posts) have to say over someone who has very few posts.
2. Do a ‘whois’ search
To do a whois search go to somewhere like www.whois.net or whois.webhosting.info and type in the URL of the HYIP. These services display a lot of information such as who registered the domain their contact details, when it was registered and even where they are hosting the site.
a. Check if the HYIP is hosted by a free web hosting site
Using the hosting information from the ‘whois’ search you can determine if the HYIP is on a free web hosting service. If the HYIP is hosted by a free service you can be pretty sure that it is a scam.
b. When it was registered
If a HYIP claims to be 5 years old but the ‘whois’ search says that the domain is only a couple of months old, you can be pretty sure that it is a scam.
3. See what the HYIPs contact details are like
Go to the HYIP site and check out their contact details, the more ways to contact them the better, eg Email, Phone, Forum, Address, etc
4. Test the contact details
Send an email to the HYIP admin asking a legitimate question. If they do not respond then it may not be worth investing with them. If they do reply but it takes them many days/week to do so, again it may not be worth investing with them.
5. Read over the website and see if it has any thing that looks suspicious
Go to the HYIP web site, click on all the links and see if that actually take you to where they are supposed to. If the designer has done a poor effort in designing the website then they will probably do a poor job with your money too. Also keep an eye out on what they are writing too; after a while your may notice that some HYIPs have exactly the same words (word for word) on them (in the FAQ, news, etc). It is clear that they have copied it from another HYIP site and that they are probably scammers.
6. Know what the HYIP does to make its money
Find out how the HYIP makes its money. If the HYIP claims to make its money through “a secret banking loan” or something similar they are a scam. If the way they invest money also sounds too risky/dodgy then don’t invest in them.
7. Returns that are too good to be true usually are
The old saying ‘if it is too good to be true’, you will find that it probably is. If a HYIP promises hourly payouts it will most likely be gone long before you can get any Return On Investment (ROI). Further more if a HYIP promises ROI of you initial capital in less than a week it is also likely to disappear soon and become a scam.
8. Watch out for HYIPs with high referral commission
If a HYIP offers a referral commission above 15% it implies that it needs more members to survive. This indicates that the HYIP is most likely a Ponzi scam and should be avoided.
9. How long does the HYIP hold your principal for?
Check out how long a HYIP holds your principal for. A majority of HYIPs go under well within a year and it also ties your money up in a single program.
10. Always do a test spend and withdrawal
As mentioned in the golden rules section, always do a test spend to see how the HYIP performs. If a HYIP does not pay you when you make a test withdrawal then feel lucky that you have only lost a small amount of money. Payouts should not take more than 48 hours after a request, if it does this is a sign of concern if they do not have a good reason.
Other how to spot a scam suggestion
1. Any HYIP with less than $5 minimum investment is more likely to be SCAM
Scammers try to be smart but investors need to be smarter. If you know of any method, technique or resource that can help reduce the risk of investors getting scammed then we want to hear from you. Please contact us and we will add it to the list.
Regards,
HYIPCastle.com Admin team
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