"What is the HYIP Prime Bank Fraud"
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Some High Yield Investment Programs or HYIP programs are blatant examples of the Prime Bank type of fraud.
According to the Securities and Exchange Commission, the FBI and other law enforcement agencies around the globe, the prime bank fraud or con is a classic that's been going on for decades, though given new life through the Internet.
The details vary, but the essential story is that the top 50 major banks of the world ("prime" banks -- hence the name of the fraud) have had secret trading programs among themselves ever since the Breton Woods Agreement, the formation of the International Monetary Fund and the World Bank in the late 1940s. These programs are super profitable, with little risk, so they're secret. Only the banks and/or a few select traders are allowed me make these trades. Sometimes they're allowed to participate to make money for humanitarian causes.
The minimum amount of money needed to engage in these transactions is large, so some traders are allowed to pool money from investors such as yourself. They'll then distribute your proportionate share of the profits to you.
(In your dreams.)
In its original form, this prime bank scam has successfully targeted high income investors, municipalities and nonprofit organizations
Heck, promoters of these frauds have even taken out ads in USA TODAY and THE WALL STREET JOURNAL!
The scam will throw around the names of fictitious financial instruments such as debt obligations of the top 100 world banks, Medium Term Bank Notes or Debentures, Standby Letters of Credit, Bank Guarantees, an offshore trading program, a roll program or bank-issued debentures.
The one HYIP site I visited which was an example of this fraud wrote a lot of financial gobbledegook about the US government's policy of attracting Eurodollars back into the US by "enabling European Prime Banks to issue Bank Debenture Instruments in the form of Letters of Credit (LCs), Standby Letters of Credit (SLCs), Prime Bank Notes (PBNs), Prime Bank Guarantees (PBGs) and Documentary Letters of Credit (DLCs) . . ."
Foreign banks do use "bank guarantees" as US banks use "letters of credit" to ensure payment of international business transactions, these are never sold or traded.
The con artists may claim that these are issued, traded, guaranteed or endorsed by:
The World Bank Department of Institutional Integrity (INT)
Operations Evaluation Department
The International Monetary Fund (IMF)
The Federal Reserve
The Department of Treasury
The International Chamber of Commerce (ICC)
An international central bank.
One thing that this scam shares with all the HYIPs I've looked at is extreme vagueness about exactly where the money is coming from
Just what does trading in European bank debentures mean? Just what are all these mysterious, secret trades between the prime banks of the world? What's being traded? How can one bank make so much money from another bank, guaranteed?
These questions are just too complicated to explain to ordinary people such as you and me, the con artists may explain.
If you don't understand how an investment makes its money, which is the case for this prime bank fraud and most HYIPs (which may refer to day trading etc but are rarely specific), don't risk your hard earned money on it.
So prime bank HYIPs are clearly scams. Are there any indications that other types of High Yielding Investing Programs are frauds?
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