Operators generally set up a website offering an “investment program” which promises very high returns, such as 1% per day (3678% APY when returns are compounded every day), disclosing little or no detail about the underlying management, location, or other aspects of how money is to be invested. The U.S. Securities and Exchange Commission (SEC) has said that “these fraudulent schemes involve the purported issuance, trading, or use of so-called ‘prime’ bank, ‘prime’ European bank or ‘prime’ world bank financial instruments, or other ‘high yield investment programs.’ (HYIP’s) The fraud artists … seek to mislead investors by suggesting that well regarded and financially sound institutions participate in these bogus programs. In 2010, the Financial Industry Regulatory Authority (FINRA) warned that “[t]he con artists behind HYIPs are experts at using social media — including YouTube, Twitter and Facebook — to lure investors and create the illusion of social consensus that these investments are legitimate.
Though Ponzi schemes have existed since at least the early 1900s, the rise of digital payment systems has made it much easier for operators of such websites to accept payments from people worldwide. Electronic money systems are generally accepted by HYIP operators because they are more accessible to operators than traditional merchant accounts. Some HYIP operators opened their own digital currency companies that eventually folded; these companies include Standard Reserve, OSGold, INTGold, EvoCash, and V-Money. StormPay started in the same way in 2002, but it remained in business even after the HYIP that it was created to serve was shut down by the State of Tennessee.
Some HYIPs have incorporated in countries with lax fraud laws to secure immunity from investor laws in other countries. The operators have been known to host their website with a web host that offers “anonymous hosting”. They use this website to accept transactions from participants in the scheme.
Some investors try to make money by attempting to invest in HYIPs at an early enough stage to create a return, and then by cashing out before the scheme collapses to profit at the expense of the later entrants. This is in itself a gamble as poor timing may result in a total loss of all money invested. To reduce this risk some of these investors use “tracker sites” listing the schemes and their current state. One expert states that there is not enough evidence to corroborate that tracker sites can actually help investors make more money.