What is the name given to the fraudulent operation that involves paying abnormally high returns to investors out of the money paid in by subsequent investors rather than from revenues generated by any business?
"High-yield investment program A high-yield investment program (HYIP) is a type of Ponzi scheme, an investment scam that promises unsustainably high return on investment by paying previous investors with the money invested by new investors. 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,"
"theory. As with the Ponzi scheme, the price exceeds the intrinsic value of the item, but unlike the Ponzi scheme: Ponzi scheme A Ponzi scheme (; also a Ponzi game) is a form of fraud which lures investors and pays profits to earlier investors by using funds obtained from more recent investors. The victims are led to believe that the profits are coming from product sales or other means, and they remain unaware that other investors are the source of profits. A Ponzi scheme is able to maintain the illusion of a sustainable business as long as there continue to"
"Ponzi scheme A Ponzi scheme (; also a Ponzi game) is a form of fraud which lures investors and pays profits to earlier investors by using funds obtained from more recent investors. The victims are led to believe that the profits are coming from product sales or other means, and they remain unaware that other investors are the source of profits. A Ponzi scheme is able to maintain the illusion of a sustainable business as long as there continue to be new investors willing to contribute new funds, and as long as most of the investors do not demand full"
"Tunneling (fraud) Tunneling or tunnelling is financial fraud committed by ""the transfer of assets and profits out of firms for the benefit of those who control them"". In legal terms, this is known as a fraudulent transfer. For example, a group of major shareholders or the management of a publicly traded company orders that company to sell off its assets to a second company at unreasonably low prices. The shareholders or management typically own the second company outright, and thus profit from the otherwise disastrous sale. Tunneling differs from outright theft because people who engage in tunneling generally comply with"
"a particular market reaction such as manipulating the market price of a security. Spoofing can be a factor in the rise and fall of the price of shares and can be very profitable to the spoofer who can time buying and selling based on this manipulation. Under the 2010 Dodd-Frank Act spoofing is defined as ""the illegal practice of bidding or offering with intent to cancel before execution."" Spoofing can be used with layering algorithms and front-running, activities which are also illegal. High-frequency trading, the primary form of algorithmic trading used in financial markets is very profitable as it deals"
"trading is where groups of investors fraudulently inflate the share price of a company, at which point they sell the shares they own for a profit. While this is illegal, the market consequences are usually minimal. In a smaller number of cases, circular trading is used in a way that has a direct impact on the success and failure of companies. In some cases, shareholders set thresholds for the price of shares at which they will stay invested within a company or leave it. Another example of this is where shareholders set a price threshold at which they will decide"
"overvalued. Circular trading is fraudulent because the signal that investors receive to buy shares has no basis in reality and is made with the sole purpose of creating interest where none is warranted. This fraudulent practice is therefore widely considered unethical and is banned in many countries. This issue is most prevalent in India, where companies such as Videocon Industries Ltd had their shares devalued fraudulently by the brokers Mansukh Securities and Finance Ltd. and Intec Shares and Stock Brokers Ltd. Circular trading has become a particularly important issue since the advent of high-frequency trading in the 1990's. This trading"
"Securities fraud Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of securities laws. Securities fraud can also include outright theft from investors (embezzlement by stockbrokers), stock manipulation, misstatements on a public company's financial reports, and lying to corporate auditors. The term encompasses a wide range of other actions, including insider trading, front running and other illegal acts on the trading floor of a stock or commodity exchange."
"means to address pump and dump schemes perpetrated by unregistered groups and individuals. Pump and dump ""Pump and dump"" (P&D) is a form of securities fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operators of the scheme ""dump"" sell their overvalued shares, the price falls and investors lose their money. This is most common with small cap cryptocurrencies and very small corporations, i.e. ""microcaps"". See Microcap stock fraud. While fraudsters in the past relied on cold calls,"
"payments to earlier investors to give the illusion that the investment is successful. This ploy is used to trick new investors to invest in the scheme and to lull existing investors into believing their investments are safe and secure. In reality, the fraudster almost always steals investor money for personal use. Both types of schemes depend on an unending supply of new investors; when the supply of investors inevitably dries up, the whole scheme collapses and investors discover that most or all of their money is gone. Affinity frauds can involve the targeting of any group of people who take"
"Contrarian investing Contrarian Investing is an investment strategy that is characterized by purchasing and selling in contrast to the prevailing sentiment of the time. A contrarian believes that certain crowd behavior among investors can lead to exploitable mispricings in securities markets. For example, widespread pessimism about a stock can drive a price so low that it overstates the company's risks, and understates its prospects for returning to profitability. Identifying and purchasing such distressed stocks, and selling them after the company recovers, can lead to above-average gains. Conversely, widespread optimism can result in unjustifiably high valuations that will eventually lead to"
"which focuses purely upon the abuse of inside information in relation to financial markets for personal financial gain, and is wholly unrelated to creditor's rights or insolvency law. Fraudulent trading In company law, fraudulent trading is doing business with intent to defraud creditors. Where during the course of a winding-up, it appears to the liquidator that fraudulent trading has occurred, the liquidator may apply to the court for an order any persons who were knowingly parties to the carrying on of such business are to be made liable to make such contributions (if any) to the company's assets as the"
"and more are the hallmark of the so-called ""prime bank"" fraud; they may sound great on paper, but the guaranteed offshore investment with the vague claims of an easy 100% monthly return are all fictitious financial instruments intended to defraud individuals. A rogue trader is a trader at a financial institution who engages in unauthorized trading to recoup the loss he incurred in earlier trades. Out of fear and desperation, he manipulates the internal controls to circumvent detection to buy more time. Unfortunately, unauthorized trading activities invariably produce more losses due to time constraints; most rogue traders are discovered at"
"million from about 2,500 investors. Giuliani called Galanis ""a career white-collar criminal."" The scheme was this: Galanis's company lent the investors $4 for each $1 they invested and told them that they were eligible to deduct four times their actual investment on their taxes. However, the loans were fabricated. In the New York state case, Galanis was charged with selling real-estate tax shelters involving the Nashua Trust Company, which was said to be acquiring and developing non-casino hotels in Atlantic City. None of that work ever happened. As many as 1,400 investors entrusted Galanis with $75 million. The cash was"
"Abnormal return In finance, an abnormal return is the difference between the actual return of a security and the expected return. Abnormal returns are sometimes triggered by ""events."" Events can include mergers, dividend announcements, company earning announcements, interest rate increases, lawsuits, etc. all of which can contribute to an abnormal return. Events in finance can typically be classified as information or occurrences that have not already been priced by the market. In stock market trading, abnormal returns are the differences between a single stock or portfolio's performance and the expected return over a set period of time. Usually a broad"
"out of funds received from later investors duped into believing they are themselves receiving entry into a high-return investment scheme. The Madoff investment scandal is an example of this kind of high-level embezzlement scheme, where it is alleged that $65 billion was siphoned off from gullible investors and financial institutions. Internal controls such as separation of duties are common defences against embezzlement. For example, at a movie theatre (cinema), the task of accepting money and admitting customers into the theatre is typically broken up into two jobs. One employee sells the ticket, and another employee takes the ticket and lets"
"stone, taking all the duped investors' money with it. When a group of traders create activity or rumors in order to drive the price of a security up. An example is the Guinness share-trading fraud of the 1980s. In the US, this activity is usually referred to as ""painting the tape"". Runs may also occur when trader(s) are attempting to drive the price of a certain share down, although this is rare. (see Stock Bashing) Actions designed to artificially raise the market price of listed securities and to give the impression of voluminous trading, in order to make a quick"
"Illicit financial flows Illicit financial flows, in economics, are a form of illegal capital flight that occurs when money is illegally earned, transferred, or spent. This money is intended to disappear from any record in the country of origin, and earnings on the stock of illicit financial flows outside a country generally do not return to the country of origin. Illicit financial flows can be generated in a variety of ways that are not revealed in national accounts or balance of payments figures, including trade mispricing, bulk cash movements, ""hawala"" transactions, and smuggling. Although illicit financial flows are closely related"
"the highest rate. To make money off this expensive money, it had to lend at even higher rates, meaning that it had to make more, riskier investments. This system was made even more damaging when certain deposit brokers instituted a scam known as ""linked financing"". In ""linked financing"", a deposit broker would approach a thrift and say he would steer a large amount of deposits to that thrift if the thrift would lend certain people money. The people, however, were paid a fee to apply for the loans and told to give the loan proceeds to the deposit broker. The"
"Pump and dump ""Pump and dump"" (P&D) is a form of securities fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operators of the scheme ""dump"" sell their overvalued shares, the price falls and investors lose their money. This is most common with small cap cryptocurrencies and very small corporations, i.e. ""microcaps"". See Microcap stock fraud. While fraudsters in the past relied on cold calls, the Internet now offers a cheaper and easier way of reaching large numbers"
"of sudden or unexpected withdrawals. In his guilty plea, Madoff admitted that he hadn't actually traded since the early 1990s, and all of his returns since then had been fabricated. However, David Sheehan, principal investigator for Picard, believes the wealth management arm of Madoff's business had been a fraud from the start. Madoff's operation differed from a typical Ponzi scheme. While most Ponzis are based on nonexistent businesses, Madoff's brokerage operation was very real. Rather than offer high returns to all comers, Madoff offered modest but steady returns to an exclusive clientele. The investment method was marketed as ""too complicated"
"a number of variations on ""Flipping (city name here)"" e.g. ""Flipping Vegas"", ""Flipping Boston"", ""Flipping San Diego"", or ""Flipping Miami"". Flipping Flipping is a term used primarily in the United States to describe purchasing a revenue-generating asset and quickly reselling (or ""flipping"") it for profit. Though flipping can apply to any asset, the term is most often applied to real estate and initial public offerings (IPOs). The term ""house flipping"" is used by real estate investors to describe the process of buying, rehabbing, and selling properties for profit. Renovating distressed or abandoned properties was sometimes linked to malicious and unscrupulous"
"of generating commissions, selling software that is supposed to guide the customer to large profits, improperly managed ""managed accounts"", false advertising, Ponzi schemes and outright fraud. It also refers to any retail forex broker who indicates that trading foreign exchange is a low risk, high profit investment. The U.S. Commodity Futures Trading Commission (CFTC), which loosely regulates the foreign exchange market in the United States, has noted an increase in the amount of unscrupulous activity in the non-bank foreign exchange industry. Between 2001 and 2006 the U.S. Commodity Futures Trading Commission has prosecuted more than 80 cases involving the defrauding"
"stock is sold without being borrowed and without any intent to borrow. The practice of spreading false information about stocks, to drive down their prices, is called ""short and distort."" During the takeover of Bear Stearns by J.P. Morgan Chase in March 2008, reports swirled that shorts were spreading rumors to drive down Bear Stearns' share price. Sen. Christopher Dodd, D-Conn., said this was more than rumors and said, ""This is about collusion."" A Ponzi scheme is an investment fund where withdrawals are financed by subsequent investors, rather than profit obtained through investment activities. The largest instance of securities fraud"
"uses compromised brokerage accounts to purchase large quantities of that stock. The net result is a price increase, which is often pushed further by day traders seeing a quick advance in a stock. The original stockholder then cashes out at a premium. In the early 1990s the penny-stock brokerage Stratton Oakmont artificially inflated the price of owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Firm co-founder Jordan Belfort was criminally convicted for his role in the scheme. He later turned his story into a memoir, ""The Wolf of"
"unproven trading methods for stocks, bonds, commodities, or Forex, while generating sizable revenues for unscrupulous authors, advisers and self-titled trading gurus. Most active money managers produce worse returns than an index, such as the S&P 500. Speculation in stocks is a risky and complex undertaking because the direction of the markets are considered generally unpredictable and lack transparency, also financial regulators are sometimes unable to adequately detect, prevent and remediate irregularities committed by malicious listed companies or other financial market participants. In addition, the financial markets are subject to speculation. This does not invalidate the well documented true and genuine"
"is deceitfully indicative to investors as normal and healthy opportunities for investment. This can cause investments of money to leave other areas of the economy where it once was perhaps more accurately dedicated and enter the now seemingly more profitable and seemingly more expanding market. Once this activity reaches some unknown particular point, or rate, of growth, the activity is called a boom. Booms create undue waste. Normally, economies are very conservative and prudent in their resource use, but ""injecting"" money into them, always at specific intended or unintended points, disrupts them and causes undue waste and subsequent periods of"
"1857 novel ""Little Dorrit"" both feature such a scheme. Ponzi carried out this scheme and became well known throughout the United States because of the huge amount of money that he took in. His original scheme was based on the legitimate arbitrage of international reply coupons for postage stamps, but he soon began diverting new investors' money to make payments to earlier investors and to himself. Typically, Ponzi schemes require an initial investment and promise above average returns. They use vague verbal guises such as ""hedge futures trading"", ""high-yield investment programs"", or ""offshore investment"" to describe their income strategy. It"
"Abnormal profit In economics, abnormal profit, also called excess profit, supernormal profit or pure profit, is ""profit of a firm over and above what provides its owners with a normal (market equilibrium) return to capital."" Normal profit (return) in turn is defined as opportunity cost of the owner's resources. A related broader term is economic rent, which applies to the owner of a resource, such as land, rather than to the firm as such. According to the theoretical model of perfect competition, abnormal profits are unsustainable because they stimulate new supply, which forces down prices and eliminates the abnormal profit."
"to the extent of the value they gave for it, which means that they may lose much of the benefit of their bargain, even though they have no knowledge that the transfer to them is fraudulent. Often fraudulent transfers occur in connection with leveraged buyouts (LBOs), where the management/owners of a failing corporation will cause the corporation to borrow on its assets and use the loan proceeds to purchase the management/owner's stock at highly inflated prices. The creditors of the corporation will then often have little or no unencumbered assets left upon which to collect their debts. LBOs can be"
"Creative real estate investing Creative real estate investing is any non-traditional method of buying and selling real estate. Confidence tricks and pyramid schemes in the 20th and 21st century such as Nouveau Riche (real estate investment college) have embraced the term, leading contemporary usage of the term to be synonymous with unscrupulous practices. ""Bird dogs"" get paid a referral fee for finding good deals for other investors. This is often where people begin their investing career as there is only time at stake. They are typically paid when the deal closes. Some birddogs will structure companies and partnership arrangements as"
"money, but in fact should make more money than the passive strategy of investing in everything equally (since this strategy appeared to be statistically more likely to be successful than the strategy of any one investment manager). The name for the additional return above the expected return of the beta adjusted return of the market is called ""Alpha"". Besides an investment manager simply making more money than a passive strategy, there is another issue: although the strategy of investing in every stock appeared to perform better than 75 percent of investment managers (see index fund), the price of the stock"
"Fraudulent trading In company law, fraudulent trading is doing business with intent to defraud creditors. Where during the course of a winding-up, it appears to the liquidator that fraudulent trading has occurred, the liquidator may apply to the court for an order any persons who were knowingly parties to the carrying on of such business are to be made liable to make such contributions (if any) to the company's assets as the court thinks proper. Conceptually, fraudulent trading is similar to a fraudulent conveyance, but the key distinction is that an application to have a transaction set aside as a"