Abstract
A High Yield Investment Program (HYIP) is an online Ponzi scheme, a financial fraud that pays outrageous levels of interest using money from new investors. We call this fraud ‘postmodern’ in that sophisticated investors understand the fraud, but hope to profit by joining early. These investors support ‘aggregators’ – reputation websites that track the status of HYIPs. We examine 9 months of aggregator data and show that there is no evidence of collusion between different aggregators. We use their data to measure the time until HYIPs collapse, finding – perhaps unsurprisingly – that longer lifetimes are associated with lower interest payments and longer mandatory investment terms. We look at the role of digital currencies in supporting HYIPs, finding that a handful of systems dominate. Finally, we estimate that this type of criminality is turning over at least $6 million/month and set out ways in which it might be disrupted.
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Moore, T., Han, J., Clayton, R. (2012). The Postmodern Ponzi Scheme: Empirical Analysis of High-Yield Investment Programs. In: Keromytis, A.D. (eds) Financial Cryptography and Data Security. FC 2012. Lecture Notes in Computer Science, vol 7397. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-32946-3_4
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DOI: https://doi.org/10.1007/978-3-642-32946-3_4
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