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SUMMARY:Orchestrated crime: the high yield investment fraud ecosystem - Je
 ns Neisius\, TU Munich
DTSTART:20140711T150000Z
DTEND:20140711T153000Z
UID:TALK53352@talks.cam.ac.uk
CONTACT:Richard Clayton
DESCRIPTION:A High Yield Investment Program (HYIP) is an online ‘Ponzi s
 cheme’\, a fraudulent scheme in which unusually high returns are finance
 d by new investors until the scheme collapses. An ecosystem of enabling an
 d promoting entities facilitates the industrialisation of this type of inv
 estment fraud. Aggregators are paid to list active HYIPs and receive a ref
 erral fee for every investor they introduce to a HYIP. A specialist softwa
 re house provides ‘kits’ for both HYIPs and aggregators\, drastically 
 lowering the barriers to entry for criminals\, so much so that they have d
 ominated the market for the past ten years. We find clear rules and incent
 ives throughout the ecosystem\, and we show that this fraud is considerabl
 y more ‘orchestrated’ than suggested in previous studies. By analysing
  the flow of money between the various parts of the ecosystem we have been
  able to provide an accurate estimate of overall turnover ($47 million in 
 2013)\, and also to show that the average HYIP made a profit of $8 000\; s
 uccessful aggregators had individual revenues in excess of $250 000\; and 
 the kit supplier had an annual revenue of at least $500 000 and potentiall
 y\, under reasonable assumptions\, twice that figure. By analysing over 10
 0 000 discussion comments made on HYIP sites we find that investors showin
 g interest in HYIPs are from many countries\, but the largest group are fr
 om the USA. Our financial modelling shows that even if investors are aware
  of the true nature of the HYIPs – and invest early to maximise their re
 ceipts – they still incur\, even on some favourable assumptions\, a mean
  loss of 24% of their investment. Regulatory action is needed\nto tackle t
 his fraud and this paper demonstrates that targeting the sale of kits for 
 HYIPs and aggregators would be a key step towards disrupting the HYIP ecos
 ystem\, with the removal of the aggregator sites the next most important a
 ction that is needed.
LOCATION:Computer Laboratory\, William Gates Building\, Room FW11
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