off-shore foreign exchange accounts

I live in Washington, and a friend told be about an off-shore foreign exchange company. You send them money ($25000) to start, and the account interest compounds monthly (usually 8%). I was told I can then open an IBC through a foreign bank, transfer money as desired, and I would only have to pay taxes after I had withdrawn more from the account than the capital I had put in. Is this legal? And what are the true tax liabilities? If I let money sit in an account like this, do I need to report the interest yearly, or only after (as they claim) I withdraw more than the original principal?

thanks