Classic ‘gifting circle’ pyramid scheme is back

Participants are asked to put up $5,000, with the promise of a $40,000 return - but while it's pitched as philanthropy, it's illegal.

It goes by several names, including “Gifting Circle”, “Women’s Financial Circle”, and  “Women’s Wisdom Circle”, among others; but whatever it’s called, the result is a classic pyramid scheme that defrauds the women who participate in it.

The scam has been around for some time, and comes and goes, but recently the Better Business Bureau serving Mainland BC has received several reports indicating that it is doing the rounds once more. Typically, the scheme is pitched as one that empowers women, or creates abundance or spiritual healing for those involved. Another tack is to claim that the funds provided will help a woman in need, or a family in a troubled part of the world.

Participants are asked to “invest” a large sum of money—typically $5,000—in the scheme, and are told that they will eventually receive a $40,000 payout. In reality, the money goes to the person at the top of the pyramid, with new members recruiting others so that the base of the pyramid stays stable. Once enough new recruits—paying $5,000 each—have been recruited, another woman at the top gets $40,000, and the cycle continues until it cannot sustain itself and falls apart.

“The buy-in is cost prohibitive to many, so those in a more affluent demographic are often targeted,” says Evan Kelly, senior communications advisor for the BBB serving Mainland BC. “Like many effective scams, people simply believe what they are getting into is legitimate or meaningful.”

The meetings where new members are recruited are often pitched as “secret” and “fun”. “It feels like an exclusive, awesome do-good group,” says Kelly. “It’s pitched as philanthropic, but is completely bogus. It’s a classic pyramid scheme that relies on recruitment, and it never totally goes away. It comes back with different names and different philanthropic aims.”

It is usually a friend who has asked the new member to join, so the “recruit” has no idea it is a scam. The friend probably does not know either, but participants are under a good deal of pressure to recruit new members, to keep the scheme going as long as possible.

Pyramid schemes are illegal in Canada, and those who take part in them, however unwittingly, could face criminal charges. Anyone who gives money to the scheme and expects anything in return should know that it is not a gift; Revenue Canada sees it as the proceeds of crime, and it is taxable. Even signing something saying the money was a gift and you expect nothing in return could land you in prison, as the scheme is designed to provide participants with a payoff.

However, the math shows that only about 12 to 14 per cent of those who buy into pyramid schemes ever get their money back. Another negative aspect of the “Gifting Circle” scam is that participants are encouraged to see all their female friends as potential “marks”, which runs the risk of damaging friendships, says Kelly. Recruits are also told that some people won’t “get it”, and are encouraged not to talk to people who might criticize or report the scheme.

The BBB has several tips designed to avoid pyramid schemes. They include being wary of “opportunities” to invest in things where the success or failure relies on subsequent recruitment; independently verifying the legitimacy of any franchise or investment; asking how a scheme makes money, if no product or service is being offered or sold; being wary of investments that promise low risks and high returns; and not letting greed overcome good judgement.

“Other huge red flags are no written agreements or contracts, and you likely don’t know the other women involved beyond the woman who invited you,” says Kelly. “It’s all about recruitment, and that’s the only place the money comes from: no products, no services, nothing.

“The schemes usually collapse after a couple of payouts. Make no doubt about it, the person at the top knows exactly what they are doing.”

Just Posted

New recovery house rules, increased funding aim to prevent overdose tragedy

Changes ‘speak to issues’ highlighted by death of South Surrey’s Zachary Plett

Police hope to speak with witnesses from fatal 2017 stabbing in Surrey

Wally Rogers was stabbed outside his home near 88th Avenue and 144th Street on July 8, 2017

Surrey RCMP say municipal force approval a ‘challenging time’ for detachment

Province green lit the plan, joint committee for transition to be established

Police watchdog seeking witnesses in officer-involved Surrey shooting

This is the fourth incident within a one-week period that IIO is investigating

Downtown Surrey BIA says businesses feel ‘slightly safer’ than last year

For second year, littering, loitering and discarded needles top business concerns in safety audit

Ethnic media aim to help maintain boost in voting by new Canadians

Statistics Canada says new Canadians made up about one-fifth of the voting population in 2016

BC SPCA overwhelmed with cats, kittens needing homes

Large number of cruelty investigations, plus normal ‘kitten season’ to blame

Memorial to deceased teen stays in place through Labour Day

Hundreds of tributes have been left at the Walnut Grove skate park

Wife charged in husband’s death in Sechelt

Karin Fischer has been charged with second-degree murder in the death of her husband, Max

B.C. Hydro applies for rare cut in electricity rates next year

Province wrote off $1.1 billion debt to help reverse rate increase

Speculation tax forces sale of Greater Victoria’s iconic ‘Tulip House’

Bob and Jan Fleming selling their retirement home famous for its thousands of tulips

Man at centre of dropped HIV-disclosure case sues province and 10 cops

Brian Carlisle of Abbotsford says Mission RCMP defamed him and were ‘negligent’ in their investigation

Conan turns to the Property Brothers for tips on buying Greenland

Jonathan Scott suggests removing glaciers and mountains to bring in ‘more natural light’

Most Read