You’ve been approached to join a mutual aid or lending group or maybe a group of insiders or special people. To become a member, you need to make a large ‘gift’, such as $5,000. In exchange, you could receive a much bigger amount by recruiting participants. Be careful! The offer might be a scam.
What is a gifting circle?
Gifting circles are pyramid schemes and participating in them is illegal. In many instances, the person asking you to join could be someone you know who is a member of a group that is active on the Internet or in certain circles. Initially, you may not be told that you’ll have to recruit more members to make a lot of money. The person will begin by drawing you in with a project you might find interesting and then tempt you with the possibility of making a quick profit.
Gifting circles can take any number of forms devised by ill-intentioned promoters. For example, a circle could appear to be an investment or a community project, or offer you the chance to be your own boss. These circles go by many names, such as gift circle, women’s financial circle, dinner party, or pay-it-forward cloud.
How it works
Generally speaking, anyone who joins a gifting circle has to recruit eight other members, who will have to contribute $5,000 each. Only once the recruitment is completed will the person pocket the $40,000, often at a circle members meeting. Recruits would in turn each receive $40,000 when they bring in eight other members willing to pay $5,000 each. That’s a lot of people and it’s only the tip of the iceberg!
The following chart shows the number of recruits needed to prevent the pyramid from collapsing.
Have you been promised a profit on the money you gift? However, no part of the operation generates a profit. For someone to make money, another person has to pay into the scheme.
Watch out for the following situations:
- You ask where the amounts you could receive will come from. If revenues are based only on member recruitment, that’s illegal. It’s really a pyramid scheme. Not only is it against the law to set up this kind of scheme, it’s also against the law to participate in it!
- You’ve been promised a big profit for little or no effort. It’s too good to be true.
- You’re encouraged to use a fake name to participate.
- You’re asked to pay in cash.
- You’re strongly advised not to miss out on this opportunity. Your emotions are being manipulated.
Despite promoters’ claims, and even if a group has a catchy name that provides a great cover, gifting circles are still pyramid schemes.
Don’t be fooled because someone told you that it’s legal, that a loophole in the law makes the operation legal, or even that a police officer or the AMF has approved it. All of these statements are false!End of the warning
To reduce your chances of falling for this type of fraud, don’t be taken in by fancy words or by web testimonials or offers that seem just too good to be true. If you have any doubts, contact the AMF or the police.