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BBB Warns Cash Gifting Pyramid Schemes Flourishing Online

5/17/2010

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this information has been sponsored by Direct Selling Education Foundation

BBB Warns Cash Gifting Pyramid Schemes Flourishing Online: Image of envelope with cash sticking out Online promotions promising easy wealth by joining a cash gifting program or gifting club are flourishing on the Internet. With many families struggling to make ends meet in the current economy, Better Business Bureau warns that cash gifting is not a legitimate way to make a few extra dollars, and in fact, is nothing more than a pyramid scheme.

Like most pyramid schemes of the past, cash gifting operations are targeting people with some form of an affinity – such as women’s clubs, community groups, church congregations, social clubs and special interest groups. But in keeping with the digital age, schemers have moved operations to the Internet and are now marketing their programs as easy ways to make money in a tough economy through videos on YouTube, paid ads on Google and attractive Web sites that engage victims. 

According to TubeMogul, an online video analytics company, currently there are 22,974 “cash gifting” videos on YouTube, adding up to an astounding 59,192,963 views. While the creators of the videos vary, the content is usually the same. Typically, the person in the video explains—in vague terms—that they’ve discovered a new program to help people make money through cash leveraging or cash gifting and might even open a FedEx envelope with cash inside to prove the effectiveness of the program.

“Bernie Madoff isn’t the only guy with a ponzi scheme; money-making opportunities promising big returns for little work are all over the Internet and are extremely enticing to millions of people struggling with today’s economy,” said Steve Cox, BBB spokesperson. “Anyone tempted by slick cash gifting marketing appeals should run in the opposite direction, or they run the risk of being the next person ripped off by a pyramid scheme.”

Some cash gifting schemes are touted as fundraisers for a good cause or as an empowerment program to help people help themselves. In order to take part, the participant must pay anywhere from $150-$5,000. After making the contribution, which is funneled to people farther up the pyramid, the participant must then convince more people to join in order to start making money themselves. 

Recruiters may claim that the operation is legal and often allude to IRS laws regarding gifting. However, almost every state has laws prohibiting pyramid schemes and/or assesses penalties on those who participate, and the Federal Trade Commission and many State Attorneys General have issued warnings about cash gifting clubs.

BBB advises people to ask themselves three questions in order to evaluate dubious money-making opportunities:

• Do I have to make an “investment” or give money to obtain the right to recruit others into the program?

• When I recruit another person into the program, will I receive what the law calls “consideration” (that usually means money) as a result?

• Will the person I recruit have to make an “investment” or give money to obtain the right to recruit and receive “consideration” for getting other people to join?

If the answers are “yes,” BBB warns people to steer clear of the scheme, don’t give in to tempting claims online and never buckle under to high-pressure sales pitches, even when they come from the mouth of a trusted friend, co-worker, neighbor or church member.

For more guidance from your BBB on avoiding scams and other money making scams, go to www.bbb.org.

About Direct Selling Education Foundation (www.dsef.org)
The Direct Selling Education Foundation (DSEF), created in 1973 by visionary leaders of the Direct Selling Association, serves the public as the industry’s goodwill ambassador. Headquartered in Washington, D.C., the international non-profit organization offers comprehensive programs that advance the direct selling industry’s support of consumer rights and protection, education about the industry, ethical leadership, and individual economic empowerment. Thousands of industry and community thought leaders from diverse backgrounds and organizations have come together at DSEF sponsored programs to learn, grow and create a vital and healthy business climate. Our services include conferences, training sessions, publications, university campus visits, teaching and instructional materials, networking opportunities, grants to organizations, consultative assistance and grants for research and case studies. For more information, visit www.dsef.org or watch this video.

As a matter of policy, the CBBB and Better Business Bureaus do not endorse any product, service or company.
 

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