By Evan Kelly, Senior Communications Advisor for BBB serving Mainland BC
There seems to be a continued lack of understanding going around. As of late, BBB has been getting many phone calls from concerned citizens of BC inquiring whether or not ‘Gifting Circles’ are legit opportunities. In an effort to raise awareness of these ‘circles’ BBB did many stories last year hoping to prevent people from falling victim. It seems we need to do more.
What is a Gifting Circle?
In a nutshell, it’s a pyramid scheme that offers high financial rewards for ‘gifting’ cash. Participants are asked to pay $5000 and are promised a payout of $40000 at another time. You can’t lose!! Individuals, usually women, are enticed by a friend or an acquaintance to get involved in one of these ‘empowering groups’ as a way to make quick cash. These gifting circles often go by other names such as ‘Women’s Wisdom Circle’ or ‘Women’s Financial Circle’ or ‘Sisters of Abundance,’ you get the idea, women helping women. I digress...while women are often targets, BBB is hearing from many men who are also getting involved. Call it what you want and involve whoever you want, it’s still illegal in Canada.
The thing about pyramid schemes is that they don’t involve a trade of goods or services; even multi-level marketing does that. Money in a pyramid is generated through the recruitment of other willing parties only, and while it can work for a few levels, it eventually becomes very unstable at the base and falls apart as more and more recruits are required to sustain it. A few people at the top of the pyramid run away with cash, many, many more at the bottom lose out. Here’s a spiffy diagram based on users needing to recruit 6 people each…(*note...it won’t take long for sustainability to reach impossible levels).
Worded properly, a Gifting Circle can feel like a safe bet and not at all illegal. Many people who have contacted me to question the legality have often been told that police officers and even lawyers are involved...it must be ok then! Sure...did you actually meet them? Nope, didn’t think so. Recruits are told the money is a gift and they even sign a waiver claiming they expect nothing in return, therefore, it’s legit. They may also be told they are raising money for a good cause. Weak at best and you will still be charged in Canada. Oh, and you were probably told not to deposit the cash you received so as not to create a paper trail. So above board right? Another nope.
Intoxicating. Too good to be true.
I’ve spoken to several people who say people they know all of a sudden have thousands of dollars dripping out of their pockets after joining one of these groups. Yep, can happen, and it can certainly seem very attractive, but it isn’t the norm. Roughly 12-14% of those involved actually get the promised payout. That leaves a high percentage of empty pockets. Oh, and I’ll say it again...it’s illegal in Canada and the U.S. Don’t waste your time and money.