Sunday, February 23

Your Gifting Circle is a Pyramid Scheme

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A gifting circle is a pyramid scheme that is gaining a strong foothold in even the most anti-MLM circles.

I was at a party last weekend where I learned about this money scam that rivals even Amway. It offers up even greater deception and insanity, providing both a smoother pitch and bigger promises. I would list mocking MLMs within the top 10 of my favorite personal finance activities, but this new one takes the cake. It’s one thing to tell people they can earn a few hundred dollars a month selling toiletries to their friends and family. It’s quite another to promise a $40,000 payout.

You read that right: $40,000

As soon as I heard that number I knew I was going to be told something ludicrous, and my friend delivered. It’s called a Gifting Circle.

A Gifting Circle is a Pyramid Scheme

A Gifting Circle is a clever way of sugar-coating the words “pyramid scheme”. It’s an elaborate, expensive scam that primarily targets women:

gifting circles induct women into the group for a specific amount of cash, usually $5,000. The groups are made up of 15 women, called a circle, but of course it’s a pyramid. Eight women on the bottom layer, then four, then two, and one at the top.

The woman at the top collects $40,000 when the bottom level is filled, which happens when each of the eight newest initiates give her a $5,000 “gift.” Once she gets her gift (they might call it her “birthday” or say her “cloud has rained”), she leaves the group, which splits in two. Remaining members move up a level, and both groups start looking for new members.

When my friend explained this to me, I actually grabbed her shoulders and shook her forcefully yelling “Scam! It’s a SCAM!”. She looked dubious but otherwise nonplussed. She had not participated in the gifting circle herself because she, thankfully, did not have $5,000 lying around for such BS.

Another girl at the party piped up that she had gone in for a “half-step”, which is $2,500. However, she got nervous and pulled her money out. Nevertheless, both of these young women insisted over and over that the gifting circle was 1) not scam, 2) not illegal, and 3) that one of their friends made it through twice pocketing as much as $90,000.

All three of those points are untrue, especially the last one. Neither of my friends realized their gifting circle is a pyramid scheme.

If anyone is trying to lead you into an investment with the reassurance that it is “not a scam” and “not illegal”, that is a big red flag that it is definitely both.

Honest business doesn’t need to lead with that defense. People selling legitimate products and services don’t start off by telling you what their business is not.  They don’t have to, they should be too busy selling you on what value they can provide. Scams work the opposite way. They try to dazzle you with too-good-to-be-true promises, while simultaneously reassuring you nothing shady is going on.

They are 100% illegal!

Gifting Circles are illegal, make no mistake about it. It’s laid out in section 206 of the Criminal Code of Canada.

My friend admitted she was aware the Gifting Circle wasn’t totally with the law, but assured me there was a loophole. There is an exchange of a gift card for the cash, which makes it a transaction instead of the gift. I don’t think paying $5,000 for a $100 gift card to Victoria’s Secret is really fooling anyone, but perhaps it is enough to dodge some legal red tape?

The target of this Gifting Circle is affluent, well-connected women

A $5,000 buy-in is cost-prohibitive to many, which means this type of scam is more likely to target a more affluent demographic. This itself is a problem, because many people with higher incomes or wealth will consider themselves “above” money scams.

There’s a stigma attached to scams that they only happen to people that are of a low socioeconomic class, and stupid or bad with money, when that really isn’t the case. Both elaborate and simple scams can and do happen to anyone regardless of their income, education, or wealth. A gifting circle is a pyramid scheme, even if it happens to rich people.

The reason scams pop up so frequently, and operate so successfully, is because we’re hardwired to believe them

The sell is incredibly persuasive, particularly for the Gifting Circle.

A group of friends joining together to pay out a big “gift” to another friend works under the guise of women helping women. The close friendships between participants create an atmosphere of trust and security, which easily overcomes most hesitations you would otherwise feel to parting with $5,000. Seeing your friends participate, or even profit, from the scheme assuages any worry that you might have that it’s not legit.

To venture even deeper into the crazy underground garage of this multi-story scheme, there is even a made-up history that Gifting Circles were established during World War II to help wives and mothers whose husbands were off to war. You can read more about the dark fairytale mythology that is Gifting Circles here. Rest assured no matter what anyone tells you, a gifting circle is a pyramid scheme.

There are so many layers of psychological swindling happening that it is downright disorienting.

These scams persist further because people will lie to keep them going. Do I think this girl my friends “know” made $90,000 through gifting circles? Fuck no — unless she is at the heart of this scam and on her way to jail. Do I think she’s telling them it’s worked for her multiple times to get more buy-ins? Of course, that’s the easiest sell: “look it worked for me, so it will definitely work for you”. My only regret is she wasn’t at the party so I could ask her directly to tell me more about how she made off with nearly six-figures by asking friends of friends to give her $5,000 each as a “gift”.

People in the middle or at the bottom of the Gifting Circle likely don’t know they’re part of a scam.

The person at the top definitely does.

The person at the top of a gifting circle is actively committing fraud. They are a con artist. They are not your friend. They are not a victim. They are conducting an elaborate scheme to steal money directly out of your pockets. Frankly, you should report them to the police and have them arrested for robbing you and your friend group. But doing so comes with the embarrassment of having to admit you fell for their ruse. A gifting circle is a pyramid scheme, and sometimes it happens to good people.

You should never feel embarrassed or stupid if you’ve lost money to a Gifting Circle. 

You should feel angry that a friend deceived you.

Everyone makes mistakes with their money. Sometimes these are small mistakes, but sometimes they’re big. Chances are, the more money you have the more likely you are to make a bigger mistake. You simply brush yourself off, learn from it, and move on.

Live in Calgary? Be extra careful.

I’ve lived in Calgary for 2 years and this is the first time the gifting circle is a pyramid scheme has crossed my path. However, it’s one of the most common pyramid schemes in the city.

The main one in the city is called Prosperity, but there are others with names like “Women Empowering Women”. Mygirlfriendss said the one they had been involved in was called something with the word “cloud” in the name (in reference to your payout being “when your cloud rains”) but insisted they couldn’t remember the name. I’m guessing they just didn’t want to tell me because I was freaking out. There is a CTV news clip about gifting circles that includes an interview with the Calgary Police Department Economic Crimes Division that is also worth a watch here.

The only way to make money is to earn it. Don’t give it to assholes.

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About Author

Student debt killer, super saver, and stock market addict. BSc. in Chemistry from the University of Alberta, MBA in Finance from the University of Calgary. CEO x 2 and MOM x 1. Currently residing in Calgary, Alberta, Canada, but hooked on travelling.

45 Comments

  1. It’s amazing what people will allow themselves to believe for the prospects of easy money. It’s important to get the word out to help prepare people for the situation. I can imagine the social pressure to participate must be pretty significant. Sort of me being at an Amway party a “friend” has roped you into. You really don’t want to buy anything but feel obligated because you think everyone is buying. Great post Bridget!

      • Bridget. You make a lot of blanket negative statements. Please explain why this particular gifting program is illegal. You site the criminal case but what aspect of the code does it not comply with?? Also you classify this as a scam but show me someone who has lost money?? You can get your money out anytime you ask for it because there are many people waiting to replace you. Plus this is 100% voluntary. There is no obligation. The payout is fixed so there is no gamble unlike a lottery or a casino. Nobody has been arrested and in fact many police officers and CRA employees are involved complete with a thorough review against the governing laws. I realize that there may be several different versions of these programs that don’t do things to stay on the right side of the law but it’s unfair of you to use your ridiculous blanket statements for every program. During the wars, gifting circles were common so I don’t know where you get off saying that it’s a made-up story. So you have no evidence to back up any of your statements. Maybe you should actually do some research when you write a piece on something. My biggest peave about your story is that people tend to believe what they read from seemingly credible sources. Your BS will prevent people from getting the information they need to possibly change their lives and the lives of their friends and family. I’ve changed my life and the lives of the people around me. This is not for everyone but it is life changing for some. Shame on you Britney !!!

        • I legit linked a news show warning against these scams. If you take the time to watch it, you can see that the police are involved and trying to prevent people from losing money in these, particularly in Alberta.

          The story that they were started in the war is myth. There’s no evidence to back up those statements, you’re just hanging on to them because you want them to be true.

          I have no idea why you’re asking me to “do some research” when it’s clear from the post that I did extensive research. I included all the links to my sources above, you might want to check them out.

          You haven’t changed your life or those of the people around you. You’re still hoping you’ll get your payout. You won’t. It’s not coming. You put $5,000 into nothing.

          Also, my name is Bridget, which you got right at the beginning of your rant but seem to have forgotten by the end.

  2. This is crazy! At first, I was hoping your post would be about make-up selling parties and online jewelry sales – which can be scam-my enough, IMHO. Perhaps the scariest part is how people reacted when you talked with them about it. Yikes!

  3. WOW! I have never heard of this scam, thanks for bringing it to my attention. I do enjoy reading about these MLM schemes.

    • I’ve seen people do ok in MLMs — it’s more of an exhausting challenge with little payoff than it is a real “scam”.

      This takes the cake as far as fraud, however. Can’t believe it’s happening.

  4. Crazy, I’ve never heard of this before. I am part of a Calgary swap & shop and plenty of ladies post the “make money at home, join this group” post and I can’t help but wonder what they are involved in.

    A lady I work with has a side gig in financial planning and invited me to an information course to see what it’s all about. I told my mom about it and the first she said was ” it’s a pyramid scheme!” I didn’t know that was a thing. Have you heard of a financial planning pyramid scheme before?

    • I haven’t — but maybe it’s something like Primerica or Investors Group, they’re heavy on the sales pitch.

      I would say anything that has a hint of being a pyramid scheme probably is one, but I’d be extra cautious about anything that manages your money.

  5. If there really was a “get rich quick scheme” wouldn’t we all be rich??

    Kinda like just take these pills and you’ll be 30 pounds lighter!! If it were that easy we would have all caught on by now….

  6. I have never heard of that. It amazes me what people will try for a huge pay out. When I was younger my Mom was in a Club Hand. Basically a bunch of women would put money in a pot every month and when it was your month to collect, you got the pot.

  7. I laughed out loud when I read your last line because it was so perfect in its truthfulness, bluntness and simplicity: “The only way to make money is to earn it. Don’t give it to assholes.”

    Anyway, I’m a new reader, also in Calgary, (still!) working in O&G. I enjoy your blog. Congrats on your wedding!

      • I “bought” a spot for $5000 and I invited some of my girlfriends to see it (hoping they would join too). None of them did and now the cloud I’m in isn’t moving anymore. I can’t even get my money out because there’s no new women on the bottom of the pyramid to “eek me out”.

        • Actually, the city I’m living in is just now starting to see these circles pop up. And its become very popular because, well it works! Don’t ask me how but I know 2 friends personally that have invested 1,400 dollars and after 5 weeks or so, got paid 11,200. The only thing they had to do was find 2 investers to bring with them to the circle.

        • I got invited by two groups already, and went to three meetings. I was impressed as I knew some of the ladies, and made their money back, and put in another $5000.00, a couple more times. They are on their third time, and helping out others. I was supposed to go to another meeting tomorrow, but I think I will decline. Thank you for all the stories on here. And I was assured it wasn’t a scam, and the police know about these circles, and so did Revenue Canada. I even met an old neighbor at the last meeting, and he told me it really works and he made money already, and joined in April! Yes, it is secretive, and it was a little confusing and disconcerning to me. I also don’t have $5000.00, yet alone $2500.00, nor do I want to ask anyone else for the money! What I do know is that in Calgary, it works different, and I heard that from someone who used to live there, and now she lives here, and has made some serious money!! She also said that she had money before that because she had worked for a great company. I’m glad I saw this, but the people are making money. I just don’t have it to give, and want to know exactly, how is it a scam! They even said that the police were at one of the meetings.

  8. So… did you do it? Do you know a friend that did it and lost money? And can you lay out specifically the illegal parts about the gifting circle of receiving 5 g?

      • I did it and made money and was then able to help out friends. Where under section 206/207 does it say it is illegal? I gave in $5,000 and got $5,000 back in exchange for a GC. I didn’t get more than I gave from any one person which is in subsection 8. The group donates a whole lot to charity too… they are all volunteers who keep it going. At least the gifting circle I am part of does. Not sure if they are all like this.

        • Smarty pants on

          Good job setting things straight Lori J and Lola. I agree, there is nothing wrong with this and people need to educate themselves properly, do your homework and stop bashing things that you have no experience in. Go out there and clock your 9-5 and pay the big guy 28 – 40% taxes on your hard earned dollars….good luck in whatever method you choose to get ahead, as long as yes, it is legal.

  9. A true ‘gifting circle’ is not what you have described here. Yes some clever, or not so clever women, may have named their venture a gifting circle but they have used the name inappropriately. Because as you have quite rightly stated here, their venture is in reality a pyramid scheme. A true gifting circle is where people contribute excess goods, time and services to the circle and people take from the circle what they NEED (notice the word need here). No-one gives what they cannot afford or cannot do without. A gifting circle is a way of equally sharing resources and time, in that those with excess give, and those with less receive. As it’s name implies, it’s structure is circular in nature. It is not a pyramid structure.

    It is very sad that some women have taken this beautiful notion of giving and receiving and used it to deceive others and defame its name. So please DO NOT be deceived. What has been described as a gifting circle here and in some other places is a distortion of the truth. Namaste.

  10. You don’t have all your facts straight. This article is full of holes. This type of thing isn’t for me but I have been exposed to it. It is not a pyramid scheme but keep believing it is.

  11. My friend just joined a gifting circle. One of the members sponsored her for $5,000. That person will get their $5,000 back . My friend and the sponsor will split $40,000. It seems too good to be true. I told my friend we will wait & see.
    Thank you for writing this article. I agree with you it’s a scam. Her friend recruited her and now my friend has to recruite 2 more friends.

  12. Well… in an active circle where do you think the people at the top used to be? AT THE BOTTOM…. The bottom keeps filling up and pushing people to the top.. Once they make it to the top it’s their birthday… more people coming in allows everyone to get pushed to the top to the birthday seat. As long as people keep joining or coming it keeps flowing… and no, I am not a member, but I am versed in how it works.

    • It’s a scam.

      It relies continuously on recruiting new people. For you to “get to the top”, hundreds of new people will need to be recruited, which is very unlikely.

  13. I am a part of one of these Gifting Circles and have been since July 2016. I am in the “birthday” spot for a second time, I also have 2 half spots in another cloud. My son is in the “birthday” spot for a second time also. My best friend has already made $100,000, she is a single mom and just 2 weeks ago bought a condo. I personally know many who have made money in this. I also know a few who have gifted then decided to leave before reaching the “birthday” spot to collect their $40,000 and did receive their $5,000 back, I still have not heard of anyone losing their money. Yes there are many scams out there and people need to be cautious but this is not one of them. A friend personally contacted both RCMP and CRA to make sure this was legal and was told by both that it is and we do have many RCMP members and CRA employees in our group, . We also had the lottery commission look at this as we were hosting meetings in a casino and it was deemed legal by them as well.
    If you have the mindset that this is a scam then absolutely this is not for you, but I am forever grateful that I was introduced to this amazing group because it is truly life changing!!!

      • Bridget, you really have no idea what you are talking about. This is not the “scam” you are presenting. People really DO make a lot of money and everyone helps to get each other to the birthday spot. Anytime you invest money, whether into stocks, etc, you are taking a risk of losing it. Most people are willing to part with the $5000 or $2500 when they try to go for their $40,000. It’s part of the game. And it IS NOT illegal. If it were, people would be getting arrested left right and centre. I know of NO ONE who has been arrested or charged, do you???? If you are going to LIE, maybe check YOUR facts first.

        • I think people are scared of the unknown, if they fully educated them selfs about this they would understand how it works. They have no faith that good things can happen to good people.
          I know of many people who have done this and it changed their lives for the better and made many of their dreams come true. And no they aren’t in jail or charged with a crime they are on holiday or driving nice cars 😉

  14. Everything in life that is shaped like a pyramid is a scam. I think that way of thinking, right there, shows lack of intelligence.

  15. Ruth Symonds on

    It’s happening all over again in BC. I was just approached and I
    can’t believe people still believe that it will come true. What’s that saying??? If it’s to good to be true then it is!! Is it because it is our friends who try and sell us this amazing pitch. Please someone do something about this. I have told my friend that it is a right out scam but she believes them. It doesn’t help when they have known someone who has received the 40,000. I mean I saw it happen too but never received anything in the end. I was a victim of this long time ago….I’m not embarrassed but wish I knew better back then.
    How do we save our friends from falling for this scam yet again?