It goes by several names, including 鈥淕ifting Circle鈥�, 鈥淲omen鈥檚 Financial Circle鈥�, and 鈥淲omen鈥檚 Wisdom Circle鈥�, among others; but whatever it鈥檚 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 鈥渋nvest鈥� a large sum of money鈥攖ypically $5,000鈥攊n 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鈥攑aying $5,000 each鈥攈ave been recruited, another woman at the top gets $40,000, and the cycle continues until it cannot sustain itself and falls apart.
鈥淭he buy-in is cost prohibitive to many, so those in a more affluent demographic are often targeted,鈥� says Evan Kelly, senior communications advisor for the BBB serving Mainland BC. 鈥淟ike many effective scams, people simply believe what they are getting into is legitimate or meaningful.鈥�
The meetings where new members are recruited are often pitched as 鈥渟ecret鈥� and 鈥渇un鈥�. 鈥淚t feels like an exclusive, awesome do-good group,鈥� says Kelly. 鈥淚t鈥檚 pitched as philanthropic, but is completely bogus. It鈥檚 a classic pyramid scheme that relies on recruitment, and it never totally goes away. It comes back with different names and different philanthropic aims.鈥�
It is usually a friend who has asked the new member to join, so the 鈥渞ecruit鈥� 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 鈥淕ifting Circle鈥� scam is that participants are encouraged to see all their female friends as potential 鈥渕arks鈥�, which runs the risk of damaging friendships, says Kelly. Recruits are also told that some people won鈥檛 鈥済et it鈥�, 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 鈥渙pportunities鈥� 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.
鈥淥ther huge red flags are no written agreements or contracts, and you likely don鈥檛 know the other women involved beyond the woman who invited you,鈥� says Kelly. 鈥淚t鈥檚 all about recruitment, and that鈥檚 the only place the money comes from: no products, no services, nothing.
鈥淭he schemes usually collapse after a couple of payouts. Make no doubt about it, the person at the top knows exactly what they are doing.鈥�
