Should I invest in a gifting circle?

Thinking about joining a Gifting Circle? Read this first.

Caller: How much of a risk taker are you?

Me: I guess it depends on the situation.

Caller: Have you ever heard of a gifting circle?

Me: You mean a pyramid scheme?

To be honest, for a moment there, I felt kinda special.

I was one of the “cool kids” – after all, gifting circles are shrouded in secrecy. Invitations are only extended to those who are trusted to keep the secret.

And there’s a reason for that.

Gifting “circles” are not circles. They are pyramids.

They are fraudulent. They are illegal. 90% of the people who “invest” in them will lose their money.

And when you lose your money? The two friends you invited to participate in the circle will lose theirs too.

As a friend of mine, who “invested” (and lost) in one of these circles many years ago put it:

“It’s awkward. Facing the friends you convinced to lose their money.”

(Not familiar with pyramid schemes? This wikipedia article explains it: Wikipedia – Pyramid Schemes – the section on “eight ball model” describes a gifting circle.)

How do I know that the circle I’ve been invited to is a pyramid?

  • They call it a “dinner party” – and the positions are appetizer, side salad, main course and dessert. Pyramid.
  • They call it an “airplane” – and the positions are passengers, crew, co-pilot and pilot. Pyramid.
  • They call it the “universe” – and the positions are stars, planets, moons and the sun. You guessed it. Pyramid.

Take a look at the diagram they provided. You are looking at a pyramid from the top looking down.

Circle-as-Pyramid

But, THIS ONE isn’t a pyramid – it really IS a circle!

It’s been going for over 20 years. The people who cash out always re-invest, so the money keeps circulating.

This might sound good, but the math doesn’t support it. The “circle” will end and people will lose.

Even if EVERYONE who ever made it to the top reinvested 100% of their windfall (unlikely) – every time the circle “splits” you need to bring in NEW people to support the growth.

This requirement is exponential – which means that each time the circles split, you need twice as many new people to keep the scheme going.

Pyramid_split

But it’s not about the money!

Often these circles are promoted as “women helping women” – or a spiritual or personal growth experience, rather than a fraud. Investing isn’t about the money, it’s about:

  • Learning how to give and receive.
  • Feeling the joy of supporting another woman financially.
  • Taking a risk and learning to trust yourself.
  • Activating the law of attraction and reaping abundance in areas other than this particular investment. (I “gave” to the circle…and immediately, my money came back to me through a different form.)

If you find yourself being drawn in, consider these questions (in addition to: can you afford to lose give this money?)

  • Could you not learn about the joy of giving by contributing to charity or directly giving a financial (no strings attached, no expectation of a $40,000 windfall) gift to someone?
  • Why the secrecy? If this is so awesome (and not illegal and not fraudulent and not unethical) – why not allow as many people to experience it as possible?
  • Who started it? What was their motivation? (Hint: whoever started it placed themselves at the top of the pyramid – or centre of the circle, if you prefer – and cashed out first.)

There is nothing “abundant” about a pyramid scheme. It’s unsustainable.

Even if you get in early enough and manage to cash out – left in your wake will be a whole bunch of women who lose their “investment” – and the longer it goes on, the more people will lose.

Do you really want to be a part of that?

2 Comments

  1. Dr. Jayne A. Gibson on October 20, 2013 at 4:15 pm

    Thank you so much for posting this information Patty. I, for one, appreciate it so much especially after being caught up in one of these scams myself.

    If you think it can’t happen to you, think again! It happened to me several years ago when I was trying to find out how I could increase my income while still working full time. Armed with a bunch of thoughtful questions and some research behind me, I pursued, what I thought was, a Multi-level marketing opportunity.

    The fellow was smooth and had all the answers to all my questions. He even showed me the website http://www.ripoffreport.com where there was a bad write-up about them, but he carefully explained all of that away. I thought I had asked all the right questions and I was prepared to put my money where my mouth was. As soon as I agreed to the amount of money the pressure started to pay, pay, pay and the service and attention I was used to receiving took a dramatic turn for the worse.

    I asked a friend to help me. She is incredibly savvy and astute. Once we finished the rest of the research (the research I didn’t think of on my own) we found out that the smooth talking fellow wasn’t using his real name. He didn’t even work for the company that I had decided to join; he worked for a pyramid company that had a completely different name and different owner, who was known for scamming. Once we got the correct spelling of the owner’s name we found out all kinds of things and his name was smeared all over the internet.

    I was able to cancel my contract and get my money back but not without being harassed by a rude fellow who threatened me daily by phone and, called me a looser. These people prey on good hearted folks. The Gifting Circle uses Women-Helping-Women as a way to suck you in and pull on your heart strings. Who doesn’t want to help their sister entrepreneur reach her goals?

    Some advice about getting involved in any enterprises like this: Do your research! If you’re not good at research, find someone to help you. Ask every question that you can think of and listen carefully to the response. If that person has “all” the answers, some bells and whistles should go off for you. Go into it half heartedly until you know for sure that the company is reputable and there is an element of trust in who you are actually dealing with. Put a small amount of money into the company and see what happens before you decide to invest $15,000.00 that you will never see again.

    Dr. Jayne A. Gibson
    http://www.ourowncelebration.com



    • Patty K on October 24, 2013 at 4:28 pm

      Hi Jayne…

      Thanks for chiming in. I’m so sorry to hear about your bad experience (and glad to hear that you got your money back). Since writing this, I’ve heard from several people who have been scammed – you are not the only one!

      And yes, the fact that these are set up to prey on good hearted people is what bothers me most. The way the thing is presented is very manipulative. During the conversation with the person who tried to enroll me into this scheme, I found myself doubting what I knew to be true. And my research online shows that lots of really smart and often highly educated women have fallen for it.