Gifting Clubs

Gifting clubs are a type of fraudulent money making operation often beginning in neighborhoods, churches, or similar small communities. The Internet is also a popular place to find a gifting club classified as a business opportunity or online money-making venture. In reality, the clubs are illegal pyramid schemes.

Cash gifting has become a catch phrase used to describe a group of people organized as a "club" or "association" with members eager to help new friends - often from within their own neighborhood or church group. New club members give cash "gifts" to the highest-ranking club members in order to join. They are promised that if they get additional members to join the club, they, too, will rise in the club's ranks and earn more money than they paid to join the club.

The problem is that, like most pyramid schemes, gifting clubs must continually recruit ever-increasing numbers of members to survive. When the clubs do not attract enough new members, they collapse. Most members who paid to join the clubs never receive the financial "gifts" they expected, and lose everything they paid to join the club.

There is no such thing as "easy money"
Promises of quick, easy money can be a powerful lure - especially when it comes with the additional benefit of new friendships or the convenience and ease of the Internet.

If you are approached about joining a gifting club but are not sure if it is legal, the Bureau of Consumer Protection reminds you to:

  • Consider that a legitimate gift has no strings attached and is not an "investment".
  • Avoid being misled into thinking a gifting club is legitimate because the ads say that members consider their payments a gift and expect nothing in return. This is an attempt to make an illegal transaction look legal.
  • Be wary of success stories or testimonials of tremendous payoffs. Very few members of illegal gifting clubs or pyramid schemes ever receive any money.
  • Do not buckle under to a high-pressure sales pitch that requires you to join immediately or risk losing out on the opportunity. Solid opportunities and friendships are not formed through never-wracking tactics.
New twist to pyramid schemes                                                                                               
Fantastic opportunity!?!
Think twice if the opportunity involves making an initial "gift" and then you just have to recruit new members into the club. This is only a new twist to the age-old pyramid scheme.

Pyramids are subject to Wisconsin laws that prohibit untrue, deceptive or misleading presentations and unfair practices.

Pyramid schemes may be disguised as games, buying clubs, motivational companies, chain letters, mail order operations or multi-level business opportunities. They all have the theme of get-rich-quick. The latest versions are called "giving" or "gifting" networks. Consumers are asked to "make a contribution" to the chairperson of the plan, who is on top of the pyramid.

Social and/or religious organizations are prime targets for promoters. Participants are encouraged to bring in friends or relatives, so they are discouraged from checking first with the Bureau of Consumer Protection or the Better Business Bureau.

The new twist
A new source for cash gifting clubs is the Internet. They still promote themselves as clubs or associations - never as a business. They set up websites and YouTube links with appealing club names implying benevolence, friendship and charity, such as Abundant Living System. Money, in the form of cash, is transferred using FedEx (avoiding mail fraud charges by the post office). Promoters use common names that are not easy to trace, such as "Smith" or "Jones". They are hard to trace and even more difficult to locate since they can operate from a variety of locations - even from a foreign country.

There are many types of pyramid schemes, and the number of people involved varies. Consider the numbers if one person recruits six "investors", each of whom, in turn, had to recruit six others. Carried through nine progressions it would require over 10 million people!

Pyramid Progression
 Level Number of People 
1 6
2 36
3 216
4 1,296
5 7,776
6 46,656
7 279,936
8 1,679,616
9 10,077,696

The company or one individual is at the top. When the supply of people runs out, the pyramid collapses, and most people at the bottom of the pyramid lose their money.

Characteristics of a pyramid
  • Emphasis is on recruiting new participants, rather than selling a product or service.
  • A product or service may be offered but is largely ignored.
  • Presented as a "unique" way to obtain a quick and easy living.
  • Unclear where money is being spent.
  • Concentrate on recruiting people with limited means and knowledge of business.
  • Participants may initially make some money.
  • Participants rarely complain.
Protect yourself
Before you invest, ask for the company's business and financial statements. Check references and backgrounds. Where is the company incorporated: Out-of-state corporations are often difficult to track down.

Beware of statements by the company that it has the approval of a government agency, Better Business Bureau or Chamber of Commerce. None of these organizations ever endorse or approve specific marketing pl

(Taken from the Bureau of Consumer Protection Consumer Facts "Gifting clubs.")