The Financial and Consumer Services Commission is sounding the alarm about “gifting circles” aimed at bilking women out of their money.
Joleen Dable, who works in the commission’s investigative enforcement counsel, says the circles are made up of 15 people in four levels.
Dable says the eight women at the bottom pay a membership fee or “give a gift” — usually around $1,250 — to join the circle.
Once the bottom level has been filled, Dable says the woman at the top is “celebrated” and collects their money.
“The person receiving the $10,000 will then give you back a small gift,” said Dable. “In this case, it’s a $10 gift card.”
After the top-level member leaves, the group splits in two and the members at the second level move to the top.
Eight new members must then be recruited to each group for the new top members to get their payout.
Dable said the pyramid scheme eventually collapses when they are no more recruits to bring into the group.
Stiff Penalties Involved
She said the odds of making it to the top of the pyramid are slim and there are stiff penalties for taking part in schemes like this.
“Not only the perpetrators could be held accountable but the participants could also be accountable and arrested,” Dable said. “The monies received by the perpetrator and the victims could also be seized as proceeds of crime.”
You can also be charged with tax evasion if the money is not reported to the Canada Revenue Agency.
Dable said gifting groups often tout themselves as women helping other women, but the only person benefiting is the one at the top.
Warning Signs
She said there are several ways to tell if an opportunity is a pyramid scheme.
“Beware of the get-rich-quick philosophy, there’s no such thing,” she said.
“If it sounds too good to be true, just leave it behind.”
Other warning signs include earnings based on how many people you can recruit rather than through the sale of products or services, and recruiters encouraging you to keep the information secret to make it seem exclusive.
New Brunswickers who are uncertain about the legitimacy of an opportunity can contact the commission or the Competition Bureau.
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