03/21/10 - Article No: 69

Cash Gifting Schemes

Article about the illegal cousin of the Ponzi scheme, the cash gifting scam. How to detect and avoid them.

The cash gifting scheme is the Ponzi schemes equally illegal cousin that is essentially the same thing, with the irrelevant difference that the operators claim that the sign up or registration fee is actually a gift and not an investment in an effort to make the operation look legal.

Just like a Ponzi scheme, members have to pay an entrance fee to join the pyramid. Once they join they then receive entrance fees from members they recruit and other members joining below them. The supposed distinguishing factor that the entrance fee is classed as a gift and not an investment has no effect on the inevitable outcome that, just like Ponzi schemes, people who enter are unlikely to make any money, and if they do, it will be no where near the lucrative payouts promised when joining.

Additionally, just like Ponzi schemes, cash gifting pyramids offer little or no products and all or the majority of money being paid into the system comes from the entrance fees or `gifts` which makes the operation illegal, yet notoriously hard to prosecute and shut down, meaning that illegal cash gifting schemes can continue for years until they collapse or get shut down.

High level members who do actually make a profit risk losing it when the scheme fails to attract new members and inevitably collapses, or they risk having their money confiscated from the company that deals with the payments or even from the government if the scheme is shut down by authorities. Members should also be aware that they are participating in an illegal scheme and could potentially find themselves in trouble with the law.

Just like Ponzi schemes, Cash gifting schemes rely on high pressure sales tactics, grossly exaggerated profits and deceptive sales tactics such as fake testimonials. It is extremely rare that members will make anywhere near the profits implied when joining, and the more money a member does make from a cash gifting scheme, the higher the chance they can find themselves in trouble with their countries authorities.

Most prolifically, Cash Gifting scams will use hyped up websites to bait their victims into joining, though potential victims are also advised to be on the watch out for both affinity cash gifting scams and chain email cash gifting scams.
Affinity cash gifting scams pick on people by feigning a shared interest or belief. For example Christian cash gifting scams are popular and the scam will use religious drivel to bait people into joining. Often potential victims may find themselves being persuaded to join at dinner parties held by friends, or friends of friends. In these cases, emotional blackmail can often be used to get victims to join.

Chain letter cash gifting scams use chain email to recruit new members.
The email will usually contain plenty of unrealistic hype, and will tell the victim to send money to various postal addresses and then forward the email to your friends, adding your address to the addresses on the email. The system proposes that people will end up sending you loads of money. It never works, and it illegal.

Finally, with all illegal pyramid schemes, when the scheme does close for whatever reason, the vast majority of members will not have made a profit, rather a loss.

References
FTC – The Gifting Club Gotcha



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