Gifting Circles are pure genius

They seem like such a great thing. A friend whispers in your ear at work about inviting you to have a glass of wine tomorrow night with her. She’s meeting a bunch of smart, successful women – like yourself of course – and you should come. Who wouldn’t want to go check that out? You need a break from work and the kids anyway. Besides, it’s good to get together for friendship, sisterhood, and a little laughter with other driven women who share your interest in (something).

Your friend picks you up and it’s like a little caper trying to park and sneak in. This is fun already! You have some really good wine and talk about stuff with other women that you wouldn’t be able to say with men and the kids around. It’s exclusive which makes you feel special, as you can only get in if you were personally invited. Everyone is on a first name basis only and you recognize a few people who work in your industry. You get so many hugs that you can just feel the love. You connect with wonderful, giving women on such a great level that you don’t want to go home. Luckily everyone agrees to meet in secret again next Tuesday.

You don’t know it yet, but you got invited to what is usually called a ‘Women’s Gifting Circle’, a ‘Women’s Financial Circle’ or a ‘Women’s Financial Collective.’ Men are strictly forbidden. You wouldn’t want men around anyway. All they would do is make rules and try to be logical and stuff. Besides, this is the chance to connect with other women who do what you do for a living and maybe accomplish great things. Its huge parts empowerment meeting, wine party, and a women-only networking event all rolled up into one.

On the second night two of the women motion for you to join them in the front room. They tell you in hushed tones about how this group has done great things for women like raising money to fly local Hispanic women home to Mexico to escape abusive husbands. Or how they helped someone’s ailing mother into a really good home that can treat Alzheimer’s, or they got cancer treatment for two orphans in Haiti, or they helped that woman in the red dress by the door get out of debt so she could start her own business and find a real man. These are all great things that really strum your heartstrings, especially after that second glass of high end Pinot. You lower your voice and ask where the money came from. Ah, they say, everyone freely gifts $5,000 and in a few months it will be your turn to decide what good thing you are going to do with $40,000.

Wow, you say.

Sure it’s a lot of money but you didn’t get invited because you are living paycheck-to-paycheck. This is a Gifting Circle for women who do (something). You all have good jobs and a middle class lifestyle.

Two wine parties later you freely write the check.

Gifting ClubYou even sign a special contract saying you voluntarily gift this to the club without any expectation of getting it back. All you want to do is do good with your money, sort of like a passing-it-on kind of thing. Of course, as soon as you pay in your money you become one of the stars in this chart to the left. Once there are eight new stars, the ‘sun’ in the middle gets her $40,000 – a 700% payoff. The chart then splits in half and everyone moves up a level. The two green planets are now their own stars, the blue moon Mommies move up to planets, and the stars are now one step closer to their own big payoff. Maybe.

The day after you write your check you get a call with the name of the woman who will get your group’s $40,000 once everyone finds eight new stars. They also tell you some wild story about how she is going to save the lives of three Afghan war orphans with diabetes but you aren’t supposed to tell anyone. It’s a secret.

This is how the 'dinner party' version works. It's the same as the star chart kind of scam but sounds better.
This is how the ‘dinner party’ version works. It’s the same as the star chart kind of scam but sounds better.

Now, nobody is required to bring in new special friends to gift money but how else are you going to help save three Afghan war orphans? We’re supposed to be saving that country, right? In fact, there isn’t an organization doing anything at all. It’s just a bunch of women enjoying friendship, fellowship, and wine. And secretly talking to their friends at work about why they should join their Gifting Club to save babies.

That, plus as soon as all you “stars” get eight new people to kick in you get one level closer to your own $40,000 jackpot. You start dreaming about what kind of thing you can do to fix the world with $40,000. You want to do something better than everyone else so you have a great story to share at the wine parties.

If it sounds too good to be true...well it must be true!
If it sounds too good to be true…well it must be true!

But at one of the get-togethers you kind of wonder how these things can keep going. After all, it seems like the numbers don’t really work. You ask someone but they quickly shoot you down. Oh no, they say. The naysayers are men who don’t want strong, powerful women doing good things. We’re doing this ourselves! Well is it legal you ask? It’s perfectly legal, they say with a little tinge of indignation. There isn’t a central organization and nobody is forcing anyone to recruit. Besides the IRS allows you to gift up to $10,000 without paying a tax. It’s up to you to “follow your heart and do what you think is best on your tax return when you get your $40,000” they say to you with a wink.

So where’s the scam, you ask? It’s a reasonable question. Most of the time the women involved don’t see the crime, either. After all, the $5,000 is a gift that they give freely and without any expectation of any return. Much like a holiday present, right?

Wrong. Gifting Clubs are illegal pyramid schemes. They’re done with really slick emotional appeal, but sooner of later these clubs are going to run out of women to scam. It’s simple exponential math.

This is why your typical pyramid scheme doesn't work.
This is why your typical pyramid scheme doesn’t work.

Lets assume you get in as one of the first eight stars. For all eight of you stars to move up to be moons, you need to recruit eight new people. Then for all eight of you moons to move up to planets you need to bring in 16 new stars. It keeps going. All of you initial eight might get paid after 128 new stars join, but to keep going and let everyone receive $40,000 the scheme needs to bring in more people than exist on the planet. I suppose you’re going to run out of women in your city first, and that is when it starts to fade away and collapse. The money disappears but everyone says they swear they want to keep it going. Maybe next summer, the bottom levels all tell themselves.

I actually admire this kind of sophisticated ripoff. Not to say that I would do one of these. I’m not even sure I could. But all that emotion and wine hides a scam that willingly snookers women into giving up $5,000. They actually BELIEVE they are going to be able to help legless orphans in Africa or whatever. Plus the top levels kind of suggest you don’t have to report it to the IRS when you get your $40,000 so you can spend the whole amount on your secret good thing. That makes you complicit in something that feels good and fun at the same time, which draws you in deeper. It’s pure genius.

-Samuel Owen

© Samuel Owen 2012. All rights reserved. Please read important notices and disclaimers by clicking here.

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