rant: gifting clubs

"All frauds, like the wall daubed with untempered mortar always tend to the decay of what they are devised to support." --Richard Whately


Under the paragraph heading Pyramids are illegal in the article Better Business Bureau Warns Against Gifting Clubs, is the following explaination of a pyramid scheme (gifting club):

"Here is how a pyramid scheme works: A potential participant is required to pay money to join a pyramid. The only way of advancing in a pyramid is to recruit others who also pay money to join. Often, the new recruits are a participant's friends and family. If enough new participants continue to join, the pyramid continues to grow. In order for everyone in a pyramid scheme to profit, however, there must be a never-ending supply of new participants.

In reality, each new level of participants has less chance of recruiting others and a greater chance of losing money."

One of the most easy-to-understand essays on Gifting Clubs can be found in The Skeptic's Dictionary. Okay, so the Better Business Bureau warning was pretty clear, but I just dig The Skeptic's Dictionary... ;-)

A Washington State-specific link:

Some other links to check out:



Okay, here's my own two cents

Some people claim that there's been a gifting club in Canada going on for about 30 years. In this club, each person contributes $5,000, and recruits 4 new people who each contribute $5,000, etc., etc. For the purpose of example, let's pretend that contributions can only be made once a year. Year one a person recruits 4 people to pay $5,000, year two those four people each recruit 4 people to pay $5,000, etc. If that were to happen, then the entire population of the Earth would have had to contributed to the same club (at least three times) within 17 years. See the sequence to the right.

Some people with "rejoin" (re-gift, etc.) and put in another $5,000 (and recruit another 4 people). No matter how you slice it, the math doesn't lie. For every $5,000 any individual person makes in such a club, somewhere down the road another individual is going to be out $5,000. Anyone who says differently can't do math at the third-grade level, or they're so embarrassed they were duped into such an unethical, illegal scam that they'll lie--even to themselves--to defend it.

If you've been sucked into a Gifting Club, you're not alone. If you're one of the people who have made money, realize that for every dollar you earned someone else lost a dollar. I know, I said that before, but it's worth repeating because some people just don't want to face the consequences of their actions. If you're one of the people who lost money, I feel for you as you were ripped of as surely as someone who has been mugged.


1
4
16
64
256
1,024
4,096
16,384
65,536
262,144
1,048,576
4,194,304
16,777,216
67,108,864
268,435,456
1,073,741,824
4,294,967,296
17,179,869,184

I realize that people with good intentions have started and joined gifting clubs. As Marx said, "The road to Hell is paved with good intentions."

Many of the people who join gifting clubs don't realize the ethical and legal implications. Or, they know deep down that something isn't quite kosher about the club, but their faith in the golden goose has quelled their Still Small Voice.

I've heard great stories about people giving back the money to the people who were below them on the pyramid. Bravo. I wish I had confidence that as people become educated about these clubs the schemes would be irradicated. But, alas, I fear wherever there are people looking for something for nothing, the pyramid will strive. That is, until the poor saps at the bottom loose their money, and lose their friendships with those who sucked them in.


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