New Zealand Law Society - 'Gifting Circles' considered illegal pyramid schemes

'Gifting Circles' considered illegal pyramid schemes

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The Commerce Commission says people should avoid involvement in Women’s Gifting Circles as it considers them to be illegal pyramid schemes.

The Commission began investigating Women’s Gifting Circles after receiving a series of complaints in 2016. The evidence gathered to date indicates that a number of Circles were set up over the past three years and the Commission considers that some may still be active.

The Circles originated in the US and Bali. Women typically join the scheme after being invited by a trusted friend or family member. They are asked to pay a “gift” of $7,000 in return for empowerment, wisdom and sisterhood and the promise of $56,000 should they attain the “Lotus” status.

Head of Investigations Ritchie Hutton says the Circles appear to date to have largely affected communities in Nelson, Tauranga and West Auckland.

“Like all pyramid schemes, this one requires the constant recruitment of new members to buy in and inevitably people get burned as new recruits dry up and the Circle collapses. These Circles try to mask the insidious nature of their existence by requiring new members to sign a document saying they are ‘gifting’ the $7000 joining fee and expect nothing in return, while still promising a $56,000 pay-out if they reach the top of the Circle as ‘Lotus’,” he says.

Mr Hutton says the Commission considers the Circles to be scams and likely to breach the Fair Trading Act.

"Women operating a Circle or who invite others to join one may be committing a crime and could be fined up to $600,000 per offence. If you are approached to join a Circle, don’t. If you are already in a Circle, you should leave and not encourage anyone else to join," he says.

The Commerce Commission wants to hear from anyone who has been approached recently to join a Circle, or anyone who has information that identifies a ‘Lotus’ profiting from the scheme.

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