What Is a Money Gifting System?
A money gifting system, or cash gift scheme, is a method of income generation that involves members of the scheme "gifting" sums of money to other, more senior members, as the price for their inclusion in the scheme. New members then recruit fresh members who in turn gift them.
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FTC Definition of a Pyramid Scheme
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Money gifting systems fall under the FTC's definition of pyramid schemes as they "promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public."
History
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Many money gifting schemes now advertise online. Before the advent of the Internet, similar cash gifting schemes would spread by word of mouth through communities and private clubs.
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Function
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A new member pays money to their higher ranking recruiter, who takes a share of that money and passes the remainder to his recruiter and so on. The new member then recruits other members, and the cycle continues.
Warning
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According to a statement delivered on May 13, 1998, by Debra A. Valentine, general counsel for the FTC, because of the way they operate, money gifting schemes are doomed to eventual failure, as the number of recruits required to maintain payments in the scheme will eventually dwindle to nothing--with a lot of investors seeing no return whatsoever.
Illegality
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Money gifting schemes, as with all pyramid schemes, are illegal. Participating in a cash gift scheme constitutes criminal fraud and may result in criminal prosecution.
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References
- Photo Credit Cash image by Greg Carpenter from Fotolia.com
