Connecticut Attorney General's Office

Press Release

Attorney General Warns About Illegal Pyramid Schemes Disguised As "Gifting Clubs"

November 6, 2009

Attorney General Richard Blumenthal warns that so-called gifting clubs operating in Connecticut are actually illegal pyramid schemes doomed to collapse and cost participants thousands of dollars for nothing in return.

In at least one scheme reported to Blumenthal's office -- dubbed "The Women's Gifting Table" -- women are encouraged to join a "sisterhood" in which they each provide a $5,000 gift to another woman in the network. As new women join the group, others move to higher "positions" to eventually receive their own gifts totaling much more than their initial contribution.

When such schemes inevitably fail to recruit enough new members, the pyramid collapses and leaves the newest members with nothing.

Blumenthal said these gifting clubs and other pyramid schemes violate state and federal law. He has initiated an investigation into complaints about The Women's Gifting Table and others disguised as "gifting clubs."

Blumenthal said The Women's Gifting Club is particularly pernicious because it appeals to economically vulnerable citizens, urging them to seek cash advances on credit cards or sell their belongings -- including their cars and family heirlooms -- in order to join and feed the pyramid scheme.

"Gifting clubs take more than they gift -- often ending in economic ruin for participants and their families," Blumenthal said. "A gifting club is merely a fancy name for an old-fashioned pyramid scheme that bleeds newcomers to feed the parasites above them. Even as I investigate, I urge all Connecticut citizens to immediately reject and report such schemes.

"Gifting clubs are the gifts that keep on taking. These fraudulent clubs exploit economic catastrophe -- urging newcomers to sell their belongings, jeopardize their credit and assume devastating debt with deceptive and dangerous promises. Citizens facing foreclosure and job loss may risk everything for these ominous opportunities.

"State and federal law prohibit all pyramid schemes because each one is a house of cards doomed to collapse. Any offer involving upfront money payments with promises of riches, but no product or service, should be considered suspect."