Gifting (the pyramid scheme which isn't)

I wrote this for the GEA list, and I'm sure everybody here is far too smart to be taken in by this. But just in case, publishing it here too.

Back in December two people sent Emails warning about a new scam in Munich. I unwittingly discovered this scam first hand myself, and have written a more detailed account, to entertain the interested, warn the susceptible, and warn off the scheming.

We went to one of these "gifting" events last week. We had actually been invited to "an evening of alternative people, with interesting and open-minded viewpoints", so it came as a bit of a surprise to find we were being asked to donate money, in the hope of getting it back 8-fold. The evening was fascinating in the same way a messy car crash is a fascinating spectacle, albeit one you normally don't boast about having witnessed and admired.

How did we meet the person who invited us ? We went on a GEA mountain trip. There was a woman there who complained she didn't like the mountains, snow, or walking. So why did she come ? Presumably she was only there to find susceptible idiots.

The "gifting" was a well choreographed evening. Very early on the Master of Ceremonies stressed that once you gave the money, it was gone, There was no guarantee you would get it back, while projecting that if you played the game right you would get it back 8-fold.

Why give the money ? Because of the joy of giving ! Because of the energy you release !!!

There seemed to be 5 or 6 people scattered around the audience ready to make just the right comment, at just the right time, or better still to ask a question that the MC was more than prepared to answer.

One question that struck me was: "Shouldn't I ask my friends if they would follow me, before I pay over the EURO 10k ???". "No !!! If you have not showed commitment first, how can you expect them to follow you ! That kind of behavior will destroy the energy."

I have a slightly more cynical answer. If you are tempted, your friends will bring you back to your senses if you discuss it with them. Unless you have already paid the money. Then you will be desperate to recoup the money, and be all the more persuasive.

The high point of the evening was when 2 people had decided to pay to enter level 0. They handed over envelopes full of cash, yes lovely 500 EURO notes ! to the lucky level 3 recipients, to cheers, clapping, and massive quantities of feel good energy.

Energy was a much used, and abused word the whole evening. Not the life force energy (Chi) that acupuncturists and reiki masters seem to manipulate. Not the karma that Buddhists believe a good deed, or good life generates. On cold reflection, it’s the energy of naive greed.

How does the scheme work ? Best to describe what the chart looks like.

On the top row: level 0, there are eight circles into which two names can be written.
Below on level 1 there are four circles, also with 2 names.
On level 2 there are 2 circles
And one level 3 there is 1 circle with 2 names.

People who want to enter the scheme hand over EURO 10,000, and get their name written into one half of one of the eight circles on level 0. This EURO 10k is divided between the two people on level 3.

Now people who have entered on level 0, progress to level 1 by bringing in two other people who pay EURO 10k each to the lucky level 3ers. You progress to level 2 when the two people you brought in, have brought in another 2 each (an additional 40k). And of course you make it to level 3 when 8 new people come into level 0.

Now you are on level 3, having contributed EURO 10k yourself, convinced two friends to contribute EURO 20k, and their friends have contributed EURO 120k (that’s EURO 150,000 total if addition is not your strong point).

The next 16 people (EURO 160k) who enter the scheme on level 0, will pay the money directly to you and the person you share the circle with giving you a return of EURO 80k, on your EURO 10k investment ! Does this beat the hell out of the stock market or what ???

After having received your EURO 80k because your friend’s friend’s friends paid in EURO 80k, you drop off the chart. At this point of course you are free to pay in EURO 10k to reenter on level 0, and screw another 14 people to get back to level 3. And most people do. Re-enter !

There is no doubt that the scheme or scam is legal. It may look, sound, feel, and stink like a pyramid scheme. But because you drop out after 4 levels, it technically is not a pyramid scheme. Best of all, the MC stressed there was no guarantee. And every time somebody handed over money he asked them how they felt (great, empowered, relieved, anxious, and of course… full of energy), and made them confirm they understood the money was gone.

It was also stressed that new suckers must be found through personal contacts. Advertising in newspapers, or on the Internet is illegal. Cheating people is illegal, but there is no law against accepting money from suckers.

Actually it is illegal (sittenwidrig) to take money from suckers but only decided on a case by case method. Applicable laws are:
§ 263 StGB (Betrug) text here
§ 6c UWG (Schneeball-/Pyramidensysteme) text here
§ 138 BGB (sittenwidrige Geschäfte) text here
and BGH (Bundesgerichtshof) case law 1997-04-22 XI ZR 191/96 and through a huge test case currently being considered by the BGB being brought by lawyer Erik Millgramm on the behalf of 200 clients. Should this case be successful then all pyramid stystems will be banned without exception.
It is estimated that only about 25 people are behind all of the pyramid systems in Germany, Austria and Switzerland. Makes you think doesn't it?
Katrina

Unless it was a charity, I can assure you that it is NO joy or Pleasure to give money away.

I decided not to join - obviously. I was worried that I could not find 14 friends stupid enough to follow me in.

Of course they don't have to be stupid, they just have to believe they have 14 friends who are stupid enough. Thats a thought. Maybe the 60 odd people at the meeting who has already joined were not stupid at all, they just believed their friends were.

Interesting background Katrina came up with, very lawyerly. It must be great to be one of the first in to the scheme. Unless you believe in reincarnation or hell.

BTW we got fed, quite a nice vegetable soup. So if you're invited, and hungry ...

Ugh, pyramid schemes, subway muggings... seems like the economy needs to pick up, before Bob's forum name becomes an ironic shell of it's former self. Next we'll probably see The Forum cult sweep through town...

I was never interested in should schemes but was intregued enough to do about 30 seconds of research on it at work. Here's a nice summary of why these things can't work:

Pyramid / Ponzi Swizz

Many years ago I fancied this secretary who had just got into Amway. She sat one day in her car tryinbg to convince me to sell soap products as a way out of the rat race. I wanted to go out with her but she wanted to make a go of this Amway thing.

She chose Amway over me. No worries looking back...her loss is my wife's gain!

This pyramid scheme or snowballing is not new, meaning there have been many articles and reports about them recently. The last one I read was in FOCUS (free subscription) around Valentine's Day called the Lonely Hearts club in Köln. Same scheme, but with an entrance fee of ONLY €500.

Just don't be dupped. And as Karambos says, it can't work. I'm not a math genius, but reading over the probabilities again and again finally I understood it.

The way to make the scheme work is to promise "investors" only a random chance of making money. Take everyone's money then pull a few names out of a hat and give the winners all the money (after the organiser has taken his own cut of course). Obviously you could only ask people for small sums of money that they wouldn't be too upset if they lost.

A legal scam! Maybe I should patent my idea...

You can't.
Article 52 Eurpean Patent Convention states:
Patentable inventions
(1) European patents shall be granted for any inventions which are susceptible of industrial application, which are new and which involve an inventive step.
(2) The following in particular shall not be regarded as inventions within the meaning of paragraph 1:
a. discoveries, scientific theories and mathematical methods;
b. aesthetic creations;
c. schemes, rules and methods for performing mental acts, playing games or doing business, and programs for computers;
d. presentations of information.

I think theres already such a scheme available in most countries. Its called lotto.

Sorry, I forgot the [irony] [/irony] tags in that last post

*bonks Katrin on the head*
Don't be so pedantic (says me)

I'd apply Article 53 to this one.

Besides, if his idea were to have a technical field or involve a technical character then you never know.. best ask a patent attorney or check at the German Patent and Trademark Office at their free "Erfinderberatungstelle".

I mean, just look at the ever-so unaccuarate statement that computer programmes cannot be patented..

EDIT: I've totally changed this post as I think I was missing something... Suffice to say it was a legal point, but the moment has now passed...

Get back to work you lazy sod Angel!
53a at a push, 52c would count though, you checked the case law on that, you cheeky mare! He could copyright it but I think that it is out of scope for EPC.
mind you you've got the software you chuck some EPs up...
I'll see you at about 5 then missus, I've signed up for more time with the Queen of Pain ha ha.
NOTE: to anyone else this post might not make sense but then again it isn't meant to...

You two work together at the "Certain Employer" by any chance? Well guess who else does.

MadAxe, where did this gifting presentation take place? Will there be more? I know lots of suckers.

DOB 1993? HOly moly...Cedric, you're not the youngest anymore!

"Gifting", "Dogging" all these new gerunds are confusing the hell out of me. Or are they participles of the present active?

my understanding is that dogging is rather passive. stand there, pretend to be walking the dog.

it's ok I already have my coat on

J

@marc - who is cedric?

I guess no one here has been watching Neighbours since you are in Germany (although it's avaliable on the net). But a very similar think was on it recently. The description of the meeting in the original post perfectly explains an episode of neighbours recently. It was called Life Mechanics, where people went to meetings to learn how to better their lives, but were encouraged to pay money. Plants were used to create the right atmosphere etc, as in this Gift scheme, and it was all based around feeling good about it all.
Anyways who says Neighbours didn't teach us anything?

In my experience, plants are essential for creating the right atmosphere. Perhaps this was the gift that the attendants were supposed to recieve? The plants themselves. I think the money aspect was just a distraction to filter the greedy from the worthy.

Jah works in mysterious ways, especially when plants and gifts are concerned.

And your right, we must love our Neighbours, love Jah, and love the plants he has gifted us.

It was funny in Neighbours because the whole scam was done by saying that the meetings were free, but that donations were the only way there were funded.
And then at the end of the meetings the plants would clap the loudest, go on about how much it had helped them and empty their wallet into a bucket. Generally making the others feel guilty about not helping.
But it was all ok, the whole scam was uncovered by the local Erinsborough News!