British Columbia

'Gifting circle' pyramid scheme leads to 4 arrests in Lower Mainland

An investigation was launched after a complaint came to police in September.

Consumer watchdog warned women about the scheme in 2016

Four people have been arrested in connection with a large pyramid scheme, known as a gifting circle, running in Mission, B.C. New participants are asking to give a $5,000 "gift" to the person at the top, with the promise of an eventual $40,000 payout. (Carolyn Ray/CBC)

Mission RCMP have arrested four people in relation to an illegal "gifting circle" pyramid scheme potentially involving thousands of people across the Lower Mainland.

An investigation was launched after a complaint to police in September claiming district employees, contractors and volunteers working within the RCMP detachment were running the scheme. 

RCMP, with help from the Federal Serious and Organized Crime unit, executed four search warrants at four different locations in Mission on Feb. 20. Four people were arrested but they were released without charges.

Watchdog warning

The Better Business Bureau warned women about gifting circles in 2016.

The watchdog said the scheme works by promising women a $40,000 payout — if they invest $5,000 and recruit a few friends. Gifting parties are held under the pretence of helping another woman or family in need, but those who show up are actually just giving their money to the person at the top of the pyramid.

"It may take a couple of wine parties or two to entice women to part with their money," said Evan Kelly, senior communications adviser for the bureau, in 2016.

"After all, a friend asked you to join, it couldn't possibly be a scam, right?"

The Better Business Bureau says members have gotten together over wine to entice new members into the pyramid. (CBC)

Organizers try to make the payments sound legitimate by insisting they're tax-free gifts. RCMP said participants avoid detection by using fake names, cash only and an encrypted app to communicate.

Eventually, the pyramid falls apart and rookies paying the top member lose thousands.

A statement said Mounties know of more than 100 gifting circles, or clouds, running across the Lower Mainland. Up to 11 incidents involving the schemes have been reported to regional police in the past two years.

Investigators believe there may be thousands of people involved or in the process of being recruited.

"There are virtually no winners in this," Insp. Annette Fellner said in the statement.

"People who are involved in this kind of fraud are imaginative. They sound convincing and say the right thing to make you believe it's perfectly legal when it isn't."