Would you give money to a stranger - just like that? How would you decide if you were promised that you would also receive money as a gift and that your efforts would pay off many times over? Giving circles in social networks are based on this principle – according to the “snowball system”. Find out what's behind this scam.
Giving circles look for victims in public online groups
Social networks thrive on exchange and interaction with others within the network. One form of this interaction with members is organized through public groups in which you can get in touch with new people about specific topics or interests.
Some of these groups also pursue financial purposes and are used to recruit potential victims. There is usually a so-called snowball system behind this. In order to conceal the fraud, this system is embedded in ever new scenarios. One of these meshes is the so-called gift circle.
How do giving circles work?
Nothing less than a windfall is promised - all that is required is a stake worth a few hundred to several thousand euros. After a few rounds at the latest, you should move into the position in which you will receive the gift.
But the system soon collapses because after just a few rounds it is no longer possible to attract enough new entrants - and so the “investors” come away empty-handed and sometimes lose a lot of money.
How does the pyramid scheme work?
Giving circles work according to the so-called “snowball system”.
The snowball system (also known as a pyramid system) is a usually commission-based business model that requires an ever-increasing number of new participants in order to function. The focus is not on selling a product or service, but on recruiting new partners or participants.
Giving circles work according to the snowball system
A giving circle, for example, consists of four rings: in each ring the number of members doubles. So there is one person in the inner ring, two in the second ring, four in the third ring, etc. In each round, a gift is made to the people in the inner circle.
Of all things
Eight new people initially join the fourth ring with a gift, after which the circle divides: person one leaves the circle, all other members move up one ring “inside”. Eight new people must now join both circles. In the next rounds there are 32 people, then 64, next 512 people, etc. Mathematically, in this example, the number of new entrants required already exceeds the number of people living on earth in round eleven.
How to recognize a pyramid scheme
The transition from the legal distribution system to the illegal pyramid schemes [these are prohibited in Germany in accordance with Section 16 Paragraph 2 of the Act Against Unfair Competition (UWG) ] is fluid. Therefore, take your time and ask questions if, for example, agreements or the company structure are not clear to you.
Also, be suspicious
There are sure signs when you may be drawn into a pyramid scheme where you can only lose:
Further information, tips and experiences
The Hamburg police provide information about snowball and pyramid schemes ( HERE ). The NDR program “Markt” is also dedicated to this dangerous phenomenon. ( HERE ) The sports presenter Kathrin Müller-Hohenstein has also had her own experiences with such a giving group and reported on it. ( HERE )
Source: www.polizei-beratung.de
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Notes:
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