Blessing Loom Scam Could Land You in Jail

Blessing loom program is an illegal pyramid scheme: Internet Scambusters #928

A “Blessing Loom” may sound like a highly beneficial program or even a sacred object.

But it’s nothing of the sort. It’s a pyramid scheme and a scam that could draw you into an illegal involvement, which could, in turn, land you in jail.

In this week’s issue we explain how the scam works and how easy it is to fall for, especially if you’re desperate for money.

Let’s get started…

Blessing Loom Scam Could Land You in Jail

Hard financial times are luring more people than usual into pyramid schemes, notably, right now, a scam known as the “Blessing Loom” or “Gifting Circle.”

Like all pyramid schemes, most recently one known as “Secret Sister,” it works on the idea that the earlier participants make some or all of their money, while later ones lose out — they pay their money but get nothing when the scheme collapses.

The Blessing Loom scam has surfaced on social media, such as Facebook, Instagram and Twitter, and, with many people hard-pressed for cash, as well as knowing the scheme is being promoted by their own friends, they fall into the trap.

It’s the fact that friends, sometimes churchgoers, are drawn in to make the scheme seem more genuine that adds a particularly nasty twist. The use of terms like “blessing” and “gifting” also add an air of legitimacy to the con.

It’s actually illegal for anyone to knowingly participate in this or any other pyramid scheme, but that doesn’t seem to be stopping people from joining up and trying to make that elusive profit.

The supposed idea is that you pay $100 to buy in and then subsequently receive a total of $800 from those who join afterwards. However, in some versions, victims are invited to “invest” $500 and are then led to believe they will collect thousands of dollars. Almost certainly they won’t, but because the initial outlay is relatively small, they join anyway.

“Most people who get involved with it are going to end up losing money,” says Kati Daffan of the Federal Trade Commission (FTC).

The way the scam works is that a person is invited, usually by someone they know, to put in their money and then to find eight other people whom they invite to do the same thing. They, in turn, must find another eight participants. And so on.

Each person who “joins” is asked to send the money to the person who invited them, usually via an online app, which often makes it nearly impossible for anyone who realizes they’ve been duped to get their money back.

Those who initially succeed get $800 or, in the case of the $500 fee, a total of $4,000.

In a recent report, Maryland Attorney General Brian E. Frosh told the Washington Post: “Think about it. How is it possible for everybody to get $4,000? It is a crime to be part of this and soliciting people for it. It also means that you’re putting your friends and family members at risk. There are way more victims than winners in these pyramid schemes.”

Just don’t do it, said Frosh.

In some parts of the US, taking part in this type of scheme, whether by paying in or soliciting others to do so, can result in up to a year of jail time and a fine of as much as $10,000.

The FTC’s Daffan added: “At a time like this, when there’s so much financial hardship, we see these and many other kinds of moneymaking schemes spreading like wildfire, especially on social media.”

The Post also highlights another potential problem: The IRS does actually regard any money that a person receives as income, and that makes it taxable. If you don’t pay the tax, you can be charged with fraud.

And that’s happened in the past, when perpetrators of a gifting circle were jailed for four years for tax fraud.

The best way to avoid this scam and other pyramid schemes is to ignore easy-money or get-rich-quick promises, especially those that claim to multiply your money in return for recruiting others to take part.

Furthermore, programs (outside of financial institutions) that rely on an outlay of money without a product actually being sold are also highly suspicious.

The US Securities and Exchange Commission (SEC) points out that all pyramid schemes ultimately collapse.

“Pyramid scheme promoters may go to great lengths to make the program look like a business, such as a legitimate multi-level marketing (MLM) program,” the SEC says. But “there’s only one possible mathematical result.” Financial disaster for all but the few.

Check out the SEC’s general guidance on pyramid schemes.

If you receive an invitation to take part in the Blessing Loom or a similarly illegal program from someone you know, send them a copy of this Scambusters issue. You’ll be doing them a big favor!

There’s also a simple video that explains how the Blessing Loom scheme operates: Blessing Loom Explained.

Alert of the Week

A new outbreak of fake package delivery notices is sweeping the US right now.

The common wording of a text message victims receive is something like: “We came across a parcel owed to you. Please claim ownership and schedule for delivery.”

It may seem to come from a well-known package delivery company, the postal service, or it may have no recognizable source.

The message may contain an Internet link but more likely a phone number where the scammer asks for personal information including a credit card or other financial account number.

Just don’t do it. If you receive such a message, the wording will signal a scam. If you’re not sure and there’s an alleged delivery organization name, look up the phone number independently and call them to check.

Time to conclude for today — have a great week!