'Pyramid scheme': Commerce Commission warns members of Women's Gifting Circle

Women's gifting circles originated in the US and Bali. Photo / Getty Images

Four women have been warned by the Commerce Commission for likely breaching the law by operating a pyramid scheme in New Zealand.

The consumer watchdog started investigating the Women's Gifting Circle in 2017 after receiving a series of complaints about the initiative.

Having originated in the US and Bali, gifting circles are considered by the Commerce Commission to likely be illegal pyramid schemes.

In these schemes, individuals typically join after being invited by a trusted friend or family member. They are asked to pay a "gift" of around US$5000 (NZ$7890) in return for empowerment, wisdom and sisterhood and the promise of US$40,000 should they reach the circle's top status of leader or "Lotus".

As is often the case, the scheme depends on continual recruitment of new members to join and pay gifts to keep it going.

Commission chair Anna Rawlings says that all four women involved in organising and recruiting for the Women's Gifting Circle have likely breached the Fair Trading Act.

Operating a pyramid scheme in New Zealand could lead to a criminal conviction and a fine of up to $600,000.

"The Commission considers that the Women's Gifting Circle is likely to be a pyramid scheme operating under the guise of a personal growth network," Rawlings said.

"Promoting a pyramid scheme is specifically prohibited by the Fair Trading Act because these schemes commonly mislead about the likely financial rewards of membership. Pyramid schemes require constant recruitment of new members to buy in and inevitably people lose out financially as recruitment dries up, and in this scenario, the circle collapses."

Rawlings said the inevitable collapse can often have a significant impact on those involved.

In addition to warning the four organisers, the Commerce Commission will also issue more than 200 letters to other members of the gifting circle, advising them of warnings.

""We consider these circles to be scams and would urge any person who may find themselves associated with them to take the Commission's concern with Women's Gifting Circle seriously, and to stop any ongoing involvement immediately."

The Commerce Commission also warned of other scams similar to these circulating around New Zealand.