Same scam, new shape: Don’t fall for the “Blessing Wheel” pyramid scheme

Known by many different names, the “Blessing Wheel” or “Circle Game” might look appealing when you first come across it on social media, with its promise of a big reward for a small initial investment. But, don’t be fooled: this so-called “game” is really a pyramid scheme in disguise!

Pyramid schemes have been around a while

Pyramid schemes have been around for over 100 years now—made famous by Charles Ponzi, who ran the first high profile investment scheme from 1919 until his arrest in 1934. At the time of his arrest, he was charged with bilking $15 million dollars from would be investors, worth a massive $292 million in 2020.

How a pyramid scheme works

In its simplest form, a pyramid scheme’s leader, such as Ponzi, promises a high return on your investment within certain timeframes and typically will charge a fee for the opportunity to invest. The leader will begin by recruiting close family and friends for the initial investments, with the first round of investors then recruiting additional investors. This step is important because those funds from the second and third round of investors will be used to help pay back the return on investment to the first round of investors.

While the payouts to the original, and even second, third, and later investors, provides an appearance of legitimacy to the investment, it eventually becomes harder to get others to invest, leading to the earlier investors “cashing out.” Once this occurs, it begins draining the funds from the accounts. When the lower level investors of the pyramid want to “cash out” as well, there are no funds left, and the pyramid collapses.

Of course, there are other high-profile cases, such as the Bernie Madoff scheme, in which a lot of the funds obtained for investments are used to fuel lavish lifestyles.

With the advancement in payment technologies, such as Venmo, PayPal, Cash App, etc., as well as the financial strains many have experienced due to COVID-19, we are seeing a resurgence in pyramid schemes in the public sector, fueled by social media platforms like Facebook, Snapchat, Instagram, etc.

New name, same scheme

The most common form of current pyramid schemes has many names: Blessing Wheel, Circle Game, Blessing Loom, Christmas Wheel, Snowflake Blessing, Cash App Wheel, Cash Wheel, and others. But, at the end of the day, it’s all a ploy to get others to part with their hard-earned money in the hopes of earning more.

The below visuals make it easy to see that the “wheel” is nothing more than a pyramid in a different form.

The goal is to make it to the middle of the wheel where you can “cash out” and receive all of the funds from the individuals on the outer portion of the wheel. Once the wheel is full, and the individual in the middle “cashes out,” the wheel splits into two new wheels with the top half going to one wheel and those individuals moving one ring closer to the middle, and the bottom half going to the other wheel and doing the same.

While some people may actually make it to the middle of the wheel and “cash out,” it is usually only done to provide an appearance of legitimacy and help recruit others. Many will never make it to the middle of the wheel, as the leader will close the wheel/game after collecting the funds paid in by the new recruits, leaving the “investors” high and dry. It’s also common to see many of the individuals closer to the middle of the wheel be the same person just using different names, thereby again providing the wheel an appearance of legitimacy.

Look out for the signs

Schemes like these always seem to pop up during times when people need extra cash the most (holidays, COVID-19, etc.). It’s important to be aware of the signs of a pyramid scheme to protect yourself as well as friends and family. Scott Credit Union members should contact us, as soon as possible, if they suspect they are a victim of this scam, so our Fraud Management team can help them.

It should also be noted that pyramid schemes, Ponzi schemes, etc., are illegal in many states, including Illinois and Missouri. The schemes can take many forms, but as the old saying goes, “If it looks like a duck, swims like a duck, and quacks like a duck, then it’s probably a duck.”

More Resources:
Here’s a good resource on pyramid schemes and other scams: “SCAMS Protect Yourself. Protect Your Money” from the Pennsylvania Department of Banking and Securities.