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'Women's gifting circle' groups in NZ are illegal pyramid schemes, Commerce Commission warns

The Commerce Commission is warning Kiwis to stay away from "women's gifting circle" groups - because they are technically illegal pyramid schemes.

Four women in New Zealand have been formally warned for promoting and operating such a scheme in New Zealand after the commission began investigating in 2017 following complaints.

The groups originated in the US and Bali and rely on people recruiting friends and family to join.

Individuals are typically asked to pay a large cash payment to join - up to $7900 - with the promise of receiving $63,000 should they reach the circle's top status of leader of "lotus".

Once recruitment inevitably dries up, those in the middle of the scheme are simply left without the money they paid - which the commission says can be devastating for some families.

Commission chair Anna Rawlings said anyone promoting or participating in such a group is likely breaching the Fair Trading Act.

"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," she 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.

"This can often have significant financial impacts on the lives of individuals involved."

About 200 letters will also be sent to other known members of the circles.

A lotus flower. Source: Hong Zhang/Wikimedia Commons