Cash Gifting Clubs: Are They Legal? Do They Work?

A new craze has taken the Internet by storm, in the business opportunity or online money-making venture category, and that is "cash gifting." Cash gifting has become a catch phrase to describe a group of people, loosely organized as a "club" or an "association," but never in a type of "business" structure. The stated goal of these cash gifting clubs or associations is to help others make "$100,000 a month; $5,000 a week," etc. Extravagant claims of instant wealth are promised everywhere by clubs with names like Abundant Living System, Global Gifting System, The People's Program, and so on.

Before we deal with the issues of legality or whether these clubs bring in the promised dollars to their members, let's briefly examine how these clubs work, so that you can decide for yourself. Posted all over the Internet, using Google ads, or the Google search engine, are solicitations for numerous "cash gifting" clubs, many of which use YouTube links or links to websites in which you are bombarded with information about how these clubs work, why these clubs claim to be legal, and how the money will just come pouring in to you upon joining. Most clubs have differing levels in which you can join, starting as low as $100 with some, $500 with others, and some will only let you join with an initial $2,000 "gift." Initially, when you join, you send someone you probably don't know, a FedEx package by overnight delivery, a cash gift, and usually you attach some sort of statement or declaration from the club stating that "you don't expect anything in return," to comply with some alleged quasi-legal membership "rule," that you understand how gifting works, in order to protect yourself from any incrimination with the IRS or the FTC.

The fun part begins after you join. Now, to be honest with you, I didn't join, so I am simply sharing what my "sponsor" told me, and what various gifting websites laid out about what you do after you join. But getting back to the "fun part," once you send someone your gift and your gifting statement, you then must recruit others to do what you did. But not to worry. "Everyone needs money," according to your sponsor/trainer. So how do you accomplish this? Mailing out postcards was a popular option with most gifting clubs. Placing ads on the internet and competing with all the other "gifters" out there doing the same thing as you. I was kind of fond of the postcard idea, because that involves sending out postcards to "business opportunity seekers." Last I knew, postage isn't free, and you have to buy a list of opportunity seekers, hence additional costs. But wait a minute! Weren't we told that the money would start pouring in overnight, putting an end to all our financial worries?

But, let's continue with this great marketing plan. Let's assume you're really savvy and decide to set up a website with you talking up the opportunity on YouTube, or even using someone else's video and putting it on your website. The calls come in from interested participants and it's up to you to persuade them. It might be helpful to have a good , unlimited long distance phone carrier, because it is likely you will have to call many of these prospects back. With the postcards, it could take weeks to get responses, and most marketers who use this method usually talk in terms of a 3% response being good. So how many names of opportunity seekers are you going to have to buy? And from whom? Most likely your "sponsor" will sell you a list of opportunity seekers or route you to a company that his sponsor makes a commission from, that sells such lists. Either way, the people who brought you in are hedging their bets with some sure money in case you don't "sell" anyone.

All right, what about the legality of this thing? Incredibly, gifting clubs are recording phone conversations with Internal Revenue Service representatives and Federal Trade Commission representatives, and playing them on YouTube, in an attempt to legitimize their gifting activities. The problem is that they don't ask the right questions to the government representatives, and so they claim that a certain IRS or FTC official gave their blessing to the gifting club's activities. For example, instead of asking the IRS or FTC if it is legal to form clubs for the purposes of sending each other tax-free gifts, and soliciting others to join through the internet or the mail, they ask pointless questions like, "Is it legal to give someone a gift of up to $12,000?" and "Am I limited in the number of gifts I can give to someone?" A great response that someone running a website debunking the cash gifting activity gave, was that "the IRS isn't in the business of determining what's legal and what isn't. You can be a drug dealer and be arrested for dealing, but the only thing the IRS wants, is the tax money the drug dealer has to pay on his profits!"

With regard to the FTC, they may not have the time and energy to prosecute everyone involved with cash gifting clubs. The modus operandi of many gifting clubs, sadly, is that when one of them reaches its saturation point and can't get any new members or "gifters," they shut down, and start up a new "club" under another name. Evidence of this is everywhere on the web. The only limit to the number of cash gifting clubs seems to be the number of names the promoters can invent. I have seen names like SendCashNow, and OvernightCashSystem, just to name a few. With the internet, it's easy to hide your identity. I always wondered why many of the promoters always have last names like "Miller, Smith, Harris, and so on." Never a name like "Wyzhibitski" that would be easy to track in a phone book.

The real reason the cash gifting clubs are illegal seems to be simple: they're a variation on a pyramid scheme. The promoters will all say they're not pyramids, but what happens when they can't (or YOU can't) recruit members? Many gifting clubs such as Abundant Living System and Global Gifting System are now claiming to provide "residual income." It's not possible unless people are being recruited. If so many people were "getting involved," according to the promoters, then why not share the leads from all the great demand that's out there with you, the new recruit? Some well-intended promoters probably do some of that, but when that runs out, you're told to get a website, run ads on the internet, or mail out postcards. Eventually, when new members or gifters can't be found, the money runs out, and either a new "club" is formed, or the old club simply vanishes, or both. The FTC tends to prosecute the promoters, not the rank and file members, but the bottom line is that when you find objective comments from ordinary people who tried gifting, that many of them never got their original investment back, and spent a lot of their own money "advertising" the opportunity. They're hard to find, but on complaint boards out there, many of the now defunct gifting clubs that crashed and burned, have tales from former "gifters" who didn't make the promised $100K per month. With no way to verify that claim, is it even true that the promoter ever earned that much?

Here's a great way to verify the claims of "earnings" of cash gifting clubs promising $100,000 a month: instead of making everyone watch the YouTube videos of people opening up FedEx envelopes with cash in them, have the promoter or sponsor in any gifting group show you their FedEx airbill receipts. FedEx overnight shipping is the preferred method of sending cash gifts, probably in an attempt to avoid any charges of mail fraud by using the post office. FedEx, by the way, costs an average of about $20 a pop to ship something overnight by standard air, arriving at 3 pm the next day. I verified this by calling them and asked for a typical shipping charge from Kansas City, MO to Houston, TX. You can set up an account with them and get a discount, but you're still paying between $15 and $20 a pop to send gifts. But for someone getting "$100,000 a month" in gifts and promising to show you how to do the same, keeping the airbill receipts as proof of the cash should be no problem, right?

Any fool can replicate a video of someone opening up FedEx envelopes showing cash inside (I notice you can't always see the faces of the people opening up the envelopes, or that it's difficult!), but showing actual tracking numbers from FedEx would impress me even more! The sad truth with cash gifting is, that eventually people who can't recruit new members to give gifts will get burned financially, the gifting club that you joined will shut down, and that's that. The one technical clause that would make all of this activity run afoul of the IRS is that you are supposed to be giving gifts "with no expectation of anything in return." It will even say this on the "gifting statement" new members are expected to sign and attach, when they forward their "gift"