Editor’s note: The men and women who participate in these gifting clouds have not been identified by name for legal reasons.
Dozens of Cloverdale women have invested thousands of dollars into illegal pyramid schemes known as “pay-it-forward clouds,” and are actively working to recruit family and friends throughout the Lower Mainland to join them.
The concept surges in popularity every few years, and has recently re-branded to escape the negative connotations of “gifting circles,” which is how the RCMP and Better Business Bureau (BBB) often refer to these pyramid schemes.
Clouds promise that if you invest a sum of money and recruit two more people who are willing to invest, you will one day receive a sum of money larger than the initial investment. In the case of Cloverdale’s clouds, women are commonly told that if they “gift” $5,000 and recruit two more participants, they will then in turn get a “gift” of $40,000. Other clouds offer lower buy-ins for those hesitant or unable to commit to a bigger sum.
The language used within the groups, at weekly meetings and within group conversations via an anonymous, encrypted texting service, is important. It isn’t a “scheme” – it’s a community that helps women become financially independent. It’s not a pyramid, it’s a cloud. It’s not illegal, it’s a gift.
Despite the positive terminology, the clouds are by definition pyramid schemes and illegal in Canada. Rather than selling a product or service, all of the money made in a cloud is generated by enticing new members to join. The Canadian Anti-Fraud Centre defines a pyramid scheme as “frauds that are based on recruiting an ever-increasing number of investors” and it is illegal to promote a pyramid scheme or even to participate. According to the RCMP, conviction could mean up to five years in prison, or a fine of up to $200,000.
So why are so many Cloverdale women signing on to the pyramid scheme? The Cloverdale Reporter attended three seminars hosted in Cloverdale businesses in December 2017 and January 2018 to investigate.
“What if one opportunity changed your life?” asks the woman at the front of the room. A group of around 20 women and a few men sit at tables, sipping wine and picking at appetizers. This cloud meets at a local restaurant weekly.
Some at the table are apprehensive — they know that a reporter is sitting next to them. Some are hopeful — they believe a positive story will make it easier to encourage newcomers to join.
“If you have an article, it may help us, because we could always show people who are wanting to come in,” said one male participant. “As long as it’s not negative.” The table laughs.
“I can’t see it being negative, because there’s nothing negative about this, right? It’s all really positive,” responds a woman.
“Back in the ’90s, when I was involved, it was very clandestine,” she continued. “Everyone was hiding. But now it’s so exciting because it’s open and anybody can come, and we’re not trying to hide anything.”
The presenter flips through her PowerPoint slides. She is confident, well-spoken and seems to be well received by the crowd. She explains how the cloud system — which takes an hour-long presentation to describe — is “very simple,” and how great it is to see friends make it to a “birthday” and receive their gift of $40,000.
She flips to the next slide. It shows 15 gift boxes, arranged in a pyramid.
“The shape of this is a triangle,” says the presenter. “It’s a triangle because the flow of a triangle works well. We see triangles in many aspects of our lives. I work for a non-profit organization. I’m the executive director, so in that triangle, I’m on the top all the time, just like a CEO.”
She acknowledges that it’s “extremely rare” for the people at the bottom of the corporate ladder to rise to the top of the triangle.
“The pay-it-forward pyramid is very different…” she says. “It’s actually an ever-evolving triangle, so no one ever stays at the top. No one ever stays at the bottom. It’s equal for everyone. Everyone shares the opportunity equally.”
At the bottom of the pyramid, there are eight boxes representing the newcomers who pay a fee of $5,000 each. At the top, there is a box representing the person who will receive $40,000.
During the presentation, the speaker explains that clouds can trace their history back to groups of women who worked to support each other during the Second World War. She tells the audience that the clouds are illegal in the U.S. but not in Canada. She says that the clouds have been vetted by lawyers, Canada Revenue Agency representatives and RCMP members. She confidently quotes sections of the penal code and states that gifting is legal, in any amount.
The pitch is thorough and well-rehearsed. But there are red flags that can’t be ignored, even with a smooth delivery. The terms “triangle,” “cloud” and “pyramid” are used interchangeably. The room is told that when you receive the $40,000, you must not deposit it in the bank. You may not post anything about the clouds online. All communication is done through the encrypted text messaging app Telegram, in which cloud members go by code names. The last slide of the PowerPoint presentation says you should not discuss what you’ve heard at that night’s meeting outside of the cloud groups, to protect the privacy of those in attendance.
Cloverdale is a cloud ‘hot spot’
The Cloverdale Reporter sat down for an interview with a local businesswoman to discuss her involvement in several clouds in the area. She also regularly hosts cloud meetings. For the purpose of this story, we will call her Jane. She first became involved with the clouds two and a half years ago.
“I remember it very well,” she said. “It was quite a hot spot in Cloverdale.”
Since then, she has become dedicated to the cloud groups. Last summer, she was doing five presentations a week.
She explained, “the women who started this protect it with their life, because it’s what enabled them to be single moms, move on and help so many others.”
“The whole premise is that you’re in it not for personal gain but to eventually pay it forward,” she said. “I’ve been blessed to help a lot of single moms, single girls, help change lives.”
“It’s all been really good, but I’ve also seen the ugly part of it. You know, life has got that, it’s got the good and the ugly. There’s going to be people that take it, and log it under a good thing, but use it for self-gain. And manipulation. So there’s two sides.”
The pay-it-forward clouds in Cloverdale are the “good side,” she said. They focus on community and on helping others.
“At the end of the day, the money is great, but it’s the community that people have said [is the best aspect]. I have met and become friends with the best people in the world. I know, if something happened to me in life, they would be there for me.”
According to Jane, the groups continue to consist primarily of women because “a woman trusts.”
“A woman gives easily,” she said. “I’m not saying every woman, but most women. It’s more in their heart to say, ‘I’m going to help you.’ ”
Sometimes women will come to the cloud meetings with a negative perception, she said.
“They will have heard somewhere, ‘I was in this one, oh, it was horrible and everybody was fighting and they lost money, blah blah blah.’ And I go, yeah, it’s human nature. Unfortunately, that’s what happens. But just imagine there’s another way to do it. Why not try a positive way? So please don’t shut down something super great … let’s show the positive.”
Jane explained that she encourages people to come to presentations in order to fully understand the nature of the clouds. “If you try to tell people [outside of presentation format] they will immediately try to conjure up their own ideas of ‘Oh, it’s like a pyramid,’ or ‘Oh, it’s like a Ponzi scheme.’ ”
“There’s many, many people who would talk about the legalities, which I have no problem with,” she said. “There’s no issue, and we’ve been told that a million times.”
Jane said that the clouds have been around for 11 years. “It wouldn’t have grown to 4,500 women across Canada, if it wasn’t legal. There’s no way. And it’s growing rapidly.”
“It’s been the best adventure of my life, to be quite honest,” she said. “I have thoroughly loved it. I wouldn’t be involved in it as much [if I didn’t],” she said.
Sense of community, charity drives clouds
It is early January when the Cloverdale Reporter attends another local meeting. There are chairs for about 50 people. A table with wine, cheese and crackers sits to one side of the room. The visitors are told to help themselves.
In Jane’s absence, the presentation is made by a substitute speaker. Many in the room are familiar to one another, and the atmosphere is welcoming and pleasant.
As the guest speaker begins her presentation, she places an emphasis on the community of the clouds, on new friendships that may be made, and the satisfaction of seeing new-found friends have their first, second and third “birthdays.”
This cloud places more emphasis on “paying it forward.” The presenter says that some of their groups directly support women in the community who are living in poverty, or who are trying to escape abusive partners. One of the PowerPoint slides shows a list of charity and non-profit organizations to which they have donated or plan to do so.
But despite her words, the promise of a positive impact, and the smiling faces, the structure of the financial scheme she describes is illegal. As noted in the Little Black Book of Scams published by the Canadian government, “Although pyramid schemes are often cleverly disguised, they make money by recruiting people rather than by selling a legitimate product or providing a service. Pyramid schemes inevitably collapse and you will lose your money.”
Warnings go unheeded
The BBB and the RCMP have issued statements warning the public about “gifting circle” scams in the past. There are several news stories that have been written over the years warning about such scams. The most recent story was published on Monday by the Abbotsford News and shared on other Black Press sites, including the Cloverdale Reporter, after Mission RCMP arrested four people for allegedly being involved in a gifting cloud.
Evan Kelly has written a number of such warnings during his time as a seniors communications advisor at the BBB.
“Every few years, it rears its head,” said Kelly. “It’s one of those things that doesn’t quite go away.”
“It’s usually a friend of a friend that encourages you to join these groups,” said Kelly. “Don’t get taken in by it.”
The clouds are driven by recruitment only, which Kelly noted was “the number one trait of a pyramid scheme.
“People could face anything from fines to jail time.”
Kelly said that while police departments may send out press releases, and are aware that clouds are operating within certain regions in the Lower Mainland, they often need to prioritize other crimes over investigating pyramid schemes.
When contacted by the Cloverdale Reporter in January, Surrey RCMP indicated they had received one complaint of a gifting cloud operation within Surrey, and that it had been taken as information only and not investigated.
“Most crimes are under-reported and it’s possible more are occurring,” said RCMP Cpl. Scotty Schumann.
Schumann also noted that in cases of financial schemes, people are often too embarrassed to report it to the police or may not be aware that what they are involved in is illegal.
But Kelly stressed that no matter if the group calls itself a circle or a cloud, “it’s still a pyramid and it’s still illegal.”
To report a scam, contact the Canadian Anti-Fraud Centre at 1-888-495-8501 or visit antifraudcentre-centreantifraud.ca, and inform your local police station. Residents of Cloverdale can contact the Cloverdale/Port Kells RCMP office at 604-502-6266.