With the world plunging into economic crises due to Covid-19 and mandatory lock-downs, it isn’t a surprise that fraudulent economics is rearing its ugly head everywhere. The most common being “the blessing loom”. It goes by other names such as:
- Blessing Bank
- Infinity Loom
- Snowflake Blessing
- Giving Circle
How it started
This pyramid scheme first surfaced in 2016 when Derek Loom, an American citizen roped in ‘blessed investors’ via social media. He was arrested in 2019, but by that time, he had already made at least 10 Million USD and authorities couldn’t press any real charges against him, as per various media reports. The scam easily and quickly reverberated through the four corners of the earth, via the worldwide platform, Facebook.
How it works
Persons are usually recruited by invitation only. With a small investment of let’s say $100, through some digital payment service like Paypal or Venmo, you can spread the wealth, and see a huge return on the money (your ‘entry fee’). The only catch is that you have to recruit other ‘investors.’ They, in turn will invite others and the goal is for everyone to end up making loads of cash. It’s evident on social media right now, that persons are posting their invites directly in groups and on their facebook walls with captions such as “inbox me” or “find out how!”
How you lose
This sounds like heaven! Right? Unfortunately, in most cases, it ends up being hell for most unsuspecting hopefuls. The trouble with the scheme is its reliance on recruiting others in order to keep the ship afloat. Once people stop participating, the money ship sinks. This will leave lots of disappointed people to lose the cash they initially invested.
The idea of the blessing loom is similar to that of a ponzi scheme. According to invesopedia, A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for early investors by acquiring new investors. This is similar to a pyramid scheme in that both are based on using new investors’ funds to pay the earlier backers. They sound pretty much identical!
Tenesha W. 27, from Brooklyn NY was employed as a pre-school teacher before covid-19 struck the USA in January 2020. The pre-school soon closed its doors indefinitely and she was forced to apply for unemployment benefits. Being a single mother, having 3 children aged 5 -13, with no income and no assistance caused Tenesha to go into depression. Soon, she was offered a rope in the dark. A friend of hers contacted her and asked her to invest $100 to join the loom. Her friend explained how it worked and she was on board. I mean, how hard could it be to find two people, right? That she did. Once Tenesha received her $800 ‘hand’, things started looking up for her. She decided to try another group. She made another $800 and then another. This was way more than she had bargained for! Things were definitely turning around for her.
One day, she saw a post on social media that offered way more than just $800. This time, you could invest $625 and gain $5000. This seemed like some kind of miracle. Tenesha was quick to message the poster and join his group. Her early gains were being depleted and she needed a quick fix so that she could at least pay something on her rent and stock up on some much needed groceries. She could only dream about getting her hair and nails done again. Once she joined, she embarked on her mission of recruiting the required investors. She invited the friend that recruited her in the first place, but she wasn’t interested as the stakes were a bit high for her. Instead, she was met with- “Girl, why didn’t you stick with the $100 groups!?” Tenesha was puzzled since her friend was so confident when recruiting her. This seemed like a sure thing, so why not up the stakes a bit? She continued her recruiting mission and finally secured her people.
Everyone was finally in! Her recruits also had the job of recruiting their own people so she just sat tight for a bit until it was her turn to receive her blessings. Days passed, weeks passed, and she sent countless messages to her group chat asking why it was taking so long for her payout? Was anyone else getting paid? She was always met with the same response. ” The money is coming, everyone has to wait their turn.” By this time, two months had passed, and her ‘winnings’ from previous ‘blessings’ were already gone. “Count this one as a loss, sis” her friend advised. This statement came much to Tenesha’s surprise because she had been so sure the plan was all fail-safe. “Why didn’t you tell me this sh#t wasn’t sucker proof? I need my $500 back!” By this time, the group had grown stagnant, and most members were either leaving the whatsapp group or had stopped responding altogether.
Tenesha made a formal complaint to the NYC police department in the hopes of getting back the $625 she had invested. However, her case was difficult to bring to a close and she basically got no where. Although these schemes are illegal in NYC, it is difficult to prove that the funds are taken/stolen rather than ‘gifted.’
More on how the loom works
CBS 19 provided these tips on how to avoid social media scams:
- Stay alert to pyramid schemes. Pyramid schemes promise quick profits for recruiting others. Scammers prey on the desire to make a lot of money with very little effort. But remember, pyramid schemes are illegal in the United States and Canada.
- Be skeptical: Before you accept any offer on social media, do your research. Just because something appears to be fun and was shared by a friend, doesn’t mean there isn’t an inherent risk. Many of these offers include extravagent promises that aren’t kept.
- Monitor Friend Requests. Don’t accept friend requests from people you don’t know. Also be wary of a second friend request from someone you are already connected with; the second profile may be an imposter trying to access your data and your friends list.
- Ask questions and research the offer before joining any business venture. What appears to be a legitimate investment could still be a pyramid scheme. Check business ratings and reviews on BBB.org and other search engines before agreeing to work with or invest in any company or individual.
According to the office of the NY Attorney General, people invest in pyramid schemes for various reasons. These include:
Those who participate out of greed;
Those who are misled into thinking that they are joining an “investment club” or a “gift program”;
And those who believe that the products or services are legitimate.
One Way to actually Build Wealth
The major problem with these schemes is that you’re basically promising something you can’t guarantee. BWM recommends doing your research and joining a proper ‘box hand’ or ‘sou sou’ instead. According to Essence Magazine, A sou-sou (also spelled sou sou, su-su or susu) is an informal rotating savings club, where a group of people get together and contribute an equal amount of money into a fund weekly, bi-weekly or monthly. The total pool, also known as a hand, is then paid to one member of the club on a previously agreed-on schedule. The pool rotates until all members have received their share.- Sounds Legit.
Related: More on sou-sous