Two Londoners were taken into police custody on Monday, accused of being behind a “gifting cloud” pyramid scheme investigators believe has been in operation in the London area for at least a year.
The arrests came after officers executed a search warrant at a “gifting cloud” meeting that was being held in Lambeth, police said Tuesday, noting such meetings have been taking place on a bi-weekly basis throughout the city.
The overall number of people involved in the alleged scheme is not known, but police said it involved tens of thousands of dollars.
Police said they were now seeking out people who have been approached for, invested in, or profited from the alleged scheme, also known as a “gifting circle” scheme, among other names.
Shakila Bayat, 51, and Bernard Baratta, 72, both of London, have been jointly charged with conducting or managing a pyramid scheme and will appear in court on Jan. 7.
Like other pyramid or Ponzi schemes, money for the scam is generated by recruiting other parties, like friends and family, into the fold and having them fork over money with the promise they’ll get back a much larger sum in the future.
The difference, police say, is that those behind the scheme portray the money as being “gifted” instead of invested, and refer to it as a “cloud” instead of a pyramid.
“Organizers of this scheme attempt to convince prospects that the scheme is not a pyramid but an ‘ever-evolving cloud’ and that it is legal because the Canada Revenue Agency (CRA) allows for gifting in this country,” said London police in a statement.
Gifts, which are non-taxable, have to be for special occasions like “a religious holiday, a birthday, a wedding, or the birth of a child,” according to the CRA. The meeting in Lambeth, which police say saw eight people “gift” $5,000 to the person at the top of the scheme, resembled a birthday celebration.
According to the RCMP, new members are recruited, or “invited” into the scheme by friends or acquaintances, and pay a “gift” — in this case, $5,000 — to join.
Gifting pyramid schemes are cash-only and encourage the use of fake names, something police say is to impede authorities. In other instances, gifting schemes have presented themselves as ventures to help raise money for charity, or help a woman in need or a family overseas.”
In the end, pyramid schemes fall apart as they become unsustainable. Most people who become involved will never see the promised payoff or the return of their money.
“Only the people at the top of the pyramid profit from this scheme,” London police said. “Organizers will often inject themselves back into the pyramid at upper levels to profit more,” leaving those waiting for their “birthday gift” payoff to wait even longer.
Anyone with information is asked to contact London police at 519-661-5670, or Crime Stoppers at 1-800-222-TIPS (8477). Residents who have been approached for, invested in, or profited from the alleged scheme are asked to contact the Financial Crime Unit at 519-661-5515, extension 5257.
WATCH: February 2018: B.C. police warn about the re-emergence of an old pyramid scheme that could cheat thousands of people out of thousands of dollars.