Gift Circles

Gift circles are classic pyramid systems (events akin to lotteries) and therefore illegal according to art. 43, item 1 of the Swiss Lottery Ordinance, LV.

Gift circles usually work according to the following principle: the initiator of the circle is in the central segment (centre) of the system. He or she searches for co-initiators to help him establish the system (the first circle). The aim is to recruit a pre-defined number of participants who will make a pre-defined deposit. Several segments are placed around the centre that need to be filled with participants – the further away from the centre, the more participants per segment. As soon as a sufficient number of participants have been recruited to fill all segments of the circle, all deposits are "gifted" to the initiator in the centre, who then leaves the system. New circles are established and each individual who was in the second segment of the original circle is now in the centre of a new circle, with every participant of the original system moving towards the centre by one segment. New participants have to be recruited to fill the outermost segments of the new circles. When they have been filled, the deposits are again gifted to the individuals in the centres of the new circles and a third generation of circles is created whose outermost segments have to be filled. This process repeats itself until the market is saturated and new participants are difficult to recruit. The consequence is that a few co-founders make a lot of money while a lot of individuals lose a great deal.

Organisers or recruiters of a gift circle will be reported to the cantonal prosecutors.