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Bernie Madoff may be in prison but plenty of Ponzi schemers are still running free on the Internet.

Among the most viral are cash gifting programs or gifting clubs.

These clubs are hyped via video. According to TubeMogul, an online analytics company, there are close to 23,000 cash gifting videos on YouTube, which have garnered more than 59 million views to date.

Why so popular? When you promise people ways to get up to $12,000 from total strangers in the mail, those promises get attention. But according to the Better Business Bureau, most of these cash gifting programs are not legitimate, and may possibly be illegal.

"Bernie Madoff isn't the only guy with a Ponzi scheme," Steve Cox, a bureau spokesperson, said in a recent statement. "Anyone tempted by slick cash gifting marketing appeals should run in the opposite direction. Or they run the risk of being the next person ripped off by a pyramid scheme."

How It Works
The clubs promote sending money to strangers. Sites such as The Peoples Program use videos to vaguely outline the club's "team approach" to achieving wealth.

Additional on-site program publicity states: American "citizens have the Constitutional right to gift property" including cash. It mentions the program is not a company, but is "just a private sharing club." And: "When someone accepts the invitation [to join the club], they move through a natural progression from the giving to the receiving stage of the activity."

Accepting an invitation requires providing an email and phone number. Then you’re asked for $50 to join the club and assigned a private membership number. Next, you agree to send your first gift. In the case of  the Peoples Program your first gift—which must be at least $150 and can be as much as $10,000—goes to James Eng, who led you to the site in the first place, and Chris Bernardo, another member of your new club. (Neither Eng nor Bernardo responded to emails or phone calls for comment.)

After you make your first gift, you’re responsible for setting up your own cash gifting web site and then for inviting others to join and make cash gifts to you. Fail to recruit enough people, and you won’t be able to replace the money you sent up the chain. 

Cash Gifting: What the Law Says
Are these clubs illegal? In terms of their philosophy on giving gifts of cash, no. The U.S. gifting rules are found in the IRS Tax Code, Title 26, Sections 2501-2504 and 2511, which essentially says people can transfer money or property to another person. It also says the government has the right to tax gifts worth more than $12,000.

But online news articles justifying these clubs raise a red flag. One pro-gifting story, "Is Cash Gifting Legal?," is attributed to "online marketing entrepreneur" Merudh Patel, who is also a recruiter for That story is reproduced virtually word for word on Peoples Program site, which appears to be a different program. (The latter at least explains that their information is not to be considered tax advice and that a CPA should be consulted "regarding your decision to pay taxes on your gifts.")

Although recruiters claim there are no laws against making a cash gift to someone, the Federal Trade Commission maintains that the clubs themselves, and their rules for recruiters, are illegal pyramid schemes that violate the FTC Act.

“These programs are illegal,” says Frank Dorman, a spokesperson for the FTC. “They’re promising results that can’t be obtained.” (Dorman was unable to say whether or not the FTC will take action against The Peoples Program. Complaints made to the commission, he said, are never made public.)

How to Protect Yourself
Tales of easy money are hard to ignore, especially when money is tight.

If you're still considering joining a group promising a hefty gift payout for an upfront fee, you should also consider:

1. Gifts should always be free. Gifts are not investments. If you’re expected to put any money up front in order to become a gift getting recruiter, beware. According to the Better Business Bureau, if you get "consideration" (read: money) for your efforts as a program recruiter, that's a red flag.

2. Look out for strangers. If you’re contacted by someone who wants to give you a cash gift out of the blue, be wary. 

3. Beware of peer pressure. If you feel like you’re being pushed into joining a gifting club, don't. Cash gifting organizations target groups "such as women's clubs, community groups, church organizations, social clubs and special interest groups," says the bureau.

4. Success stories are just that: stories.
Anyone can plug a service, so don’t be taken in by videos of “normal” people who have made money through gifting clubs. The only real winners are the ones at the top of the pyramid.

If you’ve been taken in by a gifting club scam, you don’t have to sit on your hands. Victims can file a complaint with the Better Business Bureau, or with the FTC.  You can also contact your state attorney general’s office.

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