Legal Definitions - birthday club

A birthday club is a type of illegal pyramid scheme, often disguised as a social network or gifting circle, where participants are asked to "gift" money or valuables to earlier members with the promise of receiving a much larger sum or value back when it is their "turn" or "birthday." These schemes are unsustainable and illegal because the returns for participants are not generated by any legitimate business activity or sale of goods/services. Instead, they rely entirely on an ever-increasing number of new recruits joining and contributing. When recruitment inevitably slows down, the scheme collapses, leaving the vast majority of participants with significant financial losses.

Here are some examples illustrating how a birthday club operates:

• Example 1: The "Birthday Blessing Circle" on Social Media

  A social media post circulates among friends, inviting them to join a "Birthday Blessing Circle." The invitation explains that participants should "gift" $150 to the person whose birthday is being celebrated that month. In return, their name is added to a list, and as more people join and contribute, their name moves up. The promise is that when it's their birthday, they will receive $1,200 from eight new members. This illustrates a birthday club because it uses the pretext of celebrating birthdays and "gifting" to mask a pyramid scheme. The promised return of $1,200 is entirely dependent on the continuous recruitment of new members, not on any real economic activity or service.

• Example 2: The "Community Gifting Tree"

  Within a local community group, a "Community Gifting Tree" is established, ostensibly to help members celebrate their birthdays. Each member is asked to contribute $300 to a "birthday fund" for the current month's celebrant. They are told that once they contribute, they will be placed on a waiting list, and when their birthday arrives, they will receive a "gift" of $2,400 from subsequent contributors. This is a birthday club because, despite the communal framing and the use of terms like "gifting tree" and "birthday fund," the underlying structure is an illegal pyramid scheme. The promised large return is not generated by any legitimate means but solely by the recruitment of new members who contribute their own money.

• Example 3: The "Birthday Book Exchange"

  A group of colleagues decides to start a "Birthday Book Exchange." Each participant is asked to purchase a rare or valuable book worth $100 and "gift" it to the person currently at the top of the list, whose birthday is approaching. They are promised that as more colleagues join and gift books, their turn will come, and they will receive multiple valuable books from new participants, totaling a value of $800. This demonstrates a birthday club where the "gift" is a valuable item instead of cash. The core principle remains the same: participants are promised a large return (multiple books) based solely on the recruitment of new members who contribute their own items, rather than on any legitimate sale or service. This structure is unsustainable and illegal.