By Eduardo Andrade, Managing Editor
An old scam known as the Octagon has resurfaced and is targeting school-aged children via social media. Also known as the Blessing Loom, Infinity Loom and many other names, this scheme has been around since at least 2001.
During a time when money is tight for many people, this scam is preying on the vulnerable by promising an eight-fold return on a $100 “investment.” However, the Octagon is a clear-cut pyramid scheme, which is illegal in the U.S.
The scheme involves filling out an octagon referred to as a “circle” which contains 15 people. A circle is complete when eight people fill out the final outermost spots, which cost $100 to reserve. All of the money goes to a central person and the circle then splits in two, with everybody moving up a level and tasked with recruiting more people.
In a pyramid scheme, members are recruited with a promise of payment for enrolling others into the scheme, not by investing or selling products. According to the Federal Trade Commission, signs of a pyramid scheme include income based on the number of people recruited rather than product sold, which fits this scheme particularly well as the Octagon does not involve any sales, and that promoters make extravagant promises about potential earnings.
The reason such schemes are illegal, and the reason you should not join, is because these schemes are entirely unsustainable.
Since the only way to get money is to get others to give it to you, eventually there will be no more people to recruit into the scheme, and everyone who has not already made money will lose.
This usually happens sooner rather than later, especially in small scale schemes such as the Octagon where the lack of any real business opportunity is apparent. For every person who makes money in a pyramid scheme, dozens are ripped off.
If you are already involved in one, try to get your money back from the people you gave it to, stop recruiting others, let your friends and family know what is going on, and, if necessary, report those involved who are acting with malice.
Remember, pyramid schemes are illegal and they are preying on vulnerable people in trying times.