In the late 1970’s The Circle of Gold was all the rage.
It was a pyramid scheme touting the possibility of turning a mere $100 investment into a cool $200,000 and it swept through the fashionable homes of Washington like a tornado.
Dozens, possibly hundreds, of well-heeled, highly educated people – including doctors, lawyers, school teachers, government workers and businessmen – jumped at the chance to invest in the get-rich-quick scheme called “The Circle of Gold” as an easy way to reap thousands of fast dollars.
The Circle of Gold was in fact just a new version of the classic pyramid scheme pioneered in Boston by Italian immigrant Charles Ponzi in the 1920s. The victims at the end of his pyramid scheme were lower-middle-class workers desperate for riches.
Here is how it worked. An interested person was sold a list comprised of 12 names for $100, plus had to bring in two recruits who would then pay $100 each and recruit two people each. So on, and so forth. When the person recruits their two people, they each give the recruiter $100.
The person who did the recruiting keeps $50 from each person and gives the other $50 from each recruit to the name at the top of the list they purchased. It’s either handed directly to the person or mailed to the person. The new recruit adds their name to the bottom of the list. This gets repeated with a person’s name slowly being moved toward the top of the list.
The “Golden Circle,” appeared to be respectable members of the middle class looking to outsmart inflation with a large slice of pie in the sky, which helped to add an image of legitimacy to the scheme.
The Circle of Gold was promoted at parties attended by friends and family. And supposedly, the seller had an unspoken duty to sell the scheme to only people who could afford it and or afford to lose their initial investment money.
Almost every night, promoter-investors would gather over white wine and hors d’oeuvres and flip charts in the intimate setting of a middle class private home. Waving envelopes stuffed with $50 bills as proof that the scheme works, they tried to sell their friends and colleagues what, authorities say, was a highly questionable chain letter.
The scheme started to crash when Frederick County Circuit Court ruled against two Circle of Gold promoters under state lottery statutes, and stated “Anyone participating in, or promoting, the scheme in Maryland now could be subject to contempt charges”.