An old scam has resurfaced in Utah, prompting a warning at a time when many Utahns are looking for a way to make extra money during the COVID-19 pandemic.
The scheme known as ‘Blessing Loom’ involves a group (the ‘loom’) where each person pays an entry fee to join. As more people join the loom, the original members get payouts from the money of the new members.
University of Utah law professor and former federal Consumer Financial Protection Bureau official Chris Petersen says the ‘blessing looms’ are nothing more than Ponzi schemes:
Schemes like this, where there’s no real product being sold, are illegal. Just because it’s online and they’re using Venmo or Zoom, or other internet technology doesn’t mean it’s not a Ponzi scheme."
The Federal Trade Commission has warned against Ponzi schemes – where new money is used to pay off older customers – for decades.
Some of these schemes are very old, and they’re also very illegal."
A woman in Utah who asked to be identified as Tonya told 2News that she recently paid $100 to buy-in to a group that promised an $800 payout if enough new members joined in.
Tonya said she began messaging friends on social media to see if they wanted to join the loom:
I started feeling kind of weird about it. It was definitely a mistake on my part, I’m just going to walk away from it.”
Tonya says she was told to send money over the payment app Venmo to join the group. Federal consumer officials say the schemes can also use PayPal and operate through messaging apps, as well as in person.
Complaints about consumer scams can be made to the Utah Division of Consumer Protection.
A spokesperson for the agency declined to speak with 2News about ‘Blessing Looms’ and would not say if the agency has investigated reports of them, or if the Consumer Protection wants people who have lost money to the schemes to file a complaint.
In 2016, the Utah Department of Commerce put out a warning to consumers about Blooming Looms and specifically cited concerns for young people who were being targeted over social media.
Petersen, the law professor, says state and federal officials should work aggressively to shut down ‘Blessing Looms’, especially during the pandemic when consumers may be more desperate for ways to make money.
“The way the government has approached these things is ‘leave everybody alone, let the schemes play out.’ We need to be a little more forward leaning,” he said. “Good people are going to make a mistake, that’s why it’s important to get out the message that these kinds of scams and frauds and cons are not ok.”