In truth, many money schemes collapse well before they reach a natural conclusion anyway, either because of dishonesty on behalf of those running them or because the Department Of Trade And Industry (or your country's equivalent) decides to call a premature halt to proceedings. When the DTI does stick its oar in though, not everybody is happy. On one hand, they may well be preventing potential recruits from losing money, but at the same time they are also guaranteeing that existing recruits, and particularly those who have just joined, will lose money that they might not have done had the scheme been allowed to continue. Hence those who object to DTI involvement.

Others argue that everyone joining knows that there is a risk involved, which to many is no different to betting on the horses or playing the national lottery, but that is where they are wrong. Unfortunately, a lot of people who join have no real understanding of the real risks involved, and may well be investing money that they can ill afford to lose. And we're not talking pocket money here either. One man was said to have invested and lost every penny of his £40,000 redundancy money he received after a lifetime of working down the coal pits.

And as far as being like walking into a bookie's or picking six lucky numbers for Saturday's night are concerned, there's one big difference there too. Like it or not, many money circulation schemes are illegal. The lottery and betting on the gee gees is not. Initially, the DTI had to resort to using a wide variety of legislation to close down money schemes, but as of February, 1997, it became a criminal offence to not only start money circulation schemes, but also to attempt to recruit others. And those who fall foul of The Trading Schemes Act (1996) face up to two year's imprisonment or a fine of up to £5,000 or both.

And whether the law's right or wrong on this occasion, that's why the DTI steps in to close them down. Knowing that the DTI is going to do that sooner rather than later greatly increases the risk that you will lose money, and that's why, ladies and gentlemen, you should give money circulation schemes a wide berth. Otherwise, the chances are you will end up out of pocket.

A kind of magic

In June 1994, Alchemy became one of the first such money schemes to be closed down by the DTI. It was said to have raked in three million pounds before the DTI stepped in and had attracted over 8,000 members who were promised £31,775 plus bonuses for attracting new members following an initial investment of just £250 followed by 24 monthly payments of £75 (£2,050 in total). An excellent return on your money in anyone's books.

Let's just hope nobody was holding their breath waiting for their bumper payout. If all 8,000 people had paid their monthly instalments, Alchemy would have earned an incredible £16 million, but if it was genuinely to pay everyone their promised windfall it would need to find over £254 million from somewhere to do so. And that would have meant recruiting a heck of a lot of new members (around 125,000), who of course in turn would want to reap their windfall. And that would take almost four billion pounds (and two million new recruits) to do that. And not surprisingly, those two million souls would want to walk away with their pockets bulging too . . . by this point members would be recruiting each other to keep Alchemy afloat!

Simple arithmetic says schemes like Alchemy are doomed to fail, with a few participants making money, and the majority losing it (you can be damned sure that the scheme organisers make a pretty penny either way). If the DTI didn't act, the schemes would inevitably collapse just as soon as new recruits ran out faster than members were paid off.

The Titan Business Club was another well-known scheme that took around £17 million from over 11,000 recruits before being closed down as an illegal lottery prior to new legislation coming into place. It was actually operated by two German companies and had a big following in both Germany and Holland, but was registered as a company in Wyoming, USA.

Titan's main recruiting method was to hold meetings in hotels and halls where members and potential members were invited to attend to find out how vast sums of money were being made. The atmosphere at those meetings could be described as anything from "exciting and electric" through to "revivalist and cult-like", depending on what side of the fence you come down on.

Interested persons were then taken to one side where on signing the application form and a cheque for £2,500 (later increased to £3,000), he or she became what was called a "junior partner" in the Titan Business Club. Junior partners had the right to then introduce other new members - they weren't obliged to, but seeing as there was no other benefit or product to be had, the idea was that all junior partners would recruit on behalf of the club.

A junior partner earned £450 each for successfully recruiting two new members, and became a "senior partner" and received £1,220 on the successful recruitment of a third member. What's more, the senior partner also earned £770 for each of the first two new members which that third member introduced. Any further successful introductions by a senior partner were also treated in the same way as the third introduction.

Just as with Alchemy, members stood to make a great deal of money - in theory at least. Initially, Titan fought the DTI's attempts to wind the company up, taking their case to the Court Of Appeal. Titan's defence was that a lottery involved the distribution of money or prizes to participants purely by chance, while participants in Titan earned money by recruiting others - something that was not left to chance alone. The courts though took a different view. In their eyes, Titan and similar schemes did represent illegal lotteries because every new participant was gambling on the scheme continuing long enough for him or her to recover his money and, hopefully, make a profit. The legal battle continued for over a year, but eventually the Titan Business Club was finally wound up in June, 1997. Its assets had been frozen and recruitment halted for months before that, but needless to say a lot of "junior partners" never saw a penny of their money back.

Girl Power

And yet no sooner has one money scheme been closed down, another springs up to take its place. One of the most "successful" in recent times has been Women Empowering Women (WEW) which is said to have attracted over 150,000 participants since coming to the UK via the USA. Membership in Women Empowering Women was only open to the fairer sex and by invitation only - usually through family or friends. It first arrived in the UK via the Isle Of Wight in October 2000, but quickly spread to the mainland, enjoying a following bordering on the fanatical in the likes of South Wales, Glasgow, Somerset, Lancashire and parts of London.

For an initial investment of £3,000, you could buy a place on the scheme known as a "heart". You then progressed up the pyramid if and when you encouraged others to join, with the promise that you would get back £24,000 within a matter of weeks if all the participants involved recruited enough members. A big part of the scheme was what was called "emotional support" which groups of members offered each other on a weekly basis, and the underlying message was one of women helping other women.

WEW brochures described "a new economic experience" for participants. "Trust the system and remember this feminine process works best through sharing with others, the opportunity we have been given," the promotional literature said. Promises of an independent source of cash to help women pay off credit card bills and other debts was a strong attraction, not least to those who could least afford to lose their initial stake money but were desperate enough to participate. And I'd be lying if I told you that some people didn't benefit from Women Empowering Women because they did. There were women who invested £3,000 and weeks later had £24,000 to their name.

Naturally enough, stories of such success spread like wildfire, ensuring a healthy queue of new participants only too eager to hand over their £3,000 entry fee. Not only that, other related schemes - Islanders Empowering Islanders on the Isle Of Wight and the more widely spread Friends Empowering Friends - sprung up in its wake. Another reason for the schemes' initial success was the fact that members "gifted" the money to each other with no formal organisation in place - and as such the schemes were not technically illegal because of loopholes in the law. The term "gifting" also gives the scheme an air of respectability. One "community investment club" scheme, The Investment Club, which promised to turn an initial investment of just £100 into £88,300 ("Smaller outlay, greater rewards, more control and less risk") actually operated from its own shop in the town of Newport on the island.

Even so, in area after area, the money schemes collapsed, with the number of people out of pocket far exceeding those who had made money. By their very nature, each scheme's source of new members quickly dries up and those last through the gate don't climb the pyramid to the dizzy heights where they are in profit. As soon as this begins to happen, previously successful participants also stop reinvesting in the scheme and it quickly collapses.

The figures speak for themselves. Take a scheme like Women Empowering Women which attracts 150,000 members. Assuming that they each invest £3,000 and all of the money invested is distributed among fellow members. That's a total pool of £450 million pounds!

But for each of those 150,000 to each receive the promised £24,000 return on their investment, the pool would need to contain £3,600 MILLION POUNDS - the receipts from 1.2 million members.

And of course, those 1.2 million members would want their £24,000, meaning over nine million participants are now required. And of course, those nine million . . .

The maths are simply this. For anyone to walk away with £24,000 there must be eight people who lose or "gift" £3,000 for them to do so.

Isle Of Blight

While initial success stories from the Isle Of Wight were heralded throughout the country, news of other members being out of pocket was not so quick to do the rounds. It actually took the best part of six months for the scheme to capture the small island's imagination, with early £24,000 payouts creating a lemming-like desire to participate. The power of a few big payouts to suck others in would do a Dyson proud. During one week, the Nat West bank had so many £3,000 withdrawals that there was a genuine fear that it would run out of money.

It wasn't long though before the local Trading Standards Office was taking hundreds of calls from worried participants who hadn't seen a penny back after investing their initial stake. A lot of people had borrowed the money to take part and now found themselves with a debt they could not afford to pay. Others lost their life savings, even their houses.

The resulting publicity stopped the scheme dead in its tracks, but the true extent of the losses suffered will never be known. A lot of participants are simply too embarrassed to admit that they lost money. With a money scheme like WEW, even those who profit can end up losers in the long run. For a member to make money, she would have had to recruit others to join - usually from her circle of friends or indeed her own family. How do you tell your best friend or mother that the £3,000 they invested on your recommendation has gone?

The fallout from WEW in the Welsh town of Llanelli was the subject of a BBC TV programme which clearly illiustrated the aftermath of a collapsed money scheme. While some women clearly benefited from their participation - it was claimed that nearly £150,000 was paid out to one group of women in just ten days - with stories of new cars, mortgages being paid off and expensive foreign holidays, the majority of participants found themselves losing part or all of their investment. In closely-knit communities, tensions between the winners and losers are inevitable, and in Llanelli, the result was the intimidation and even death threats being made against those who were seen to profit out of the misery of others.

Another unforeseen consequence is that meetings where large sums of cash are being handed about quickly attract the attention of criminals. Two armed men got away with £60,000 when they robbed 15 housewives of their stake money at a WEW meeting in a house in an affluent suburb of Dublin.

The name game

The people who launch such schemes are coming up with ever ingenious ways to make them attractive to new recruits. Most now have themes, such as a dinner party where those joining are really paying for a starter so that in time they can enjoy the fruits of desert. Others employ the terminology of air travels where your initial investment buys you a seat on the plane and as the scheme takes off you make your way through the cabin ranks until the become a pilot.

The KF Concept promised big money for a £1,000 investment. It gave away cars, holidays and cash at its recruitment drives. Its founder Kevin Foster lived in a big house in Kent complete with swimming pool and private zoo. Everyone was going to get £5,000 back within two years. The scheme took in an incredible £34 million. Now you know how Mr Foster, an ex-taxi driver, lived such a fantastic lifestyle. He was at the top of the pyramid. Those at t5he bottom lost all of their money.

One of the most successful variations of this was an American scheme called Pit Stop (in some areas it was renamed Money Exchange) which used racing car terminology to attract men. US$2,000 bought you a place in the pit crew and once you had attracted enough new members you would receive US$16,000 as a lead driver. You could then rejoin a pit crew and participants were told that by doing this on a regular basis earnings of US$50,000 or more per year were possible.

When the scheme was being investigated, it emerged that one of the founders had earned US$300,000 in just three weeks. The only real guarantee for those who funded this windfall was that they were being taken for a ride.