TikTok, Instagram, and YouTube are awash in content from supposed finance gurus who claim to have cracked the code of almost unlimited passive profit. Scrolling through these apps, you could be forgiven for starting to think you’re the only one not raking it in with a vaguely defined “business” (usually involving real estate, asset-flipping, or crypto trading) that more or less runs itself. So what are you waiting for? When will you be a self-made entrepreneur?
The promise is only too enticing, which explains the continued prevalence of this dubious advice. The influencers seem like ordinary people who gamed the system, and people trust their carefully curated appearance of success. But much of it doesn’t stand up to scrutiny. Look no further than @TikTokInvestors, a popular X/Twitter account that collects cringeworthy clips of money mavens whose expertise might be better avoided. This month, its repost of a TikTok in which a young woman showed her followers how to make circular transactions with credit cards (with the aim of securing higher limits) went viral, drawing speculation that she could face legal or tax penalties for the scheme.
The TikTok user, 26-year-old mother named Patricia, tells Rolling Stone that she has taught “thousands” of women such methods through her Business Women University program, with “200 girls” currently enrolled in the classes. She herself currently has “four Airbnb rentals, an event space and a long-term real estate investment.” Patricia also insists that she “never taught anyone how to commit fraud.”
Patricia explains that her system is all built on using lines of credit from banks to invest in assets that “make income every single month.” She got her start while finishing college with a newborn: unable to meet living expenses working part-time, she got a credit card with a relatively low limit and used it to buy food she then sold on campus, and used that income to pay off the debt. With the higher limit on a second card, she bought a car at auction and flipped it on Facebook. Eventually she was able to secure a line of business credit, allowing her to borrow cash to invest in a property she turned into an Airbnb, using the rental revenue from this space to start paying off that loan (and, in theory, the additional interest on it).
Kelsa Dickey, a financial coach and CEO of Fiscal Fitness Phoenix in Arizona who helps clients living paycheck to paycheck to manage their earnings more effectively, says Millan’s convoluted method of upping her available credit could come back to haunt her. “A strategy where you send an invoice from one LLC to another, then pay the invoice using the other LLC’s credit card — as a means to increase your credit score — is dangerous,” she says. One problem is that she’s being charged processing fees on each exchange, “so the amount that gets deposited is less than you charge yourself.” Although Millan doesn’t mention this in her TikTok, Dickey points out that the amounts don’t match up because of this discrepancy.
“On a $2,100 transaction, four percent is $84,” Dickey explains. “So you charge $2,100 to your credit card. You will receive a credit card statement showing $2,100 due and requiring a payment. But what gets deposited into your checking account will be $2,016 — or $84 less to pay the credit card.” This makes it a “costly” strategy, Dickey says, and it “may violate tax laws,” or could at the very least cause a “nightmare” when tax season rolls around. “A 1099 needs to be issued and sent to all sole proprietors, independent contractors, partnerships, and LLCs that you paid for services exceeding $600,” she says. These transactions are large enough that Millan will be responsible for “proper reporting of the income and the expenses under the proper LLC as well as filing requirements for the 1099s.”
Cars, Airbnbs, and extreme debt-leveraging seem to be endemic to this genre of social media, as you’ll find in other examples — from Preston Seo of the Legacy Investing Show explaining how he’s “not paying for” his $150,000 Porsche (because of tax write-offs and an Airbnb rental that partially covers the expense) to TikTok real estate investor Sam Primm saying that he’s a successful mogul because he owes the banks $25 million on the properties he “owns.” These two alone have millions of followers altogether, but they’re just a small part of a digital ecosystem seemingly built on bubble economics. Both deal in the bravado that defines the scene: Primm’s claim to fame is having gone from zero to $42 million in wealth in seven years, while Seo boasts of a $36,000 monthly cash flow and being a “Money Maverick.”
“These schemes make the same old promise that has been made for years, just with flashy assets such as cars and Airbnb properties: that you can work minimum hours per week, make a high passive income, and somehow shelter all of it from taxes,” says Dickey. “It’s completely false. People throwing around words to confuse people,” she says, mentioning Seo’s flurry of jargon in the Porsche video — “deduction,” “Section 179,” “bonus depreciation.” (She likens the fantastic claims in these videos to a scene in Schitt’s Creek where David leaves his father Johnny sputtering in disbelief by promising to “write off” expensive skin care products as a business expense, despite having no idea what a tax write-off actually is.)
But if it’s all smoke and mirrors, why are these creators allowed to continue leading their audience astray? Mark Pugsley, an attorney specializing in financial fraud and Ponzi schemes, notes that their guidance, while suspect, isn’t a crime in itself. “These people are giving financial advice but not involving securities, so it doesn’t require them to be licensed as an investment adviser,” he says. “If someone was pitching an investment in a specific company, or telling people what stocks to buy and when, and getting paid for that advice, then that gets closer to violating the law.”
He agrees with Dickey, however, that following these tutorials is a recipe for disaster — and that goes for the gurus, too. “Legal trouble? I doubt it,” he says regarding the potential consequences of their tactics. “Financial trouble? Yes.” Just something to keep in mind when you come across a TikTok of a bro in a Spider-Man shirt claiming that “it makes more financial sense for you to own a super-car that is $100,000 and up than it does to drive a Hyundai for 25 grand.”
“The question to ask isn’t, ‘Can it work?’ because every once in a while it can,” Dickey says of these various plays for quick and easy wealth. “The question to ask is, ‘How often does it work?’ The reality is, these are very high-risk strategies. Just as fast as you can get a luxury car or Airbnb property, you can lose it, along with a lot more. I have to explain to my business clients often how paying something out of your business does not mean that you’re not paying for it. You are still paying for it.”
“Progress is important when it comes to money,” says Dickey. “But fake progress can be dangerous. It can make us feel as if we’re more skilled and more capable than we are. We are not learning how to manage our money and our credit scores consistently and in a sustainable way by chasing these gimmick strategies.”
Or, to bend an old adage somewhat: if it sounds too good to be true, maybe put away your phone for a while.
