BBB Scam Alert: Social media gift exchange is an illegal pyramid scheme

better business bureauA “Secret Santa” around the office, friends, and family can be fun. A gift exchange among online friends you haven’t met, well, that’s a little different and carries a heftier consequence.

While they look like innocent fun, these gift exchanges are considered illegal pyramid schemes in holiday wrapping. Better Business Bureau (BBB) Serving Western Virginia warns consumers to avoid being Scrooge’d this holiday season.

The “Secret Sister” gift exchange campaign quickly became well-known in 2015 through Facebook posts promising participants would receive up to 36 gifts in exchange for sending one gift. Each holiday season, the scheme pops back up. A newer version of this scam revolves around exchanging bottles of wine; another suggests purchasing $10 gifts online. You might see references to receiving “happy mail” or doing the exchange “for the good of the sisterhood.”

How the scam works

The scheme starts with a convincing invitation, either by email or social media from a friend to sign up for what seems like a great, fun program. All you must do is provide your name and address and personal information of a few additional friends and tack this information on to a list that’s already started of people you’ve never met on the Internet. Next, it’s your turn to send an email or social media invitation to send a modest gift or bottle of wine to a stranger along with their friends, family, and contacts.

The cycle continues and you’re left with buying and shipping gifts for unknown individuals in hopes that the favor is reciprocated by receiving the promised number of presents in return. Unfortunately, it doesn’t happen. Like pyramid schemes, it relies on the recruitment of individuals to keep the scam afloat.

“Once people stop participating in the gift exchange, the gift supply stops and leaves hundreds of disappointed people without their promised gifts,” says Julie Wheeler, president and CEO of BBB Serving Western Virginia.

The U.S. Postal Inspection Services explains that these gift exchanges are illegal in the US and considered a form of gambling and pyramid schemes. Participants could be subject to penalties such as jail time, fines, or a lawsuit for mail fraud.

There is another layer of danger to participating in these schemes. When signing up, the alleged campaign organizer asks for personal information such as a mailing address or an email. With just a few pieces of information, cyber thieves could expose you to future scams or commit identity theft.

The next time someone promises a bounty of gifts or cash by mail, email, or social media, BBB recommends the following:

  • Ignore it! Keep in mind that pyramid schemes are international. Chain letters involving money or valuable items and promise significant returns are illegal. Stop and ask, is it worth breaking the law? Report it instead to the U.S. Postal Inspection Services.
  • Report social media posts. If you receive an invitation to join a pyramid scheme on social media, report it. You can report these Facebook posts by clicking in the upper-righthand corner and selecting “Report post” or “Report Photo.”
  • Never give personal information to strangers. This will open you up to identity theft and other scams.
  • Be wary of false claims. Some pyramid schemes try to win your confidence by claiming they’re legal and endorsed by the government. These imposter schemes are false as the government will never support illegal activity. No matter what they claim, pyramid schemes will not make you rich. You will receive little to no money back on your “investment” or gift exchange.

More information on scams is available by visiting BBB Scam Tips.

Report Scams to BBB Scam Tracker

Spot a business or offer that sounds like an illegal scheme or fraud? Tell us about it. Help us investigate and warn others by reporting what you know.


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