With the Christmas season here, and people looking for great deals on gifts, Better Business Bureau (BBB) is urging the public to stay away from secret sister (or secret Santa) gift exchanges, pay it forward schemes, and gifting circles, following a report from a consumer in Vancouver who lost $7,500.
The victim was lured into a Pay it Forward scheme that was recommended to her by a friend on Facebook. In order to get involved, she was instructed to pay $5,000, recruit two new persons to join the scheme, and then one day she would receive $40,000. She also had the option to pay $2,500, recruit one new person, and eventually receive $20,000.
The fraudsters tricked the victim into believing that her payment was a legal, non-taxable gift that must only be paid in cash. All payouts or “gifts” were to be collected in cash and could not be deposited into a bank account. Those involved in the scheme were not allowed to share details with anyone or post about it online, and all communication was done through Telegram, an encrypted text messaging app where members used code names.
All these schemes usually start with a convincing invitation, either by email or social media. However, in the case of the secret sister scheme and gifting circle, all you have to do is provide your name and address as well as the personal information of a few additional friends, and add this information to an existing list of strangers from the internet.
After that, you will also send an email or social media invitation to your contacts about the scheme. As the cycle continues, you are now left with buying and shipping gifts for unknown individuals, in hopes that the favour is reciprocated by receiving the promised number of gifts in return. Unfortunately, it does not happen.
“A pay it forward scheme, secret sister campaign, secret Santa, or holiday gift exchange among strangers might seem like innocent fun, but it is really a pyramid scheme, and this is illegal in Canada,” says Karla Davis, Manager of Community Public Relations at BBB serving Mainland BC.
“Just like any other pyramid scheme, they rely on the recruitment of individuals to keep the scam afloat. Once people stop participating in the gift exchange, the gift supply stops as well, and leaves hundreds of disappointed people without the money they hoped for or the gifts they were promised.”
There is another layer of danger to participating in these schemes. When you sign up, the alleged campaign organizer is asking 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! Pyramid schemes are international and require you to trust strangers. Chain letters involving money or valuable items that promise big returns are illegal. Stop and ask, is it worth breaking the law? Instead, report it to BBB at www.bbb.org/scamtracker.
• Report social media posts on the various platforms. If you receive an invitation to join a pyramid scheme on social media, report it. For posts on Facebook, click the upper right hand corner and select “Report post” or “report photo.”
• Never give your personal information to strangers. This will only leave you vulnerable to identity theft and other scams.
• Be wary of false claims. Many pyramid schemes try to win your confidence by claiming they are legal and endorsed by the government. These imposter schemes are false, as the government will never endorse illegal activity. No matter the claim or guarantees, pyramid schemes will not make you rich. You will receive little to no money back on your “investment” or gift exchange.