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Social media gift exchange is an illegal pyramid scheme

The Better Business Bureau is warning the public that online gift exchanges are really pyramid schemes and are considered illegal.
The Better Business Bureau is warning the public that online gift exchanges are really pyramid schemes and are considered illegal. - 123RF Stock Photo

The Better Business Bureau is warning the public that online gift exchanges are really pyramid schemes and are considered illegal.

The “Secret Sister” gift exchange campaign became popular several years ago through Facebook posts promising participants would receive up to 36 gifts, in exchange for sending one gift.

A newer version of this scam revolves around exchanging bottles of wine; another suggests purchasing $10 gifts online.


How the scam works

The scheme starts with a convincing invitation, either by email or social media to sign up for what seems like a fun program. All the participant must do is provide their 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 they’ve never met on the internet.

Next, it’s the participant’s 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.

A newer twist on the idea asks for an e-transfer email and asks users to pick a name off of a list and send money to strangers, to "pay it forward".

The cycle continues and the participant is left with buying and shipping gifts or money to unknown individuals, in hopes that the favour is reciprocated by receiving the promised number of gifts in return. Unfortunately, it doesn’t happen. Just like any other pyramid scheme, it relies 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 their promised gifts or cash.


Pyramid schemes are illegal

Pyramid schemes are illegal in Canada, and this gift exchange is considered a form of gambling and 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 is asking for personal information such as a mailing address or an email. With just a few pieces of information, cyber thieves could expose the participant 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 and report it to Canadian Anti-Fraud Centre
  • Report social media posts.
  • Never give personal information to strangers.
  • Be wary of false claims. Some pyramid schemes try to win confidence by claiming they’re legal and endorsed by the government. These imposter schemes are false as the government will never endorse illegal activity.
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1 being least likely, and 10 being most likely

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