It’s the season of giving.
If you want to spread a little holiday cheer, you might be tempted to participate in one of the gift giving chains you’ve seen on Facebook and other social media sites.
One of the most widespread is the “Secret Sister Gift Exchange,” in which participants are supposed to send a $10 gift to one of the people in the group, and then invite friends to join the party. In return, you’ll receive as many as 36 gifts back.
Then there’s the wine version.
Just buy a bottle of wine costing $15 or more and send it to someone in the group, the offer says, and invite your friends to join in. In return, you’ll get as many as 36 bottles of wine.
Not a bad way to fill up your liquor cabinet for the holidays, you might think.
Don’t do it.
These offers are nothing but high-tech chain letters. Pyramid schemes.
And they’re illegal.
So what, you might say, knowing none of your friends have been arrested for these holiday schemes. You might even know someone who said it was a success.
If you got your bottles of wine or other gifts, that’s because you were at the top of the chain. If the people who sign up after you send their bottles, you’ll get what you’re expecting.
But somewhere down the line, those who promised to participate will drop out. That’s when people — people lower on the chain than you — won’t get what they expected, if anything at all.
Here’s the math, courtesy of U.S. Postal Inspector Gregory Kliemisch.
Take a typical pyramid that involves six individuals in the chain.
“By the time you’ve reached the fourth level of participation, nearly 1,300 recruits must be on board,” Kliemisch said. “However, upon reaching the sixth level of participation, you’d have to attract more recruits than could be seated in Chicago’s Wrigley Field.”
By the seventh level, you’d need more participants than folks living in Anchorage, Alaska, he said. The ninth level requires you to recruit all of Houston, Texas and the and the Washington, D.C. metro area combined–and you still wouldn’t have enough participants, he said.
“The eleventh round requires everyone in the United States to join in if the promise will be fulfilled,” Kleimisch said. “The odds are likely greater that Santa Claus himself would fly his sleigh into the middle of Times Square to personally distribute the gifts.”
Now, the law.
Fraudulent pyramid schemes typically violate the Lottery Statute, Kliemisch said.
He said these schemes contain all three elements of a lottery: prize (expectation of monetary or other gain from participation in the pyramid); chance (the monetary return you may receive from your participation is entirely up to chance, that is, dependent on the efforts of those below you in the pyramid), and consideration (the price of your gift to join the pyramid).
“Under the federal statute, if you’re found guilty in a pyramid scheme, you may be fined or imprisoned not more than two years, or both; and for any subsequent offense you may be imprisoned not more than five years,” he said.
And depending on the state you’re in, or the state you’re sending to, you’ll probably run afoul of local laws, too.
Kliemisch said the U.S. Postal Service doesn’t allow individuals to send alcohol through the mail, and other shippers have restrictions, too.
And, if you’re sending bottles of wine to strangers you connected with on Facebook, there’s no way to tell that they’re of the legal drinking age, he said.
You could also be opening yourself up to identity theft or related fraud because you’re sharing your personal information, including your address, with strangers. Sure, maybe you’re only giving your info to friends of your friends, but will you ever really know?
Even if that doesn’t happen, and even if the authorities don’t catch on, Facebook might (though we haven’t heard reports of that happening yet). Pyramid schemes are a violation of Facebook’s terms of service, so participants could get booted from the social media site.
So if you want to spread that holiday cheer, go the more traditional Secret Santa route, or just get together with a few friends for that wine you crave.
Have you been Bamboozled? Reach Karin Price Mueller at Bamboozled@NJAdvanceMedia.com. Follow her on Twitter @KPMueller. Find Bamboozled on Facebook. Mueller is also the founder of NJMoneyHelp.com. Stay informed and sign up for NJMoneyHelp.com’s weekly e-newsletter.