Scam of the day – December 12, 2016 – Secret Sister gift exchange scam

It seems harmless enough when you see it come up on your Facebook page.  It is often titled the “Secret Sister Gift Exchange” and it provides you with a list of six people.  You are told to send a gift worth at least ten dollars to the first person on the list, remove that person’s name from the list, move the second person on the list to the first position, add your name to the end of the list and then send the list to six of your friends.  In theory, you will receive thirty-six gifts for your small contribution of ten dollars.

So where is the harm?

First of all, it is a blatantly illegal chain letter and violates Title 18 of the United States Code, Section 1302.  In addition, like all chain letters, ultimately, it is destined to fail because it is a pyramid scheme where ultimately we run out of people on the planet.  It is destined to fail.

In this particular version of the illegal chain letter, you are required to provide personal information that can lead you to become more vulnerable to scams. This scam has been with us for a couple of years and resurfaces during the holidays.

TIPS

Avoid all chain letters regardless of the guise under which you receive them.  They are illegal.  In addition, although this particular chain letter is turning up on Facebook pages, it is a violation of your Facebook terms of agreement, so you potentially face the loss of your Facebook account if you participate in the scheme.

Scam of the day – September 4, 2015 – FTC takes action against alleged pyramid scheme

At the request of Federal Trade Commission (FTC) lawyers, a judge has issued a temporary injunction shutting down Vemma Nutrition Company, which the FTC describes in its court complaint as an illegal pyramid scheme that preyed primarily upon college students and other young people.   Young people were lured to sign up as affiliates of the company which markets health and wellness drinks with promises of earnings of as much as $50,000 a week while the truth is that 90% of the company’s affiliates earned less that $3,674 annually while the company reaped profits of 200 million dollars last year.  According to the FTC, Vemma is an illegal pyramid scheme where affiliates’ earnings are tied primarily to signing up more affiliates than to selling products.   Sometimes a legitimate multilevel marketing business may look quite similar to an illegitimate pyramid scheme, which is one of the reasons that so many people fall prey to these scams.  For every legitimate multilevel marketing company, such as Mary Kay and Amway, there are many that are just scams.  In a legitimate multilevel marketing company, investors make money by selling products to the public and by recruiting new salespeople.  In a pyramid scheme the source of profits is based primarily on the recruiting of new members or salespeople.  Among the defendants in this case is Benson K. Boreyko who previously had settled similar charges regarding a pyramid scheme that sold nutritional supplements.

TIPS

Anyone who is considering investing in what is represented to be a multilevel marketing business should always investigate the company and the terms of investment carefully before investing any money.  In addition, you should also check out the company with the FTC and your state’s attorney general to make sure that the company is legitimate before investing any money.  Here is a link to information from the FTC that you should consider before investing in a multilevel marketing business.  http://www.consumer.ftc.gov/articles/0065-multilevel-marketing

Scam of the day – June 19, 2015 – FTC sending refund checks to victims of pyramid scheme

A year ago, the Federal Trade Commission (FTC) won a Court of Appeals decision against BurnLounge Inc, Juan Alexander Arnold, John Taylor and Rob DeBoer  relating to an illegal pyramid scam that had lured more than 56,000 people into investing in, what was represented to be, a multilevel marketing online digital music store.  Sometimes a legitimate multilevel marketing business may look quite similar to an illegitimate pyramid scheme, which is one of the reasons that so many people fall prey to these scams.  For every legitimate multilevel marketing company, such as Mary Kay and Amway, there are many that are just scams.  In a legitimate multilevel marketing company, investors make money by selling products to the public and by recruiting new salespeople.  In a pyramid scheme the source of profits is based primarily on the recruiting of new members or salespeople.  In the case of Burnlounge, the 9th Circuit Court of Appeals concluded “BurnLounge was an illegal pyramid scheme…because BurnLounge’s focus was recruitment, and because the rewards it paid in the form of cash bonuses were tied to recruitment rather than the sale or merchandise.”

TIPS

The FTC is mailing 52,099 checks worth almost 1.9 billion dollars to people who were victims of the BurnLounge pyramid scheme.  The checks are being processed for the FTC by Gilardi & Co.  and must be cashed within 60 days of the mailing date.  If you were a victim of this scam and have any questions about the refund program, you can contact Gilardi & Co. at 877-417-4484.  You can also find out more about this and other FTC refund programs by clicking on the “FTC scam refunds” link at the top of this page.

Anyone who is considering investing in what is represented to be a multilevel marketing business should always investigate the company and the terms of investment carefully before investing any money.  In addition, you should also check out the company with the FTC and your state’s attorney general to make sure that the company is legitimate before investing any money.  Here is a link to information from the FTC that you should consider before investing in a multilevel marketing business.  http://www.consumer.ftc.gov/articles/0065-multilevel-marketing