BBB warns of secret Santa pyramid scheme fraud

A Vancouver victim lost $7,500 in scam that promises big returns

A Vancouver resident who lost $7,500 in a secret-sister, pay-it-forward pyramid scheme has Mainland B.C.’s Better Business Bureau (BBB) issuing a warning for the holiday season.

According to a BBB press release, the scheme was recommended to the victim by a friend on Facebook. She was instructed to pay $5,000, recruit two people to join and then eventually she’d receive $40,000. She also had the option of putting in $2,500, recruit one person for a $20,000 return.

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The BBB said the fraudsters tricked the victim into believing her payment was a legal, non-taxable gift that must be paid in cash and couldn’t be deposited into a bank account. They also had to keep it a secret, with all communication done through an encrypted text messaging app called Telegram where members would use code names.

BBB said the schemes usually start with a convincing email or social media invitation. The secret sister scheme and gifting circle participants were only required to provide name, address and personal information to a few friends and add it to an existing list of strangers from the internet. Participants then buy and ship gifts to unknown individuals, anticipating they will receive the promised number of gifts in return. The great expectation is a big disappointment when nothing comes back.

“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," said BBB's Karla Davis. “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 and the gifts they were promised.”

There’s more danger, too. Giving out personal information such as a mailing address or an email account can mean future scams or identity theft by cyber thieves.

The next time someone promises a bounty of gifts or cash by mail, email, or social media, BBB recommends the proposal be ignored because it’s illegal and suggests reporting it at bbb.org/scamtracker. If it’s on Facebook, there’s a spot on the upper right corner to “report post” or “report photo.” 

“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,” said the release.

newsroom@tricitynews.com

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