PhotoThe holiday season is a less-than-ideal time to lose hundreds of dollars, but that’s exactly what has been happening to consumers who buy into an online gifting scheme called the “Blessing Loom.”

To take part in the Blessing Loom, Facebook users must deposit at least $100 into a PayPal or Whatsapp account. They’re promised an $800 payout if they can recruit two other people to do the same. Of course, participants are unlikely to receive the timely holiday windfall that they were promised.
 

The Blessing Loom -- which is also referred to as a Christmas Wheel, Snowflake Blessing, or Infinity Loom, among other names -- is a promotion that consumers should steer clear of. The U.S. postal service calls these online gifting schemes “high-tech chain letters,” while the FTC lumps them into the ‘Ponzi’ scheme category.

“Whatever it’s called, it’s a pyramid scheme," said Mississippi Attorney General Jim Hood, adding that the reason scams like these keep circulating on social media is because the people who paid money to buy into them are “desperately recruiting others in hopes they can get their money back.”

Red flags

In a press release, the State of Utah Department of Commerce urged consumers to ignore high profit offers like these on social media. Before sending money to a program or company, ask questions offline and be alert to tip-offs that could indicate a scam.
 

A gifting pyramid or Ponzi scheme will typically:

  • Promise a consumer that they will make money with very little effort or investment. Some looms may cost as little as $10 to join.
  • Include a pitch with stories of how many other people have made money from the same venture without providing concrete facts.
  • State that revenue is generated from bringing in new members or friends to buy into the program. While some complicated schemes might provide commissions to members, Jobs & Hire reports that most do not receive the amount they were initially promised. In fact, some lose everything they paid.

Consequences

Monetary loss isn't the only potential pitfall of investing in a pyramid scheme like the Blessing Loom. In some states, participation in an online gifting scheme could lead to jail time.

Mississippi law prohibits participation in pyramid schemes, Attorney General Hood pointed out. Violators could spend six months in jail and be forced to pay a $500 fine. In Alabama, violators face a fine of up to $2,000 for participating in a pyramid scheme. 

Facebook also isn't likely to take kindly to one's participation in these scams. Per Facebook's terms of service, an individual's account may be terminated if they are caught participating in "unlawful multi-level marketing, such as a pyramid scheme."


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