It’s that time of the year again: no, not snow and Christmas carols — holiday scams. Often seen on Facebook, a social-media “gift exchange,” sometimes called “Secret Sister” exchanges, isn’t just a ploy for money and person information; it’s actually a pyramid scheme, and participants can find themselves in legal trouble. Who’s particularly vulnerable? Kids.
So how does it work? The scam invites users to purchase one gift and send it to another participant, with the promise of receiving several gifts in return. It seems like a harmless way to check items off a holiday wishlist, even make new friends online, but it’s actually highly illegal.
Members of the Better Business Bureau (BBB) say they see this happen every year. “Secret Sisters” on the internet promise Christmas gifts in exchange for a small buy-in and some personal information, and people fall for the scam. Participants don’t know who they’re buying gifts for or whether those online strangers will return the favor — or what they’re going to do with personal information, from emails to home mailing addresses.
Online gift exchanges work like pyramid schemes, with participants being asked to recruit friends to expand the pool of users. All pyramid schemes are illegal, but some are less formal than others. Some pretend to be legal “multilevel marketing” companies, but they’re pyramid schemes too, relying on continued recruitment to stay afloat.
This type of activity can be punishable by fine or imprisonment of up to two years if convicted federally, and five years for subsequent offenses. If an “exchange” gift is sent through the mail, that’s also a violation of US postal regulations.

Photo from Facebook.com
If a venture runs on recruitment and promises high returns in a short period of time, it might be a pyramid scheme, according to the US Securities and Exchange Commission. Some, like “Secret Sister,” only show up seasonally on social media.
When discussing the ins and outs behind these scams and repercussions with your kids, consider these pointers from the BBB:
- Ignore it! Keep in mind that pyramid schemes are international. Chain letters involving money or valuable items and promise big returns are illegal. Stop and ask, is it worth breaking the law? Report it instead to Canadian agencies or to the US Postal inspection Services.
- Report social media posts. If you receive an invitation to join a pyramid scheme on social media, report it. You can report these Facebook posts by clicking in the upper-righthand corner and selecting “Report post” or “report photo.”
- Never give your personal information to strangers. This will open you up to identity theft and other scams.
- Be wary of false claims. Some pyramid schemes try to win your confidence by claiming they’re legal and endorsed by the government. These imposter schemes are false as the government will never endorse illegal activity. No matter what they claim, pyramid schemes will not make you rich. You will receive little to no money back on your “investment” or gift exchange.
The BBB’s advice to kids and adults: don’t trust strangers on the internet with your personal information. If anyone you don’t know is asking for your email or address, save your gifts for your own holiday party.