Watch out for this 'secret santa' scam going around online

goss 08/12/2017

A well-known Christmas scam is back for the third year in a row.

The so-called 'Secret Sister Gift Exchange', which is similar in structure to the Secret Santa tradition, encourages people to buy one gift worth $10 and send it to a "secret sister".

In return, participants are promised a minimum of six gifts, and as many as 36.

Sounds too good to be true, right? That's because it almost certainly is.

For one, the scam - which first rose to prominence in the lead-up to Christmas in 2015 - is a mathematic impossibility: why would a scheme that asks you to only contribute one gift result in you receiving so many in return?

But the old-school chain letter has also got a sinister edge to it - because the overwhelming majority of those who participate are unlikely to get the rewards they've been promised.

In this way, it's much like a pyramid scheme - and the Commerce Commission advises people to consider their involvement in it with caution.

"Pyramid schemes are likely to be unfair, because the financial rewards are dependent on the recruitment of additional members that are willing to participate," a spokesperson for the competition enforcement and regulatory agency told Newshub.

"Many participants will always be at or near the base of the pyramid, and are unlikely to achieve the promised returns."

And it's not just that it's unfair - there's a chance the Secret Sisters Gift Exchange could actually be illegal under New Zealand law.

"Any scheme that attempts to obtain gifts or items of monetary value by deception could also be a breach of the Fair Trading Act," the Commerce Commission spokesperson said.

A number of news outlets in the US, where the Secret Sisters gift exchange scheme is most prevalent, have warned their respective audiences against participating.

Sean Lyons, Netsafe's director of technology and partnerships, said while it wasn't clear whether the post was a pyramid scheme, "it appears to have features" of one.

He told Newshub that chain letter-style posts spread easily on social media, as the platform is designed "to easily be able to share ideas with others".

Mr Lyons warned those considering involvement in the Secret Sisters scheme to be careful.

"Netsafe would advise that people always exercise caution when sending money or exchanging items online with people they do not personally know," he said.

For more information on pyramid schemes and chain letters, click here.