Great Lakes Wire

Michigan Attorney General Dana Nessel has issued a warning to residents about illegal gifting schemes that may appear during the holiday season. These schemes often masquerade as gift exchanges or community support groups but can result in financial losses for participants.

Nessel explained, "Gifting schemes frequently pose as acts of kindness or community support, but in practice, they take advantage of participants’ trust and leave most of them with significant losses." She advised Michigan residents to learn how to identify these scams to protect themselves financially.

While legitimate gifting circles focus on sharing non-cash resources like food or services within a community, illegal schemes promise large financial returns in exchange for an upfront fee and recruitment efforts. They operate under names such as “Women Empowering Women” or “Circle of Friends” but eventually collapse, leaving many without their initial investment.

Key indicators of a potential gifting scheme include:

- A strong emphasis on recruiting new members rather than selling goods or services.

- Promises of high returns with little effort.

- Focus on cash or gift exchanges without formal agreements.

- Testimonials from top earners lacking transparency.

Under Michigan law, promoting or participating in pyramid schemes is illegal. Offenders could face felony charges with penalties up to $10,000 or seven years imprisonment. Participants might also encounter misdemeanor charges, fines up to $1,000, and possible jail time.

Income generated from these schemes must be reported as taxable income to the IRS. Failure to do so can lead to additional legal issues despite any assurances from organizers.

To avoid becoming victims of such scams, Nessel suggests investigating programs thoroughly before joining and verifying their legitimacy. She also advises against sharing personal information with strangers and remaining skeptical about offers promising low-risk and high-return investments. "Remember," she said, "if it sounds too good to be true, it probably is."

Consumers are encouraged to report suspicious activities and seek advice from trusted professionals by contacting the Attorney General’s Consumer Protection Team at 877-765-8388 or filing a complaint online.