ST. GEORGE — The Utah Department of Commerce announced that a social media gifting scam known as “Blessings Loom” has resurfaced just in time for the holidays.

Francine A. Giani, Executive Director of the Utah Department of Commerce, announced in a statement released on Wednesday that the Division of Consumer Protection has received reports of a gifting scam known as ‘”Blessing Loom,” a con that promises participants who pay $100 to a PayPal account and recruit two friends to the program can garner profits of up to $800 each in return.

Giani said Facebook has been the predominant source for this online hoax but warned people to be on the alert for pitches over other social media, Craigslist, email and texts.

The scam works as a sort of pyramid scheme. After responding to an invitation, $100 is paid into Blessing Loom through PayPal and then two more people are recruited. Once more people put $100 in the program, the participant starts out in the outside circle. Then, as more people join the participants’ group chat, they move up one level and receive $100 from each of the new people that are now one level below. By the time all levels are obtained, the participant receives $800.

Utahans are cautioned to watch out for this 8-person gifting pyramid which has also been promoted under other names, including Christmas Loom, Christmas Pay It Forward Loom, Christmas Wheel and Christmas Blessing Loom, Giani said in the statement.

“While extra holiday cash may sound appealing, these gifting pyramids will fleece the wallets of you and your Facebook friends,” Giani said, cautioning, “don’t fall for the social media gift trap.”

According to the Federal Trade Commission, reports of this gifting pyramid scam surfaced years ago. The agency classified it as a classic pyramid or “Ponzi” scheme where the money from new customers are used to profit previous customers who joined earlier. Participants are given the illusion of profits through new payouts, when in reality there are no profits, only new money coming in as the scheme grows larger.

The scam keeps circulating in the hopes of snaring new victims to pay older members, but once that stops, the scam falls apart.

“We are especially concerned that young people who place high value on information relayed on social media will fall prey to this old pitch,” Daniel O’Bannon, division director of the Utah Department of Commerce, said. “Please ignore high profit offers on social media and ask questions offline before you ever send money to a program or company.”

Signs of fraudulent gifting scam or Ponzi scheme:

• Offer or promotion promising a big payout with little effort or investment.
• Pitches include persuasive stories of the number of people that have made large amounts of money without providing concrete facts that can be confirmed.
• Revenue is generated from bringing in new members or friends to buy into the program.

Utah fraud

Utah ranks no. 4 in the list of states targeted by schemers, and scams are reported at a rate of nine per 100,000 people in the Beehive state. IRS impostors are the most widely reported, with tech support and rental scams coming in close behind, according to data collected by Consumer Protect.

For more information or to file a consumer complaint with the Utah Division of Consumer Protection visit www.consumerprotection.utah.gov

Sources:

• Consumer Protect – United States of Scams
• The Federal Trade Commission
• Utah Department of Commerce Consumer Alert

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