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Chain letters

What are chain letters?

Chain letters are a type of pyramid scheme that is spread through the post, or sometimes by email. They promise a large financial return for a relatively small cost.

Typically, the letter will ask you to send a small amount of money to everyone listed in the letter. You then put your name on the list and send out copies of the letter to as many people as you can. The letter claims that by doing this, you will receive a large amount of money in a short space of time.

These schemes are illegal and are a type of pyramid scheme. The only people who have any real chance to make money are the people who start the scam. Scammers often send out many thousands of letters to people using mailing lists that they have bought off another company.

In a chain letter scam you lose your money in two ways. First—you send money to the scammers who sent you the letter. Second— you waste a lot of money on postage and photocopying costs.

Warning signs

  • You receive a letter or email promising you money or good luck if you copy it and send it on to a number of other people.
  • The letter or email may suggest that if you don’t forward it on you will have bad luck or lose out on a fantastic opportunity.
  • Often a token amount, say five cents, is included in the letter ‘as a demonstration of good faith’. The letter may also recommend that you do this when you send out your letters.
  • The letter contains claims like ‘this is not a scam’ or ‘this is not a pyramid scheme’.
  • The letter contains testimonials from people who claim to have ‘made a fortune’ by taking part.

Protect yourself from chain letters

  • If it looks too good to be true—it probably is.
  • Use your common sense: the offer may be a scam.
  • You can contact your local office of fair trading, ASIC or the ACCC for assistance.
  • Beware of products or schemes that claim to guarantee income or winnings.
  • Remember that family members and friends may try to involve you in a scam without realising that it is a scam: you should seek independent advice (from a lawyer or financial adviser)

As well as following these specific tips, find out how to protect yourself from all sorts of other scams.

Do your homework

Chain letters promise huge returns or tell you that not participating will bring you bad luck. Don’t let these claims blind you to the fact that chain letters are pure scams. Even if you thought you could make money, would you want to do it by scamming other people who would then have your address?

Decide

If you have received a chain letter your best response is to throw it out. You will only be wasting your time and money by forwarding it on to other people. If you do forward it on to your friends and relatives, they will probably be angry when they quickly realise it is a scam.

Report them

If you have received a chain letter, you can report it through the report a scam page on SCAMwatch. You should also warn other people that you think may have been sent the letter.

What to do if you've been scammed; Scams & the law; Report a scam.

Similar scams:


Illegal schemes that always collapse when the supply of victims dries up, leaving nearly everyone involved much worse off.

If you are contacted by a psychic or clairvoyant offering you mystical secrets to wealth, health and luck, be very wary. Do not be fooled by fantastic claims and promises, they may be scams.

Scammers ‘guarantee’ you a job or certain level of income, tricking you into paying an up-front fee for a ‘business plan’ or materials.

 Example letter


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