Commission warns people off pyramid scam

A scam letter asking people to send $10 and be prepared to receive a guaranteed $70,000 should be thrown straight in the bin, the Commerce Commission said today.

The chain letter, apparently circulated by a Perth man, is a pyramid scheme and people should ignore it, the commission said.

A return of "$70,000 guaranteed" is promised within 60 days if people send $10 to the person at the top of a list and then mail the letter on, with their own name added, to at least 200 people.

"The letter obviously targets those who will see it as a magic bullet but it is rare that anyone reaps the rewards promised, and most people actually lose by it," commission director of fair trading Deborah Battell said in a statement.

The letter contains the statement: "I have fulfilled my duty to my children by securing their futures in a very uncertain world."

It asks people to send $10 to the top name of five listed, then take that name off the list and add their own before sending it out to at least 200 people listed in telephone directories.

"There is a significant misrepresentation in the letter where it instructs the sender of the $10 to include a note stating 'please accept this as a gift' to guarantee that they are operating within the law. This is not a gift and it is illegal," Ms Battell said.

"The commission has not found anyone who has made a return out of this scam. The only winners are the scam promoters, stationery shops and the postal service."

The commission had warned more than a hundred people recently about their involvement in the scheme, many of whom were unaware it was illegal.

Under the Fair Trading Act, chain letters that ask people to send money are deemed to be pyramid selling, with fines up to $200,000 possible, plus penalties based on the amount of money gained.

- NZPA