Ripoff Alert #2 – Lottery Winnings, Pyramid Schemes

The Ripoff Alert is a new series appearing once each week on Fridays. It alerts you to the latest scams and ripoffs trying to get between you and your money, and gives you information you need to stay safe.

You’ve Won a Million Dollars!

This is an old scam that’s still taking people today. You get a letter in the mail stating that you’ve won a million dollars, or 4 million, or whatever the amount is. It could also say “You are due payment of X amount.” You keep reading, excited about how you’ve won so much money out of the blue.

Then you get to the bottom, where it tells you how to “claim” your winnings. All you have to do is send a check for $1,000 for processing fees and once they’ve received your check you get your winnings.

In fact, it’s illegal for companies to require you to pay a fee or buy something in order to claim a prize. Don’t send that check. They’re after your bank account number and the money you send them for the “processing fee.” Just throw it in the garbage.

Pyramid Schemes

My Money Design wrote a post this week about people falling for pyramid schemes. He talks about overhearing a presentation sales pitch for a vacation club. This wasn’t about vacations though, it was about recruiting other people to join the program.

Pyramid schemes exist in a variety of industries. The procedure generally goes like this: You’re invited to a presentation at a conference center or hotel meeting room, you learn about a “great opportunity to make money effortlessly”, you’re told that the more people you recruit the higher your earnings, then you’re given the hard-sell from someone who’s been doing it a while.

If you’re looking into an opportunity like this, ask yourself this simple question: Is the emphasis on selling an actual product or service, or is it on recruiting other people? If the emphasis is on recruitment, it’s a pyramid scheme, and you should run far, far away. Beware of anyone who offers you the opportunity to quit your day job and effortlessly make thousands of dollars a month.

11 thoughts on “Ripoff Alert #2 – Lottery Winnings, Pyramid Schemes

  1. When I first moved out of my parents house, I got one of those lottery winning envelopes in the mail. I was dumb and young and was like “Hmm.. maybe there’s some merit to this”, so I googled it (like a true GenYer would) and found it to be fraudulent. Good thing I didn’t call the number!

    • I think there’s a point in all of our lives when we’ve almost fallen for something like this. The criminals continually come up with ways to make something sound official, so you always have to be on guard if something sounds too good to be true.

  2. I get those lottery winning e-mails all the time. I delete them so readily that I probably wouldn’t know if I ever did win something. The chance of that happening is pretty rare though.

    As for pyramid schemes, I don’t think they are all bad. Some are legitimate businesses that could be beneficial. I just don’t like the way it turns friends into business people who are always pushing the idea on you.

    • The lottery emails go straight to my junk folder, so I’m not sure how many I get. Sometimes I’ll click over to it and I’m amazed at the stuff in there. Most of it is alerting me to new miracle weight loss products or money that’s been found in my name somewhere in Africa. Funny stuff!

      You’re right that some pyramid organizations are legitimate. When I hear the word pyramid though, my “scam” light automatically goes off. It’s definitely frustrating when friends get into these things and try to recruit you. It can put a strain on the relationship.

  3. Omg I get so annoyed at pyramid schemes. My future MIL’s best friend always tries to get me to do them. She says all you have to do is sell vitamins, blah blah blah. I keep telling her no! Also my grandma “wins” money all the time in the mail, but she just has to send $5 to claim her prize. Poor grandma. She ended up sending cash so often that they kept sending her more and more and finally my mom had to reroute all of our mail to a PO box so that my grandma couldn’t send any more money. They use tactics like saying the $5 is going towards charity, etc. But it isn’t. I’m not sure if they do that anymore today but a few years ago it was rampant.

    • Selling vitamins seems to be the most common feature of pyramid schemes. There’s nothing wrong with selling vitamins per se, but if you’re going to be successful you have to believe in the product. As you’ve discovered, it’s not a good idea to get into it because someone persuaded you.

      Sadly, the elderly are the #1 target of criminals. They tend to be more trusting than the rest of us, and don’t always think about the possibility that someone might rip them off. This is a good reminder that anyone who has an older relative should check in with them to see if they’ve become victim to any scams.

  4. Thanks for the big mention!! I really appreciate it!

    My sister has gotten the lottery thing, and thankfully realized it was total crap. It’s amazing what people will try to pull to get your money or credit info. For some reason, this topic really makes me mad when I hear about it in relationship to seniors. I know a lot of these scams target them because they don’t know any better.

    • You’re welcome, MMD!

      I’m glad your sister didn’t get ripped off. I think most people realize that it’s not legit, but the scamsters only need a few people to fall for it to make it worth their time.

      It infuriates me as well that criminals pick on the elderly. I think the biggest issue is that they tend to be more trusting than the rest of us. But we should do what we can to protect and educate the elderly in our own families.

  5. A past co-worker got a letter in the mail a few years ago saying that she was a winner in a raffle she had entered. She got sent a check for around $8k and the letter instructed her to deposit the money in her bank account and wire a certain amount to the sender.

    The first clue to this being a scam was that she never even entered a raffle. She was convinced it wasn’t a scam. I’m not sure what she ended up doing with the check. Hopefully, for her sake she shredded it.

    • That’s the sad thing – some people who get these letters are in a tough financial situation and could really use the money. They’re so convinced they’ve won money out of the blue that they disregard all warning signs. You’re right that one of the biggest warning signs is not entering a raffle or lottery in the first place.

      Also, anytime you have to wire some portion back to someone you know it’s not legit.

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