Are chain letters legal where it involved mailing money to others?

03/09/2009 - Donations - State: TX #15487

Full Question:

Is this legal as termed in the mail order business? You receive a packet of information asking you to send $1 to each of the people on the list. You then retype the list inserting your name at the bottom and removing the top name and send it to 200 people. If X% of people respond, you will receive X$ in so many weeks. It is purported as 'mail order' (and legal) because people are paying you to be put on your mailing list. The receiver would then keep records and claim this money as income for the IRS. If this is not legal, could it be made legal to include a form stating that the sender is 'gifting' this money to the receiver. The money then would not be considered as income for tax purposes.

Answer:

The following is from the USPS:

"A chain letter is a "get rich quick" scheme that promises that your mail box will soon be stuffed full of cash if you decide to participate. You're told you can make thousands of dollars every month if you follow the detailed instructions in the letter.

A typical chain letter includes names and addresses of several individuals whom you may or may not know. You are instructed to send a certain amount of money--usually $5--to the person at the top of the list, and then eliminate that name and add yours to the bottom. You are then instructed to mail copies of the letter to a few more individuals who will hopefully repeat the entire process. The letter promises that if they follow the same procedure, your name will gradually move to the top of the list and you'll receive money -- lots of it.

There's at least one problem with chain letters. They're illegal if they request money or other items of value and promise a substantial return to the participants. Chain letters are a form of gambling, and sending them through the mail (or delivering them in person or by computer, but mailing money to participate) violates Title 18, United States Code, Section 1302, the Postal Lottery Statute. (Chain letters that ask for items of minor value, like picture postcards or recipes, may be mailed, since such items are not things of value within the meaning of the law.)

Recently, high-tech chain letters have begun surfacing. They may be disseminated over the Internet, or may require the copying and mailing of computer disks rather than paper. Regardless of what technology is used to advance the scheme, if the mail is used at any step along the way, it is still illegal.

The main thing to remember is that a chain letter is simply a bad investment. You certainly won't get rich. You will receive little or no money. The few dollars you may get will probably not be as much as you spend making and mailing copies of the chain letter.

Chain letters don't work because the promise that all participants in a chain letter will be winners is mathematically impossible. Also, many people participate, but do not send money to the person at the top of the list. Some others create a chain letter that lists their name numerous times--in various forms with different addressee. So, in reality, all the money in a chain is going to one person.

Do not be fooled if the chain letter is used to sell inexpensive reports on credit, mail order sales, mailing lists, or other topics. The primary purpose is to take your money, not to sell information. "Selling" a product does not ensure legality. Be doubly suspicious if there's a claim that the U.S. Postal Service or U.S. Postal Inspection Service has declared the letter legal. This is said only to mislead you. Neither the Postal Service nor Postal Inspectors give prior approval to any chain letter.

Participating in a chain letter is a losing proposition. Turn over any chain letter you receive that asks for money or other items of value to your local postmaster or nearest Postal Inspector. Write on the mailing envelope of the letter or in a separate transmittal letter, "I received this in the mail and believe it may be illegal." "



Please see the information at the following links:

http://definitions.uslegal.com/m/mail-fraud/
http://definitions.uslegal.com/p/ponzi/

For further discussion, please see:

http://www.mazu.com/scams/chainletters.php

03/09/2009 - Category: Donations - State: TX #15487

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