However, the receipt of this prize is entirely dependent on the participation of other individuals to whom the chain letter is sent. Individuals have no control over who will participate in the future. There is merely a chance or possibility that a sufficient number of individuals will participate to guarantee payment of the prize. Payment of a fee to the individuals already listed in the message is also required.

Promoters of chain letters may claim they are legal in that they provide a "report" or other items of alleged value to those participants who pay the required fee. Providing such items does not exempt the chain letter from being challenged under postal laws; the term "fraud" sweeps broadly to protect the public.

The relevant federal statute, 18 U.S.C. sec. 1343, reads as follows:

"Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined not more than $1,000 or imprisoned not more than five years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both." [Emphasis added]

While there are no reported cases involving the "Dave Rhodes" letter that first gave birth to these schemes on the 'net, such letters clearly fall within the scope of section 1343. To begin with, "[i]t is well settled that such a 'pyramid' or 'chain-letter' scheme constitutes mail fraud" under section 1341 when distributed through the U.S. Postal Service. _United States v. William Savran & Assocs., Inc._, 755 F. Supp. 1165, 1181 (E.D.N.Y. 1991) (citing _United States v. Armantrout_, 411 F.2d 60, 61-62 (2d Cir. 1969)).

Further, "scheme to defraud" means the same thing in section 1343 as it does in section 1341. _United States v. Doherty_, 969 F.2d 425, 429 (7th Cir. 1992). Thus, since the "Dave Rhodes" letter would violate the federal mail fraud statute if mailed, it necessarily violates the federal wire fraud statute when transmitted over the wires that propagate Usenet.

Finally, it is worth noting that such schemes also violate many state fraud laws. For example, a substantially similar scheme known as the "airplane game" -- in which each participant pays to join, and in turn receives payment from those he recruits -- violates New York's fraud laws, NY Penal Law secs. 190.60 & 190.65. _People v. Riccelli_, 149 A.D.2d 941, 941-42, 540 N.Y.S.2d 74, 74-75 (4th Dep't 1989).

For more information, go to the Make Money Fast Myth Page,the MMF Hall of Humiliation, http://ga.to/mmf/, or the United States Postal Inspection Service's page on chain letters. the MLM Now! Hall of Shame, http://mlmnow.com/html/hallshame.html, a press release by the New York Attorney General, http://www.oag.state.ny.us/press/mar98/mar10_98.html, or "Becoming a Critical Thinker," http://www.dcn.davis.ca.us/~btcarrol/skeptic/pyramid.html.

For information about multi-level marketing schemes in general, go to the FTC's brochure at http://www.ftc.gov/bcp/conline/pubs/invest/mlm.htm, or Grimes & Reese, P.L.L.C's Legal Principles of Multilevel Marketing, http://www.mlmlaw.com/library/guides/Primer.htm.

For examples of people who have found themselves in serious legal trouble for posting ponzi schemes to the Internet, see http://www.webspawner.com/users/karenl/ and http://ga.to/mmf/bawkon.html.

The above is based on information compiled from the misc.legal FAQ, Westlaw, and other sources.