Such schemes are illegal under both state and federal law. They also happen to be a bad idea. First, as a pyramid scheme, the program is bound to die out. People who are just getting into the scheme when this happens lose the monies they invested to get in. It is a gamble, and that is one reason the law prohibiting chain and pyramid schemes is found in the gambling section of the North Carolina Criminal Code.
Chain letters are a bad idea for another reason.
Most people who participate in them do not declare their earnings for tax purposes. Nevertheless, their participation in the scheme is easy to spot due to the fact that they have put their names and addresses on hundreds of mailings which are circulating around the country and, in some cases, finding their way to government agencies. The resulting audits, taxes and penalties can easily wipe out the fun and the profit of participating in the scheme. As you read the chain letter reprinted below, note the concerted effort to convince readers the scheme is legal. This is not necessarily so.