It’s a sign of the season — as Christmas approaches, scammers crank up activity like Santa’s workshop.

The most recent warning from Michigan Attorney General Dana Nessel involves warns about illegal gifting schemes, often disguised as harmless gift exchanges or empowering social groups.

While genuine gifting circles foster community and resource-sharing without monetary exchange, some gifting circles are illegal pyramid schemes that rely on recruitment and false promises of financial gain, Nessel states in a news release.

True gifting circles encourage participants to share non-cash resources, such as food or services, without monetary exchange. They are built on trust and community relationships. Gifting schemes, however, lure participants with promises of substantial financial returns after paying an upfront fee and recruiting others. These schemes operate under names like “Women Empowering Women” or “Circle of Friends” but ultimately collapse, leaving the majority of participants empty-handed.

Common red flags of a gifting scheme, according to the attorney general’s office, include:

— An emphasis on recruiting new participants over selling goods or services;

— Promises of high returns with minimal effort;

— A focus on cash or gift exchanges without contractual agreements;

— Testimonials of success from top earners without transparency.

Under the Michigan Pyramid Promotional Scheme Act, promoting or knowingly participating in a pyramid scheme is illegal. Promoters face felony charges with penalties of up to $10,000 or seven years in prison. Participants may face misdemeanor charges, fines up to $1,000 and jail time.

Additionally, any income from a gifting scheme must be reported to the IRS, the attorney general’s office advises. Failure to report earnings can lead to further legal and financial consequences.

To avoid falling prey to gifting schemes, the office suggests:

— Investigate the program thoroughly and verify its legitimacy;

— Avoid sharing personal information with strangers;

— Be skeptical about promises of low-risk, high-return investments;

— Remember, if it sounds too good to be true, it probably is.

When in doubt, consumers should report suspicious activity and consult trusted professionals. Contact the Attorney General’s Consumer Protection Team at 877-765-8388 or file a complaint online at https://www.michigan.gov/consumerprotection/complaints.