A crackdown on chain gifting schemes is being planned by the government as part of its upcoming Gambling Bill.
Chain gifting schemes have caused havoc
The schemes encourage participants to "gift" amounts of money to other people who in turn had to find other people to "gift" money to them.
The investment is supposedly recouped as the pyramid continues to grow, but sooner or later the schemes collapse.
Under the plans, people who organise, promote or recruit into schemes could face a year in jail or fines of £5,000.
The collapse of chain gifting schemes has created financial chaos in many parts of the UK.
Women have been targeted in schemes with catchy titles such as "Women Empowering Women" or "Hearts".
At present chain gifting schemes are not illegal, a situation the government would like to change.
"Chain gifting schemes are a menace. I've received many letters from people who have been duped into giving up their savings on false promises," Culture Secretary Tessa Jowell said.
"One came from a woman in London who had been lured by the so-called 'Circle of Success'. She lost £3,000, but what made her feel worse was that she had persuaded her mother in law and two close friends to join.
"When the inevitable happened and the supply of new victims ran out, they all lost their money," Ms Jowell added.
If the Gambling Bill, due to be published on 7 April, becomes law, the Gambling Commission will be responsible for investigating the schemes and ensuring those involved are prosecuted.
However, Ms Jowell said people who have merely joined schemes will not have committed an offence.