Kinda yep, that is called Google Bowling, where you bowl over a website. You can only do this with weak sites though.
3 Way linking, imagine
site B is linked to by Site A
Site B Links to Site C
Site C links to site A
Site A NEVER links to site C
ALL these sites could get penalised because they are involved in a 3 way linking scheme designed to manipulate the page rank/page ranking/SERP call it what you like.
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