Nathan Firoved, who was hired by the child's family to orchestrate the fake kidnapping, took the little boy to a basement.
There he forced the boy to take off his clothes, telling him that he would be sold into sex slavery.
Firoved is then said to have told the sobbing child that he would "never see his mommy again" and that he would be "nailed to the wall of a shed".
Taking the ruse even further, the fake kidnapper apparently pulled out a gun and pointed it at his victim, telling him that he would have to hurt him if he did not stop crying.
After a few hours, Firoved took the traumatised boy upstairs, where he was greeted by his mother and two other family members.
They then lectured him about 'stranger danger', revealing that THEY were the ones who had organised the kidnapping as part of a twisted lesson.
The child, who told teachers at school about the incident, has now been taken into protective custody.
According to authorities, the boy's aunt, 38-year-old Denise Kroutil, mother, Elizabeth Hupp, 25, and grandmother, Rose Brewer, 58, organised the kidnapping, hiring Firoved to help them.
Police said in a statement: "Family members told investigators their primary intent was to educate the victim and felt they did nothing wrong."
They have now been arrested.