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Tag: Federal Trade Commission

  • After Vemma College Flap, Herbalife Products Marketed Through One Of Largest Catholic High Schools In United States

    HerbalifeMDHSconsentUPDATED 3:59 P.M. EDT U.S.A. It surfaced on Twitter today in the $HLF search thread that Herbalife products are being marketed through Mater Dei High School in Santa Ana, Calif. The Catholic school bills itself  “the largest non-public school west of Chicago.”

    Herbalife is under investigation by the Federal Trade Commission. Hedge-fund manager and Herbalife short-seller Bill Ackman has claimed the company is a pyramid scheme that targets vulnerable population groups. Herbalife denies the claims.

    Mater Dei says its 2,145-member student body consists of 38% Caucasian, 33% Hispanic, 19% Asian, 4% African-American, 1% Native American, 1% Pacific Islander and 4% “Other Race.”

    The school did not immediately respond today to a request for comment in which the PP Blog asked it whether it was aware of an Herbalife-related promo on its website, whether the promo was a school-endorsed activity and whether Mater Dei students were being recruited to sell Herbalife.

    Vemma, another MLM company, was charged last year by the FTC with operating a pyramid scheme, amid allegations the firm was targeting college students.

    Herbalife did not respond immediately to a request for comment on whether it was aware its products were being offered to Mater Dei students, whether students were being targeted for recruitment and whether the company had any concerns given the targeting allegations against Vemma.

    The Mater Dei website has a page styled “Herbalife Program > Consent & Waiver Form.” The page says “ALL current Mater Dei student-athletes are required to have a signed consent and waiver form on file in order to participate in the HERBALIFE Program.”

    A link to the form is provided, along with  a text prompt that says forms also are distributed by “coaches.” (See PP Blog screen shot of form.)

    A separate page on the Mater Dei website is styled “Herbalife Program > About.” It includes a phone number consistent with an Herbalife affiliate site in the name of “Coach Donte Mdhs.”

    The affiliate site says, “MATER DEI HIGH SCHOOL INFORMATION . . . All H24 Products are available to MD students (except Prepare).”

    A search of the Mater Dei website returns hundreds of results for the search term “Herbalife” (without the quotation marks). One of the results is an “Order NOW & Coupon Codes” page that says discounts are available to nearly two dozen school athletic teams and “Alumni, Dance, Faculty and Pep Squad” groups.

    In February, a man being sued for the return of his alleged winnings in the TelexFree MLM scheme claimed Herbalife executives and personnel helped sell him on the TelexFree deal. Herbalife did not respond to a request for comment on the claim.

    TelexFree generated more than $3 billion in illicit business, a court-appointed bankruptcy trustee claims.




  • BULLETIN: FTC Alleges Vemma’s Boreyko Violated Order After Judge Entered Preliminary Injunction

    breakingnews725BULLETIN: (3rd update 10:17 p.m. EDT U.S.A.) The Federal Trade Commission has gone to federal court in Arizona, alleging that Vemma CEO B.K. Boreyko violated a court order within 11 days after a federal judge imposed a preliminary injunction against the MLM company.

    Boreyko contacted certain affiliates on an unknown date with Vemma  “sales or marketing material” in violation of U.S. District Judge John J. Tuchi’s Sept. 18 order prohibiting such contact “without prior delivery to the FTC and a five (5) day period for the FTC to review the materials,” the agency argued.

    The violation occurred “a mere eleven days or less” after Tuchi’s Sept. 18 order, the FTC contended,

    “FTC staff recently located two Facebook postings by self-proclaimed Vemma Affiliates that include a message from Defendant Boreyko outlining details about Vemma’s new compensation plan . . . ,” the FTC argued. “The postings assert that Vemma has doubled its Auto-delivery discount from 10% to 20% and will be having a ‘Customer Thank You Sale,’ and attaches a revised price list of Vemma products . . . None of the information contained in the messages had been disclosed to the Monitor or the FTC before being disseminated.”

    Prior to today’s FTC argument, Vemma asserted (yesterday) that “it is clear that the FTC’s interpretation of what constitutes ‘new marketing or sales materials’ and the scope of its authority to dictate the content of communications by the Corporate Defendants under the Order extends far beyond the intended scope of the Order.  Furthermore, the persistent objections by the FTC to any communications that the Corporate Defendants propose or send is preventing Vemma from restarting operations as permitted by the Order and causing it irreparable harm.”

    NOTE: Our thanks to the ASD Updates Blog.

    More later . . .

  • Vemma Tells Court Consumers ‘Possibly’ Took Unreasonable Risk In Joining Its MLM Program, But Did So Knowingly

    “Consumers represented by the FTC knowingly and voluntarily, and possibly unreasonably, exposed themselves to any claimed losses with knowledge or appreciation of the risk involved.” — Part of Vemma’s Sept. 30 defense to pyramid-scheme and deceptive-advertising charges filed by the FTC in August

    vemmalogoConsumers can be forgiven if they view part of Vemma’s defense to the FTC’s pyramid-scheme and deceptive-advertising charges as a reason to avoid the MLM trade altogether.

    Not taking time and expenses into account, the odds of losing money in MLM already are high and the odds of making money are low. But Vemma now is asserting that while the risk affiliates took when joining its program may have been unreasonable, they took it knowingly.

    Meanwhile, Vemma is claiming that “[a]ny losses sustained by the FTC and/or the consumers it purports to represent were caused by the acts or omissions of third parties over whom the Corporate Defendants had no control or right to control.”

    Vemma did not identify the third parties. But if the firm was referring to its own affiliates, including those who hyped the program on college campuses and through constant banging on social media, consumers again can be forgiven for avoiding the trade.

    There is little reason for consumers to trust any MLM if one of the industry’s most famous companies is saying it cannot control affiliates, especially if it earlier benefited from the toxic tradecraft of those affiliates.

    Vemma’s defense is pretty much a blanket denial of the FTC’s material allegations contained in the complaint here.

    Vemma critic Truth In Advertising has a link to Vemma’s response to the FTC complaint. (See Vemma’s Answer to FTC’s Complaint for Permanent Injunction here.)

    A week before Vemma filed its response, one of its top affiliates took to the web and made crude remarks about the FTC while at once asserting that Vemma itself had a “douchebag element” in its affiliate ranks. This occurred just days after CEO B.K. Boreyko had made an appeal for people to pray for the company.

    The firm’s defense that affiliates may have knowingly made an unreasonable choice in joining would come later.

     

  • VEMMA REP: FTC Used ‘Overlarge . . . Strap-On Dildo’

    vemmalogoEDITOR’S NOTE: On some days, it seems as though no one in MLM has any PR savvy. This is one of those days.

    Positioning himself as an insider who has spoken with Vemma CEO B.K. Boreyko, one of the company’s top affiliates took to the Internet today to declare the Federal Trade Commission appears to have worn a “very overlarge, extra-size strap-on dildo” and initiated a “bend-over job” against the company in the agency’s pyramid-scheme and deceptive-advertising case last month.

    This approach apparently has hampered Vemma’s ability to get restarted, the pitchman suggests.

    The crude, videotaped remarks by self-identified Top 25 Vemma affiliate Lanny Morton on Periscope came while Pope Francis was visiting the United States and occurred just days after Boreyko took to Instagram and asked “prayer warriors worldwide” for 24 hours of nonstop prayer in advance of a key Vemma hearing on Sept. 15.

    The PP Blog was unable to contact Vemma today for its reaction to Morton’s comments, which were recorded while he drove a car on an Arizona highway. His video, titled “vemma vs FTC update,” also blamed the company’s troubles on Vemma promoters who were a “douchebag element.”

    A federal judge last week permitted Vemma to restart operations, but put severe restrictions on the MLM company.

    Individuals who caused trouble at Vemma can “suck on my left nut,” Morton said in the video.

    Boreyko, he said, is “working his ass off” to get things going again.

  • URGENT >> BULLETIN >> MOVING: Evidence Before Court Leaves ‘Little Doubt’ FTC Will Prove Vemma Is Pyramid Scheme, Judge Says

    breakingnews7256th Update 6:41 p.m. EDT U.S.A. A federal judge has issued a much-anticipated order in the Federal Trade Commission’s pyramid-scheme case against Vemma that says “[t]he evidence before the Court leaves little doubt that the FTC will ultimately succeed on the merits in demonstrating that Vemma is operating a pyramid scheme.”

    U.S. District Judge John J. Tuchi is doing away with the receivership approach  established in August and instead will appoint a monitor, according to the order.

    This section of the order suggests the judge views Vemma’s products as marketable if it can get its sales process under control both in-house and externally. Even so, a limited restart may prove to be a hollow win for Vemma. Although the company will be able to restart operations under the order, Tuchi has banned the sale of “Affiliate Packets” and a compensation system that “links or ties an Affiliate’s eligibility for bonuses, or the Affiliate’s accumulation of bonus qualifying points, to that Affiliate’s purchase of the Corporate Defendants’ product, such as through autodelivery or Two & Go.”

    Was Vemma a good ambassador for the MLM trade?

    Vemma’s marketing material was “replete with deceptive income statements,” Tuchi found.

    And, the judge observed, “Some Vemma material also contains representations the Court would characterize as ridiculous—bordering on absurd—such that a listener could not reasonably be expected to believe them. ”

    From the order (italics added):

    In practice, [Vemma] Affiliates are very likely engaging in inventory loading. The great majority of Vemma product sales is to its Affiliates and, as [FTC expert witness] Dr. [Stacie] Bosley noted, under the current bonus system there is no way to unbundle the Affiliates’ intent to consume Vemma products as ultimate users from their desire to remain qualified for bonuses— bonuses that are largely driven by recruitment of other Affiliates. But their intent in purchasing Vemma products must be viewed in light of Vemma’s program design as well as its training and marketing materials, which explicitly provide that Affiliates should enroll in auto-delivery for the purpose of remaining qualified for bonuses.

    In all likelihood, Affiliates’ purchases of Vemma products are incidental to the right to qualify for and obtain bonuses . . .  Moreover, Vemma’s purported anti-inventory-loading safeguards are neither effective nor enforced . . .   Vemma contacts only 15 of its over 90,000 Affiliates a month to ask if at least 70% of their sales were for consumption or retail. And Vemma’s Vice President of Legal Affairs admitted in her testimony that the script for those calls does not really investigate the reason an Affiliate purchased product or check for inventory loading. Moreover, the Receiver found that, in practice, Vemma is five months behind on its inventory loading audits and has never suspended or disciplined an Affiliate who failed to make the requisite sales to ultimate users. And Vemma does not even attempt to apply a rule similar to the ten customer rule that was found to be a reliable way to control inventory loading in Amway. 

    Also from the order:

    ” The FTC’s evidence is certainly sufficient to show Vemma was operating an illegal pyramid scheme through 2014, and although evidence is not yet complete for 2015, the Court notes that Vemma’s 2015 “Two & Go” program contains the same indices of pyramidal structure as the former programs. Defendants have not produced evidence that the critical defects in their programs have been remedied since 2014, and the Court thus has no reason to believe at this stage that Vemma’s violations of the FTC Act are not continuing or likely to recur in the absence of injunctive relief. In sum, the Court finds the FTC has again met its burden to show a likelihood of success on the merits in demonstrating Vemma and Mr. [B.K.] Boreyko are operating a pyramid scheme, even in light of the argument and evidence provided by these Defendants.

    Tuchi has lifted the asset freeze, saying the monitor and court supervision and “an injunction against the alienation by Defendant Boreyko of any of his real estate holdings during the pendency of this action” should be enough to protect against mass dissipation.

    More analysis upcoming.

    Read the order at the website of Truth In Advertising, a Vemma critic that has worked with the FTC on the pyramid and deceptive-advertising case.

    Our thanks to the ASD Updates Blog.

  • Transcript Shows Courtroom Clash Between Vemma And FTC

    vemmalogoVemma critic Truth In Advertising has posted a transcript of the Sept. 15 battle in Arizona federal court between Vemma and the Federal Trade Commission over the preliminary injunction, asset freeze and appointment of a receiver. Vemma hopes to undo these things or at least to modify them in a way that would put the company back in business. (Link to transcript below.)

    Truth In Advertising — TINA, for short — is a witness against Vemma and has been investigating the company since at least 2013. TINA says its mission is to empower consumers to protect themselves and one other from false advertising and deceptive marketing.

    As a preliminary matter, the PP Blog observes that the transcript shatters the myth advanced by some Vemma supporters that the firm — alleged by the FTC last month to be a pyramid scheme — has been denied due process.

    At least five attorneys appeared for Vemma. Two others appeared for Vemma CEO B.K. Boreyko, a charged FTC defendant. Still two others appeared for Tom Alkazin and his wife Bethany.  (Tom is an alleged promoter charged by the FTC; Bethany is a relief defendant alleged by the agency to have profited from the scheme.)

    Vemma cross-examined FTC witnesses and advanced witnesses of its own.

    U.S. District Judge John J. Tuchi, a former federal prosecutor backed for the court by Arizona GOP Sen. John McCain and appointed to the bench by President Obama, McCain’s rival in the 2008 U.S. Presidential election, is hearing the Vemma case.

    The transcript consists of 228 pages. The FTC claims that Vemma was a pyramid scheme through which Vemma told its own distributors they effectively could buy commissions. Vemma, meanwhile, accuses the FTC of gross overreach, orchestrating a sneak attack against a legitimate business and cherry-picking facts to make it appear as though the only appropriate way for the court to deal with the company is to kill it through the imposition of an asset freeze and the installation of a court-appointed receiver.

    The judge is expected to issue a key order by 2 p.m. Arizona local time tomorrow.

    Link to the transcript.

  • SEC Declines Comment On ‘IntellaShares’ And Its Purported ‘BLACKLIST’; Ponzi-Board ‘Program’ Trades On Name Of Save The Children

    IntellaShares reportedly is threatening members who file disputes -- all while trading on the name of Save The Children. Photo source: screen shot from website of IntellaShares.
    IntellaShares reportedly is threatening members who file disputes — all while trading on the name of Save The Children. Photo source: 4/1/2015 screen shot from website of IntellaShares.

    UPDATED 11:31 A.M. EDT U.S.A. In 2010, the Federal Trade Commission took action against an online venture known as iWorks. This allegation appeared on Page 7 of the FTC’s Dec. 21, 2010 complaint:

    “They have also attempted to drive down their chargeback rates by threatening to report consumers who seek chargebacks to an Internet consumer blacklist they operate called ‘BadCustomer.com’ that will ‘result in member merchants blocking [the consumer] from making future purchases online!'”

    BehindMLM.com is reporting today that a “program” known as “IntellaShares” appears to be threatening participants with entry on a “BLACKLIST.”

    IntellaShares appears to have launched earlier this year and then experienced a prompt collapse. Despite this, the “program” claims on its website that it has or will donate $478 to the “Save The Children Foundation.”

    It is unclear if IntellaShares actually was referring to Save the Children Federation Inc., the internationally prominent Connecticut charity that operates at SaveTheChildren.org.

    BehindMLM has described IntellaShares as a “$2.50 micro Ponzi investment scheme.”

    The “program” has a presence on well-known Ponzi-scheme forums such as MoneyMakerGroup. There are assertions of an imminent “relaunch.”

    So far this year, the SEC has taken actions against two Ponzi-board “programs”: Achieve Community and Wings Network. In Congressional testimony on March 19, the agency said it is targeting scams that operate “under the guise of ‘multi-level marketing’ and ‘network marketing’ opportunities.”

    Such scams may use social media such as forums, YouTube, Twitter and Facebook to target marks. Some may imply they are linked to a charity or perform good deeds with money sent in by participants.

    In 2009, for instance, a Ponzi scheme known as AdViewGlobal purported to be involved in an effort to preserve the rain forest. AdViewGlobal, which was a knockoff of the 2008 AdSurfDaily Ponzi scheme, later disappeared.

    Like IntellaShares, AdViewGlobal purported to be in the “advertising” business. It also had a presence on the Ponzi boards.

    In 2011, a Ponzi-board “program” known as “Club Asteria” promised weekly payouts of up to 8 percent while trading on the name of the American Red Cross. During the same year, a TalkGoldPonzi forum promoter pitching both Club Asteria and a separate scam known as JSSTripler/JustBeenPaid (730 percent a year) claimed that filing disputes with payment processors meant that “all members will suffer.”

    IntellaShares may be operating out of New York.

    The SEC this morning declined to comment on IntellaShares. The FTC did not immediately respond to a request for comment.

    Update 11:31 a.m. The FTC said this morning that it “hasn’t brought any enforcement actions involving IntellaShares.”

    Whether it would remains an open question. The agency has an aggressive enforcement history when consumers end up on the receiving end of threats or are duped into joining work-at-home “programs.”

  • SEC Enforcement Chief References Investor Alert On ‘Pyramid Schemes Posing As Multi-Level Marketing Programs’ In Congressional Testimony Today, Says ‘Coordinated Effort’ To Disrupt Them Under Way

    “The staff also has recently seen what appears to be an increase in pyramid schemes . . . under the guise of ‘multi-level marketing’ and ‘network marketing’ opportunities . . . These schemes often target the most vulnerable investors, and social media has expanded their reach. The Division is deploying resources to disrupt these schemes through a coordinated effort of timely, aggressive enforcement actions along with community outreach and investor education. We are also using new analytic techniques to identify patterns and common threads, thereby permitting earlier detection of potential fraudulent schemes.” — Andrew Ceresney, SEC Enforcement Division director, March 19, 2015

    cautionflag3RD UPDATE 6:09 P.M. EDT U.S.A. Bad news for “program” scammers and their willfully blind enablers: Andrew Ceresney, the director of the SEC’s Divison of Enforcement, told lawmakers on Capitol Hill today that scams using an MLM or network-marketing business model are on the radar.

    In fact, according to written testimony Ceresney delivered to the House Capital Markets and Government Sponsored Enterprises subcommittee, they are enforcement “priorities” — right up there with insider trading, microcap fraud and other forms of securities fraud.

    “The Division is deploying resources to disrupt these schemes through a coordinated effort of timely, aggressive enforcement actions along with community outreach and investor education,”  Ceresney told the panel.

    New Jersey Republican Rep. Scott Garrett chairs the panel. Rep. Carolyn B. Maloney, a New York Democrat, is ranking member.

    In October, an SEC official attending a symposium sponsored by the Federal Trade Commission on the subject of how fraud affects communities told the audience that the SEC has a “newly established pyramid-scheme task force.”

    Ceresney didn’t reference the task force in his prepared remarks today. However, the agency already has filed two actions against MLM or network-marketing schemes this year. In February, the agency sued the “Achieve Community,” alleging it was a Ponzi- and pyramid scheme that had gathered about $3.8 million and had spread on social media. One or more criminal probes related to the SEC’s Achieve investigation are believed to be under way, amid concerns Achieve was funneling scam proceeds offshore.

    Also in February, the SEC sued a “program” known as Wings Network, alleging it was targeting Latino communities and that its promoters “used Facebook to publicize ‘business meetings’ that took place at hotels and other locations in Connecticut, California, Florida, Massachusetts, Pennsylvania, Texas, Georgia, and Utah.

    “The promoters also set up storefronts or ‘training centers’ to lure investors into attending Wings Network presentations,” the agency charged. “For example, one promoter used a storefront in downtown Philadelphia to make presentations to prospective investors, and another promoter rented office space in Pompano Beach, Fla., and spread the word in the local Latino community to attract prospective investors to come in and hear presentations.”

    Wings appears to have gathered at least $23.5 million.

    In addition to targeting vulnerable population groups, Wings Network tried to sanitize itself by falsely trading on the name of the Direct Selling Association, the SEC said in court filings. Wings has been tied to two companies that used the name Tropikgadget.

    Both ostensibly operated from Portugal through business entities set up in Madeira, a Portuguese island in the North Atlantic, and through Sharjah, a city in the United Arab Emirates, the SEC alleged.

    Court records suggest Wings had a strong presence in Marlborough, Mass., the town from which the TelexFree MLM scheme was based. In April 2014, the SEC described TelexFree as a massive Ponzi- and pyramid scheme largely targeting immigrant populations. A court-appointed trustee says TelexFree may have gathered $1.8 billion through its pyramid scheme in about two years.

    Participants hailed from dozen of countries. A partial list of U.S. participants shows many names that appear to be Latino. Trustee Stephen B. Darr said in court filings that the full list of worldwide participants “contains 1,894,940” names and spans “35,110 pages.”

    A list of alleged “winners” in the 2012 Zeek Rewards scheme broken up the SEC and the U.S. Secret Service also appears to include a disproportionate share of Latino names or names from other vulnerable population groups. Zeek is estimated to have rounded up $897 million in less than two years and to have affected on the order of 800,000 victims.

    Zeek’s name (through parent Rex Venture Group LLC) was referenced in a footnote and related link in today’s written testimony by Ceresney.

    So was the name of CKB168, a “program” that allegedly targeted members of Asian-American communities in New York and California and was taken down by the SEC in 2013. The alleged haul was pegged at at least $20 million.

    The footnote pointed to an SEC investor alert dated Oct. 1, 2013, and titled, “Beware of Pyramid Schemes Posing as Multi-Level Marketing Programs.” The alert, which has been translated into Chinese, Spanish, Portuguese, Vietnamese and Creole, has been updated to include information on “programs” such as TelexFree and Wings Network.

    Though not referenced specifically in the October 2013 alert, “programs” such as eAdGear, Zhunrize and WCM777 also have encountered SEC actions. All three appear to have affected Asian population groups. WCM777 also clearly affected Latino groups and has emerged as one of the strangest MLM schemes of all time.

    Court filings suggest that $750,000 in WCM777 money was siphoned off and provided to one or more lobbying firms. On March 13, the PP Blog reported that more than $400,000 in proceeds allegedly were directed to a former CIA operative who once worked as a political fundraiser and has two felony convictions.

    Some WCM777 promoters had claimed that $14,000 sent to the California-based “program” returned $500,000 in 52 weeks. WCM777 appears to have gathered more than $80 million in about a year, with the proceeds from the MLM “program” diverted to purchase golf courses, real estate and more. Tens of millions of dollars appear to have been diverted to Hong Kong.

    The alleged haul of eAdGear was $129 million. Two persons have been charged criminally.

    Zhunrize, the SEC said, gathered about $105 million.

    Today’s Congressional testimony took place against the backdrop of continuing clashes between Herbalife and activist investor Bill Ackman, an Herbalife short-seller who has accused the MLM program of being a pyramid scheme that targets Latinos.

    Herbalife, which was not referenced in today’s testimony, denies it is a pyramid scheme and says it is proud of its appeal to Latinos and serves the community honorably. (Ackman also isn’t mentioned in the testimony.)

    Responding on web forums such as Seeking Alpha, fans of Herbalife have accused Ackman of pandering to enforcement agencies, members of Congress and Latino groups as part of a scheme to inspire investigations that would line his pockets by driving down Herbalife’s stock price.

    In media accounts, Ackman has said he won’t keep personal profits if his Herbalife short pays off. At the same time, he asserts he is pursuing profit for his hedge-fund investors through a strategy that also delivers social justice.

    Perhaps the only thing clear right now is that MLM, no stranger to controversy, never before has been under a light this intense.

    The Capital Markets and Government Sponsored Enterprises subcommittee is under the House Financial Services Committee. The committee is chaired by Rep. Jeb Hensarling, a Texas Republican. Rep. Maxine Waters, a California Democrat, is ranking member.

    Read Ceresney’s written, footnoted testimony.

  • UPDATE: ‘Automatic Mobile Cash’ Tanks

    automaticmobilecashlarge

    “Automatic Mobile Cash,” pushed on YouTube by “Achieve Community” hucksters Rodney Blackburn and Mike Chitty, has tanked, according to chatter on the MoneyMakerGroup Ponzi forum.

    MMG poster “im the man,” citing information from SolidTrustPay, claimed yesterday that SolidTrustPay had blocked AMC’s ability “to accept deposits or make withdraws.” Other information in the 16-page, 226-post MMG thread suggests AMC was making selective payouts through SolidTrustPay and Payza at the beginning of March.

    Blackburn and Chitty were representatives of something called the “Legendary Income Solutions Team” or LIST, often mixing promos for Achieve Community with appeals for viewers to get on board the LIST train and enroll in various HYIP schemes. YouTube appears to have banned Chitty. Blackburn deleted a number of his pitches for HYIP fraud schemes, and now is suggesting he’s returned to his roots in traditional MLM.

    The PP Blog reported last week that Blackburn was touting a “tea” known as “laso,” amid claims it “mitigates” HIV, the virus that causes AIDS.

    On Feb. 18, the SEC described Achieve Community as a pyramid- and Ponzi scheme that had gathered more than $3.8 million. A federal judge granted an asset freeze. Criminal investigations into Achieve Community reportedly also are under way.

    Chitty claimed AMC paid a “dividend.” Blackburn claimed his good friend Chitty was making “3,000 a month” from AMC.

    “That’s some ridiculous money,” he said.

    In addition, Blackburn published various “earnings” extrapolations for AMC. One claimed that the purchase of 100 “packages” for $2,500 from AMC turned into $73,000 in a year.

    In January, Blackburn dared the SEC to investigate Achieve Community and other programs he was pushing. Whether he’ll dare the Federal Trade Commission or the Food and Drug Administration to investigate the laso health claims was not immediately clear.

    The laso tea is one of the offerings of an MLM “program” known as “Total Life Changes.”

    After Blackburn’s SEC dare, a “program” known as “TrinityLines” that traded on the name of God and allusions to Scripture went missing.

    Blackburn also was promoting “MooreFund,” an obvious fraud purportedly operating from the United Kingdom. He also threw in with “Rockfeller,” an obvious fraud trading on the name of the famous Rockefeller family.

    “BRING THE BACON HOME” and “Unison Wealth” also were in the stable. The “bacon” program now has carded at least its second failed launch, and reportedly has a plan to launch again tomorrow.  Unison Wealth, meanwhile, appears to have developed problems.

  • SEC Official Speaks On TelexFree Case At ‘Fraud Affects Every Community’ Event At FTC, Announces ‘Pyramid-Scheme Task Force’ And Tells Audience That ‘Program’ Consumed Entire $50,000 Retirement Account Of Trusting Mom

    “We know of at least one victim who borrowed, I think, $50,000 from his mother and gave it all to [TelexFree]. And it was her entire retirement.” — Melissa Armstrong, assistant chief litigation counsel, U.S. Securities and Exchange Commission, Oct. 29, 2014

    Melissa Armstrong of the SEC at an FTC event today. Source: FTC video.
    Melissa Armstrong of the SEC at an FTC event today. Source: FTC video.

    UPDATED 12:19 P.M. EDT OCT. 30 U.S.A. Affinity fraud was one of the topics at an all-day symposium today at the Federal Trade Commission (FTC). The event was titled, “Fraud Affects Every Community.”

    Melissa Armstrong, assistant chief litigation counsel for the U.S. Securities and Exchange Commission (SEC), was one of the featured speakers. Her topic was the SEC’s pyramid- and Ponzi case against TelexFree and how TelexFree was a form of affinity fraud.

    In her view, Armstrong said, some TelexFree promoters exploited members of the Dominican and Brazilian communities.

    And, she told the audience, the scheme spread over YouTube, Facebook, Twitter, Instagram and though local pitchfests.

    “They sold a version of the American dream that was [meant] to appeal to recent immigrants,” she said.

    Over time, Armstrong said, TelexFree gathered “hundreds of millions of dollars from hundreds of thousands of promoters. It had promised to pay them back to the tune of [about] $5 billion.”

    “The message was always consistent: You could go from having nothing to having it all in a very short time with this program,” she said. “The organizers would travel from city to city.”

    Organizers “were given the rock-star treatment,” she said. Recruiters provided “testimonials.”

    And, she said, “training centers were nothing more than recruitment centers.”

    “Ministers” of church congregations helped the scam spread, Armstrong said.

    Armstrong also touched on TelexFree’s April 2014 bankruptcy filing. And, without mentioning TelexFree co-owner Carlos Wanzeler by name, she said he “fled to Brazil” and now faces criminal charges in the United States.

    Former TelexFree President James Merrill also faces criminal charges.

    The SEC now has a “newly established pyramid-scheme task force,” Armstrong said.

    Armstrong’s remarks begin at about the 4:22 mark below.

    More information on the “Fraud Affects Every Community” FTC symposium, including the roster of speakers and topics, is available here.

    Topics:

    • Welcome/Introduction
    • A Look at the Marketplace for Different Communities
    • How and Why Fraud Affects Different Communities
    • Getting More Specific: Community Case Studies on Fraud
    • Education and Community Outreach: An Open Discussion
    • Fraud Research: Building on Solid Data
    • Wrap Up

  • Appeals Court Agrees with FTC: BurnLounge Was A Pyramid Scheme

    breakingnews72UPDATED 10:12 A.M. EDT (JUNE 3) U.S.A. The U.S. Court of Appeals for the 9th Circuit today agreed with both a lower court and the Federal Trade Commission: BurnLounge was a pyramid scheme.

    Much to the dismay of some MLMers, the case demonstrates that a company that makes some retail sales still can be a pyramid scheme if rewards derived by participants largely came from recruitment, not from product sales.

    “We agree with the district court that BurnLounge was an illegal pyramid scheme in violation of the [Federal Trade Commission Act] because BurnLounge’s focus was recruitment, and because the rewards it paid in the form of cash bonuses were tied to recruitment rather than the sale of merchandise,” a three-judge panel ruled.

    The panel further ruled that the lower court did not err when it admitted testimony by Peter Vander Nat, an FTC expert who holds a doctorate in economics and an advanced degree in mathematics. BurnLounge had sought to strike the testimony.

    Circuit Judge Morgan Christen wrote the opinion for the panel, which unanimously found BurnLounge was a pyramid scheme.

    U.S. District Judge George H. Wu of the Central District of California made the pyramid ruling in 2012, ordering the company, CEO Juan Alexander Arnold and other pitchmen to pay about $17 million.

    Read the 2014 Appeals Court ruling which, among other things, discusses the applications of the Omnitrition International Inc. and Koscot Interplanetary Inc. pyramid cases on the BurnLounge case.

    Precisely what percentage of retail sales defeats charges of pyramid-selling remains an open question, with courts choosing to look at how the MLM business operates in practice, rather than how an MLM firm may spin things.

    In BurnLounge, Wu found that the the program’s bonus system was “a labyrinth of obfuscation” that resulted in a “93.84% failure rate for all Moguls,” all of whom were required to pay a fee to become Moguls and earn cash rewards, according to the appeals panel.