Agency: Federal Trade Commission (FTC)Washington
Description:
On August 17, 2015 the Federal Trade Commission ("FTC) filed a "Complaint for Permanent Injunction and Other Equitable Relief" in the the United States District Court for the District of Arizona, against Vemma Nutrition Company, Vemma International Holdings, Inc, its principal Benson "B.K" Boreyko, promoter Tom Alkazin and his wife Bethany Alkazin ("Vemma") alleging they are engaged in a pyramid scheme, making false earnings claims, failing to disclose that Vemma’s structure ensures that most people who join will not earn substantial income, and furnishing affiliates with false and misleading materials to recruit others. The FTC is seeking to stop them from continuing to operate the scheme.
Vemma is a multilevel marketing company that claims to use its members, called “affiliates,” to promote its health and wellness drinks. The company earned more than $200 million annually in 2013 and 2014 and has affected consumers throughout the United States and in more than 50 other countries. Vemma lures college students and other young adults with the prospect of getting rich without having a traditional 9-to-5 job.
The FTC complaint alleges Vemma uses false promises of high income potential to convince consumers to pay money to join their organization. Vemma claims affiliates can earn substantial income by enrolling others either as affiliates or as customers, but Vemma focuses on recruitment rather than retail sales of its products to generate this income. The vast majority of participants make no money, and most of them lose money.
According to the FTC’s complaint, the defendants’ websites, social media, and marketing materials show seemingly prosperous young people with luxury cars, jets, and yachts, and falsely claim that Vemma affiliates can earn substantial incomes – as much as $50,000 per week. The defendants allegedly claim that affiliates’ earning potential is limited only by their own efforts and that Vemma provides young adults an opportunity to bypass college and student loan debt. Vemma urges consumers to make an initial investment of $500-$600 for an “Affiliate Pack” of products and business tools, buy $150 in Vemma products each month to remain eligible for bonuses, and enroll others to do the same.
The FTC alleges Vemma is an illegal pyramid scheme. Vemma provides little guidance for selling products but instead teacs affiliates to give away products as samples when recruiting new participants. Vemma offers no meaningful discounts or incentives to encourage retail sales, according to the complaint.
On August 21, 2015, the court halted the deceptive practices, froze the defendants’ assets, and appointed a temporary receiver over the business pending a trial. TheFTC is seeking a permanent injunction, relief for affected participants, disgorgement of all funds and assets received by Bethany Alkazin, and for Vemma to pay all monetary cost for bringing forth this action . The case is currently pending and details are available here.
Date of Action: 8/17/2015