Scam of the day – September 4, 2015 – FTC takes action against alleged pyramid scheme

At the request of Federal Trade Commission (FTC) lawyers, a judge has issued a temporary injunction shutting down Vemma Nutrition Company, which the FTC describes in its court complaint as an illegal pyramid scheme that preyed primarily upon college students and other young people.   Young people were lured to sign up as affiliates of the company which markets health and wellness drinks with promises of earnings of as much as $50,000 a week while the truth is that 90% of the company’s affiliates earned less that $3,674 annually while the company reaped profits of 200 million dollars last year.  According to the FTC, Vemma is an illegal pyramid scheme where affiliates’ earnings are tied primarily to signing up more affiliates than to selling products.   Sometimes a legitimate multilevel marketing business may look quite similar to an illegitimate pyramid scheme, which is one of the reasons that so many people fall prey to these scams.  For every legitimate multilevel marketing company, such as Mary Kay and Amway, there are many that are just scams.  In a legitimate multilevel marketing company, investors make money by selling products to the public and by recruiting new salespeople.  In a pyramid scheme the source of profits is based primarily on the recruiting of new members or salespeople.  Among the defendants in this case is Benson K. Boreyko who previously had settled similar charges regarding a pyramid scheme that sold nutritional supplements.

TIPS

Anyone who is considering investing in what is represented to be a multilevel marketing business should always investigate the company and the terms of investment carefully before investing any money.  In addition, you should also check out the company with the FTC and your state’s attorney general to make sure that the company is legitimate before investing any money.  Here is a link to information from the FTC that you should consider before investing in a multilevel marketing business.  http://www.consumer.ftc.gov/articles/0065-multilevel-marketing