In the Scam of the day for January 19, 2020 I told you about the Federal Trade Commission (FTC) suing multi-level marketer “Success By Health” and its executives alleging that the company operated an illegal pyramid scheme.  The United States Federal Court for Arizona issued a preliminary injunction shutting down the operation of “Success by Health” while the litigation progresses.  According to the FTC, “Success By Health” cheated their victims out of more than seven million dollars.  The flagship prodcut of “Success By Health” was an instant coffee product called “MyocoCafe” that contains a mushroom that “Success By Health” represented as providing significant health benefits although there is no evidence to that effect.  “Success By Health” operated as a multi-level marketing company, however, rather than a legitimate multi-level marketing company such as Amway, the FTC alleges that “Success By Health” operated as an illegal pyramid scheme through which its distributors made money by recruiting new distributors rather than through selling products which is the hallmark of an illegal pyramid scheme.  As Andrew Smith the FTC’s Director of Consumer Protection has said, “Participants in legitimate multi-level marketing companies earn money based on actual sales to real customers rather than recruitment.  But pyramid schemes depend on recruitment of new participants to pay out to existing participants, meaning that the vast majority of participants will ultimately lose money.”  “Success By Health” executives told prospective distributors that they could earn more than a million dollars per month, however, in order to do so they would have to recruit more than 100,000 affiliates working under them to achieve that level of profit.  Now the FTC has added additional charges against the defendants of operating another pyramid scheme called VOZ Travel.which sold memberships in an alleged discount travel booking platform that would be operated as a pyramid scheme with profitsmade through recruiting other members.  The FTC alleges that members were told that they could be earning more than 1.5 million dollars per year.  To date, the COZ Travel booking platform never even launched although the defendants took the money of people joining as members.

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.

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

As for supplements that purport to provide health benefits, you should never buy them or sell them unless you have thoroughly investigated the legitimacy of the claims.