FTC Charges Vemma To Be A $200 Million iIlegal Pyramid Scheme

 

The FTC lawsuit against Vemma has been published and this are the allegations: illigal pyramid scheme, Income claims, Failure to disclose, Means and instrumentalities, Relief defendent.

The FTC was granted a court order to freeze the company’s and CEO B.K. Boreyko’s assets as well as a temporary restraining order. The first hearing in court of law in Phoenix, Arizona, USA is set to September 3. If the judge deny the freeze then, Vemma might be back in business.

“Defendants are running a global pyramid scheme that has likely victimized hundreds of thousands or millions of consumers”  the FTC said in court filings released to the public Tuesday.

It is a direct attack on the MLM – network marketing industry. If Vemma is closed down, a lot of network marketing companies with a simular model in the USA are in deep trouble.

The FTC names Vemma Nutrition Company, Vemma International Holdings, B. K. Boreyko, and Tom Alkazin as defendants.Tom Alkazin’s wife, Bethany Alkazin is named as a relief defendant.

The FTC conclude that:

Unlike legitimate multilevel marketing businesses, Vemma reward affiliates for recruiting and for purchasing products to maintain bonus eligibility rather than for selling products to ultimate-user consumers.

Vemma emphasize recruitment over product sales and stress the importance of recruiting new participants into the Vemma program. Defendants direct new and prospective affiliates to follow a simple “system” in order to be successful, which greatly consists of the following four steps.

First, the individual should become an affiliate by purchasing an “Affiliate Pack”, which costs approximately $500 or $600.

Defendants frequently describe the Affiliate Pack as the Affiliate’s initial investment or start-up cost. Second the affiliate should sign up for monthly “auto-deliver in an amount sufficient to maintain eligibility for bonuses, which is approximately $150 per month.

The full law suit can be download here.

This are the FTC allegations:

Count 1: illegal pyramid scheme

Defendants promote participation in Vemma, which has a compensation program based primarily on providing payments to participants for the recruitment of new participants, not on the retail sale of products or services. Defendants’ promotion of this type of scheme, often referred to as a pyramid scheme, constitutes a deceptive act or practice.

Count 2: Income claims

In numerous instances in connection with the advertising, marketing, promotion, offering for sale, or sale of the right to participate in the Vemma program, Defendants have represented … that consumers who become Vemma affiliates are likely to earn substantial income.  In truth and fact consumers who become Vemma affiliates are not likely to earn substantial income.

Count 3:  Failure to disclose

In numerous instances defendants have represented that individuals have earned substantial income from participation in the Vemma program, and that any consumer who becomes a Vemma affiliate has the ability to earn substantial income. In numerous instances Defendants have failed to disclose, or disclose adequately, that Vemma’s structure ensures that most consumers who become Vemma affiliates will not earn substantial income.

Count 4: Means and instrumentalities

By furnishing Vemma affiliates with promotional materials to be used in recruiting new participants that contain false and misleading representations, (Vemma) have provided the means and instrumentalities for the commission of deceptive acts and practices.

Count 5: Relief defendant

Relief Defendant Bethany Alkazin, has received funds or other assets from that are traceable to funds obtained from customers through the deceptive acts or practices described herein. Relief Defendant will be unjustly enriched if she is not required to disgorge the funds or the value of the benefit she received as a result of deceptive acts or practices.

The FTC has 5 requests to the court:

1. A preliminary injunction be granted against Vemma.
2. A permanent injunction against Vemma, B.K. Boreyko and Tom Alkazin, which will prohibit them committing future violations of the FTC Act.
3. Award such relief to redress injury to consumers as a result of the defendant’s violations of the FTC Act.
4. The court order the defendants disgorge all funds and assets which are traceable to defendant’s deceptive acts or practices.
5. Legal costs