SE HABLA ESPAÑOL | MAP
312-739-4200
Contact Us

Contact Us

Archives

  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013

  • Areas & Topics

    Frquently Asked Questions

    Our Office Location

    Edelman, Combs, Latturner, & Goodwin, LLC

    20 South Clark Street
    Suite 1500
    Chicago, IL 60603

    info@edcombs.com
    Phone: 312-739-4200
    Fax: 312-419-0379


    E-mail Us  |  Chicago Law Office

    Edelman Combs Latturner Goodwin's facebook page   Edelman Combs Latturner Goodwin's Twitter Page   Edelman Combs Latturner Goodwin's Google Plus Page

    Vemma Agrees to Ban on Pyramid Scheme Practices to Settle FTC Charges

    Health drinks marketer touted unlimited income potential, but most people lost money

    Under a settlement with the Federal Trade Commission, Arizona-based Vemma Nutrition Company will end the business practices that the FTC alleged created a pyramid scheme.

    The multi-level marketing (MLM) company, which sells health and wellness drinks through a network of distributors called “affiliates,” will be prohibited under a federal court order from paying an affiliate unless a majority of that affiliate’s revenue comes from sales to real customers rather than other distributors. The order also bars Vemma from making deceptive income claims and unsubstantiated health claims.

    “Unfortunately, extravagant income claims and compensation plans that reward recruiting over sales continue to plague the MLM industry,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “MLM companies must ensure that their promotional materials aren’t misleading, and that their compensation programs focus on selling goods or services to customers who really want them, not on recruiting more distributors.”

    In August 2015, the FTC brought a federal court action against Vemma Nutrition Company, Vemma International Holdings, Inc., CEO Benson K. Boreyko and top affiliate Tom Alkazin The companies’ “Young People Revolution” campaign targeted college students and other young adults with materials that presented Vemma as a profitable alternative to traditional employment and depicted young affiliates surrounded by conspicuous displays of wealth, such as luxury automobiles and yachts. Vemma allegedly failed to disclose that the program’s structure ensured that most participants would not earn substantial income, and provided affiliates with false and misleading materials for recruiting others.

    According to the complaint, the defendants encouraged participants to buy products to qualify for bonuses and to recruit others to do the same. The result, the agency alleged, was a pyramid scheme that compensated participants mainly for recruiting others rather than for retail sales based on legitimate consumer demand for the products.

    Vemma expanded throughout the U.S and several foreign countries and took in more than $200 million a year in revenue in 2013 and 2014.

    Under the stipulated order announced today, the Vemma companies and Boreyko are banned from any business venture that:

    • pays any compensation for recruiting new participants;
    • ties a participant’s compensation or an ability to be compensated to that participant’s purchases; or
    • pays a participant compensation related to sales in a pay period unless the majority of the revenue generated during that period, by the participant and others the participant has recruited, comes from sales to non-participants.

    The order also bars these defendants from involvement in any pyramid, Ponzi, or chain marketing schemes and prohibits them from making misrepresentations about the profitability of business ventures or the health benefits of products. The order imposes a $238 million judgment that will be partially suspended upon payment of $470,136 and the surrender of certain real estate and business assets. It also requires Vemma to provide compliance reports from an independent auditor for 20 years.

    A separate order provides similar conduct provisions against Vemma affiliate Tom Alkazin and his wife, Bethany Alkazin and imposes a judgment of more than $6.7 million, which will be partially suspended upon payment of more than $1.2 million and the surrender of certain real estate and business assets.

    The Commission vote approving the stipulated final orders was 3-0. The orders were filed in the U.S. District Court for the District of Arizona on December 15, 2016.

    To learn more about multilevel marketing, read Multilevel Marketing and Business Opportunity Scams. For other recent enforcement actions by the FTC regarding multilevel marketing, see Herbalife and FHTM.