Instagram Macher Facing Wire Fraud Charges Over Bitcoin

“Jay Mazini” was raking in the virtual currency but didn’t bother paying for it, Feds say

…Or Lie Tryin’

A famous playwright once noted that if you tell an audience that a character is wealthy, they will believe he is wealthy until he does something to contradict the notion — like hand out money to other characters onstage.

That’s just not how rich people behave.

Rapper 50 Cent, AKA Curtis Jackson, is a case in point. 50 Cent was spotted handing out wads of cash to the employees of a Burger King last September — $30,000 according to press accounts — despite the fact that he filed for bankruptcy protection in 2015.

All That Glitters …

If you watched the embedded video above, you may have noticed 50 Cent’s companion, who actually initiates the giveaway: a bearded gent who calls himself Jay Mazini. Mazini, whose real name is Jegara Igbara, is an “Instagram influencer” — although, aside from once having a million or so followers, what that means at the present is a little hard to say.

Mazini raised his influencer profile in part by giving away money on the streets; 50 Cent was merely accompanying him on one of his jaunts. But as with many social media giveaway artists — we’re looking at you, David Dobrik — there was more to his act than met the eye.

The Takeaway

According to a complaint filed in New York’s Eastern District, from January to March of this year Mazini was promoting his buy-up of bitcoin through a series of Instagram posts. The Feds allege that he offered to purchase bitcoin from his followers at up to 5 percent of the virtual currency’s current market value.

The catch? In the four cases documented by the complaint, Mazini took the bitcoin — but either paid the sellers back partially or refused to pay at all. (Had none of his alleged victims heard about escrow.com?)

A warrant was issued and Mazini was arrested, but for a slew of other complaints that may or may not be related to the bitcoin charges — including “aggravated assault, luring an adult, kidnapping, possession of weapons, criminal coercion, endangering an injured victim and making terroristic threats” according to a local news source.

The complaint is the only document of note filed in the case so far — more to come, we’re sure.

KIND GMO Class Action Lurches Forward

Despite definition and timing nitpicks, the SDNY certifies three classes

In Media Res

Does In Re Kind LLC “Healthy And All Natural” Litigation have another five years ahead of it?

Possibly — the case, first filed in August 2015 and amended in October of the following year, invokes a dozen related disputes and more “name” plaintiffs than you can shake a stick at. The claims concern almost 40 KIND products, from granola to the crunchy snack bars we find at the grocery checkout line.

So there’s a potential for this thing to turn into a real marathon of an ad dispute. Most recently it was extended even further by a class certification order issued by the Southern District of New York.

Cruel to Be KIND?

At the center of the case are genetically modified foods (GMOs) and how they affect packaging and ad claims. Plaintiffs hold that KIND’s “all natural” and “non-GMO” tags are false, containing “a conglomeration of chemically-synthesized and highly-processed ingredients” that “render KIND’s labeling false and misleading based on the New Oxford American Dictionary’s definition of ‘natural’ as ‘existing in or caused by nature; not made or caused by humankind.’” They also argue that the products in question contain GMOs.

KIND advanced several arguments attempting to defuse the case. In one instance, the company argued that because the tags varied over time, the class members were not exposed to the same messaging and there were no common issues at stake. The court held that the differences between the offending tags — “All Natural/Non-GMO,” “Non-GMO,” and “No Genetically Engineered Ingredients” — were minute; this is an interpretation that every food marketer should pay attention to for obvious reasons.

The Takeaway

The court also disposed of KIND’s argument that the plaintiffs had failed to put forward a “unified theory” of what constitutes “all natural.” Although KIND was accurate when it said the complaint advanced “five different definitions of ‘natural,’” including definitions from disparate sources, including the Food and Drug Administration (“nothing artificial or synthetic . . . has been included in, or has been added to, a food that would not normally be expected to be in the food”), the New Oxford American Dictionary (“existing in or caused by nature; not made or caused by humankind”), the United States Department of Agriculture (“the product does not contain any artificial flavor or flavorings, color ingredient, or chemical preservatives . . . or any other artificial or synthetic ingredient . . .”) and Congress (unsurprisingly, too long to quote) — it didn’t matter, because “none of these definitions contradict the others.”

Although the plaintiffs lost on the request to enjoin the advertising at issue, the case is moving on with class certification assured. Plaintiffs seek redress under the laws of California, Florida, and New York.

We’ll be back in five years to let you know what comes next.

New Legislation Attempts to Shine Light on Online Marketplace Shadows

Senators demand that retailers identify third-party interlocutors

A New Italian Job

Here’s a fascinating story.

Reuters reports on an online marketplace trend that would have been unthinkable in 2019: In Italy, citizens who are out of work because of that country’s stringent COVID lockdowns are turning to an unusual form of ad work.

It turns out that anonymous representatives of merchants on a large-scale Italian e-commerce site are reimbursing people for goods purchased through the marketplace in exchange for glowing reviews — even paying some people directly to write reviews that are, essentially, ad copy.

“The reality is that the market is being manipulated,” Massimiliano Dona, head of Italy’s National Union of Consumers, told Reuters.

Ice Nine

Experts and pundits have been preaching the virtues and drawbacks of technological marketplace disruption for more than 20 years now — phenomena like fake reviews have been around for some time.

But by confining people to their homes for the better part of a year, COVID may have permanently cemented the once-fluid structure of the Internet economy and culture. Certain aspects of our lives — think distance learning, telecommuting, and dining and household purchases — will likely never be the same again.

And each of these transformations implies a whole range of negative side effects and unintended consequences, like a thriving black market for phony marketplace reviews.

The Takeaway

In an attempt to bring some transparency to online marketplaces, U.S. Senators Dick Durbin (D-IL) and Bill Cassidy (R-LA) are reintroducing the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act.

Get it? The INFORM Consumers Act. See what they did there?

The act, endorsed by the Transnational Alliance to Combat Illicit Trade (yes, that’s TACIT, although we’re not sure what that acronym is supposed to prove), will require online retailers to confirm the identities of “high-volume third-party sellers” — individuals and companies that have racked up 200-plus transactions representing more than $5,000 in sales over a 12-month period. The retailers will have to document the identities of these interlocutors through photo IDs, tax ID numbers and bank account information. Hopefully, the practice will discourage unethical behavior.

This act has been introduced before and failed to go anywhere, so stay tuned to learn more about its progress.

But it isn’t hard to see the circumstances that prompted its rebirth as a retail marketplace analogue to the Section 230 woes of social media companies. Online marketplaces must take new responsibility for the sales conducted over their platforms, even if only in a limited sense.

Check out one of our favorite blogs, The Fashion Law, for an extended discussion of cases related to this legislation.

Fashion Nova’s Shipping Policies Explode

Slow shipping speeds and gift-card refunds trigger $9M in reimbursements

Virus-Free?

The COVID crisis is only a year old, so clothing and accessories company Fashion Nova’s original agreement with the Federal Trade Commission (FTC) regarding its shipping policies can’t be a consequence of the pandemic.

We’ve talked about unreceived order scams in the past — cases where companies simply refused to ship orders they had been paid for, often for face masks and other items directly related to the coronavirus pandemic.

But Fashion Nova’s $9.3 million agreement, inked back in April 2020, described behavior from years before — it couldn’t have had anything to do with the pandemic. Reviewing this case is a refreshing break, we must confess — a blast from the pre-COVID past. Hopefully, we’ll go back to writing about plain old non-virus scams and mishaps sometime soon.

Same Old Song and Dance

We’ve covered Fashion Nova before — specifically in its lawsuit against infamous rapper and police informant Tekashi 6ix9ine.

In the shipping case, the FTC alleged that the company failed to properly notify consumers and give them the chance to cancel their orders when it failed to ship merchandise in a timely manner, and that it illegally used gift cards to compensate consumers for unshipped merchandise instead of providing refunds.

Now, almost a year after the company settled, the FTC has distributed more than $6.5 million in payments to half a million Fashion Nova customers (the company was required to reimburse $2.26 million directly to consumers).

Fashion Nova claims that its customers are “bad-ass, fashion-forward, and in control of their own destiny,” but apparently it ignored their strut when it came time to deliver the goods.

The Takeaway

Wonky shipping practices are verboten under the Federal Trade Commission Act and the (breathe deep before you read it) Trade Regulation Rule Concerning the Sale of Mail, Internet, or Telephone Order Merchandise (MITOR).

In fact, if you’re interested in boning up on shipping policy regulation, you could do worse than reading through the FTC’s complaint against Fashion Nova — it provides a succinct summary of what companies should not do after they box up their merch. It turns out the rules aren’t all that difficult to understand, even if one is distracted by world events of epic proportion.

FDA Warning Letters Make Life Difficult for CBD Companies

CBD regulation uncertainty presents pitfalls for OTC drugmakers

Things Fall Apart

Has the Food and Drug Administration ever had more on its plate than it does today?

Sure, the FDA has been around for more than a century, and it witnessed the only public health event in U.S. history to rival the magnitude of the coronavirus — the 1918 influenza pandemic. But there were no antiviral medicines during the 1918 pandemic for the administration to approve or manage, so COVID is surely the most taxing challenge it has faced.

Somehow, in the middle of the coronavirus morass, the FDA keeps churning out warnings of a more prosaic quality, with a special emphasis on products containing cannabidiol (CBD). Recently, two foolhardy companies that seem determined to provoke a reaction got the attention they were asking for.

We present them as a cautionary tale.

Poking the Bear

Honest Globe received a spanking for its Elixicure product line, which includes roll-on and pump “pain relief” products that contain CBD. The FDA spends the lion’s share of its warning accusing the company of failing to put in place adequate quality control, record keeping and production controls.

But the letter goes on to accuse the Elixicure products of being unapproved new drugs because they promised to treat pain caused by a wide swath of ailments including muscle strains, backaches, neck pain, cramps, arthritis and tendonitis. There are far too many specific claims to list here, but the company did boast that Elixicure was the “first over-the-counter CBD-infused topical pain cream product to receive FDA certified registration,” a claim that inspires the sort of relentless, dispassionate tear-down that most likely passes for passionate anger in regulatory circles.

In any case, as an ingredient in any drug — active or inactive — CBD is a red flag for the administration, and the inclusion of it, regardless of marketing, rendered the products unapproved.

The Takeaway

The CBD-related charges in BioLyte Laboratories letter run along similar lines.

As we’ve noted repeatedly, the market is waiting for the final word on CBD products and how to classify and market them. Until then, manufacturers beware — a warning letter can come at any time.

Here’s a quote from the press release by FDA Principal Deputy Commissioner Dr. Amy Abernethy that shows the administration means business:

“It’s important that consumers understand that the FDA has only approved one drug containing CBD as an ingredient. These other, unapproved, CBD products may have dangerous health impacts and side effects. We remain focused on exploring potential pathways for CBD products to be lawfully marketed while also educating the public about these outstanding questions of CBD’s safety. Meanwhile, we will continue to monitor and take action, as needed, against companies that unlawfully market their products — prioritizing those that pose a risk to public health.”