On August 8, 2024, the Federal Trade Commission announced that as a result of a lawsuit, two defendants that allegedly helped operate a purported business opportunity scheme known by several names have agreed to settlements that include lifetime bans from pitching money-making and investment opportunities.
The FTC first initiated formal legal action against the two individuals in December 2023, alleging that they played key roles in the purported scheme that targeted consumers looking to build their own businesses with a program that offered essentially no value, other than commissions that come from encouraging others to join the scheme, according to FTC lawyers.
“The defendants bilked consumers out of their hard-earned money with false promises that they would operate lucrative online businesses on consumers’ behalf,” said FTC lawyer Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “As these orders make clear, the FTC will continue to go after those who promote and sell worthless business or investment opportunities with phony earnings claims.”
The purported scheme took millions of dollars from consumers, according to the FTC’s complaint, charging at least $3,000 and as much as $21,000, plus hundreds of dollars in additional “administrative fees,” for membership, which promised its members turnkey online businesses that would be operated on the members’ behalf. Those businesses, however, existed only to sell more supposed businesses to more consumers, according to the FTC.
The stipulated final order settling the case against one defendant permanently bans him from telemarketing as well as from any role in selling or marketing money-making or investment opportunities. In addition, he is required to turn over cash and the contents of numerous bank accounts.
The stipulated final order setting the case against the other defendant permanently bans him from any role in selling or marketing money-making or investment opportunities, as well as banning him from any involvement with robocalling. He is required to turn over cash to the FTC under the stipulated order.
Both defendants are subject to monetary judgements totaling more than $7.5 million, which have been partially suspended based on their inability to pay that amount. If they are found to have misrepresented their financial condition to the FTC, the full amount of the judgment would be immediately due.
The case against other defendants is ongoing.
Takeaway: Inconspicuous and ineffective disclaimers of earnings claims that come after false or unsubstantiated claims about the money produced for members can result in a regulatory investigation or enforcement action. Consult with an experienced FTC CID lawyer to ensure compliance with the Telemarketing Sales Rule and the FTC Act, including, but not limited to, avoiding unsubstantiated earnings claims.
