United States - FTC Acts to Halt Multilevel Marketer of Health and Wellness Drinks as Alleged Pyramid Scheme

At the FTC's request, a federal court has temporarily halted an alleged international pyramid scheme operated by Vemma Nutrition Company. The company used social media and other marketing materials to attract young members, promising wealth without working a traditional 9-to-5 job. While members paid hefty fees, typically $500-600 to start and $150 per month thereafter, it was those fees, rather than retail sales of its health and wellness drinks, that supported the company and was used to pay other members. The scheme earned more than $200 million annually in 2013 and 2014. In its complaint, the FTC charged that Vemma is an illegal pyramid scheme that rewards affiliates for recruiting participants rather than for selling products. It also charged the defendants with making false earnings claims, failing to disclose that Vemma’s structure ensures that most people who join will not earn substantial income, and furnishing affiliates with false and misleading materials to recruit others. As a result of Vemma’s conduct, consumers throughout the United States and in more than 50 other countries have been injured. On August 21, the court halted the deceptive practices, froze the defendants’ assets, and appointed a temporary receiver over the business pending a trial.