A nutrition company (Defendant) based in Los Angeles may have thought that the $200 million settlement with the government would end all the nutrition-shake company’s fraudulent business practices, but a new Miami class action claims more illegalities.
The company’s settlement with the FTC last year prohibited the company from engaging in certain business practices, such as making misrepresentations about income and lifestyle. But now eight plaintiffs have filed a class action lawsuit accusing the company and its related entities and individuals of using misrepresentations and deceit to entice people to attend live events that are allegedly touted as “the guaranteed pathway to attaining life changing financial success” with the company.
The class action is the first to go after the multilevel marketing company’s top distributors, alleging that they misled hundreds of thousands of people into paying for “success training seminars” and other events—claiming that their attendance would ultimately make them rich. The company and nearly 50 distributors are named as defendants in the racketeering and fraud case.
Miami attorney Etan Mark filed the federal lawsuit September 18th with Ohio lawyer Jason Jones. Mark said that some of the plaintiffs spent thousands of dollars on tickets and travel, believing distributors who promised high profits from shake sales.
The nutrition company is said to produce four large-scale events annually, which cost attendees between $50 to $120 to attend. Plus, there are semi-local “Success Training Seminars” held during the year at a cost of $30-$50 to attend.
The complaint states that “from the stage of the year’s largest event, Defendant Mark Addy concisely stated the mantra that is used to deceive thousands of the company’s distributors and potential recruits in the U.S. every year: “If you go to all the events, you qualify for everything—you will get rich.” This mantra has been repeated thousands of times over the past four years by the Individual Defendants in close collaboration with the nutritional company.”
The FTC found a small legitimate market for Defendant’s products outside its network, and that most of the company’s distributors make little or no money, with some distributors even losing money by purchasing products that they’re unable to sell.
“The income claims become more grandiose, the disclaimers get less prevalent, and I believe that many of the defendants in this case use that as an opportunity to prey on people who are particularly vulnerable,” the attorney remarked.
The complaint says that the top-level distributors, who are members of the company’s “President’s Team,” don’t make their money selling weight-loss products as they claim, but instead profited years ago using “highly aggressive lead generation techniques” that were later banned, such as “mass marketing the opportunity as a ‘work from home’ internet system and … charging distributors thousands of dollars a month to obtain leads generated through this deceptive advertising,” according to the complaint.
The FTC didn’t specifically designate the company as a pyramid scheme, however, the company’s business model has drawn federal regulator scrutiny. In some instances, distributors used the business model to launder money, the complaint says. The lawsuit also describes an alleged Miami-based currency arbitrage scheme designed to remove money from Venezuela’s troubled economy.
This class action will undoubtedly require financial and fraud expert witnesses. Take a look at the ForensisGroup experts with years of experience in the fields of Fraud Investigations and Forensic Accounting, with expertise in damage calculations, lost profits, preference analyses, fraudulent conveyances, business interruption, cash flow analyses, partner dissolution, and business valuations.