In 2015, the Federal Trade Commission filed a lawsuit, alleging that Vemma was running an illegal pyramid scheme and targeting college students. Vemma settled Thursday with the FTC.
Under the settlement, the company’s business can’t be based on recruiting more and more people to join the Vemma network as distributors. Instead, the business has to be driven by real sales to real customers.
The company will be able to pay distributors only if the majority of the money generated in that sales period came from sales to people outside the Vemma network, said Jennifer Leach, assistant director for the FTC’s Division of Consumer and Business Education. And the company can’t mislead people about how profitable the business could be – or about the so-called health benefits of the products.
The order imposes a $238 million judgment that will be partially suspended when a payment of $470,136 is made and some real estate and business assets are surrendered. It also requires Vemma to provide compliance reports from an independent auditor for 20 years.
A separate order provides similar 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 on payment of more than $1.2 million and the surrender of some real estate and business assets.
If you’re considering going into a multi-level marketing business, or know someone who is, do research, which could save you time and money down the road, Leach said.
If you see a business “opportunity” that you think crosses the line, report it to the FTC