The Federal Trade Commission said Wednesday that Vemma Nutrition has been temporarily shut down for operating a pyramid scheme that promised college students riches if they sold its nutritional drinks, but most ended up losing money.
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“Rather than focusing on selling products,
Vemma uses false promises of high income potential to convince consumers to pay money to join their organization”,
said Jessica Rich, director of FTC’s Bureau of Consumer Protection, in a press release.
Last year, the FTC launched an investigation into the practices of Los Angeles nutritional products company Herbalife Ltd. The review, which is still pending, stemmed from ongoing allegations by New York hedge fund manager Bill Ackman that the company’s multilevel marketing operation amounted to a pyramid scheme that victimized its sales force.
In addition to being a pyramid scheme, the company is being charged 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”.
The FTC said the beverage company recruits members they call “affiliates” and tell them they can earn income by enrolling other members. Products on Vemma’s website could not be bought on Wednesday. An preliminary funding of $600 was paid for merchandise and enterprise instruments and $150 in Vemma merchandise needed to be purchased every month to obtain bonuses.
U.S. District Judge John T. Tuchi granted the FTC’s ex parte application for a temporary restraining order with an asset freeze, according to an August. 21 order that was previously sealed.
The FTC had filed a sealed… Tom Alkazin, who promoted Vemma’s business activities, and his wife, Bethany Alkazin, also were named as defendants.
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But the Tempe Ariz. company’s mission is geared more towards recruiting new “affiliates” than actuzally selling its inventory and despite making claims its clients can make up to $50,000 a week, most of the people lose money, the FTC claims. Natural Products INSIDER was unable to immediately reach them through the website for comment. As a multilevel marketing firm, Vemma urges its affiliates to promote its wellness beverages.
