InfoBytes Blog
FTC tackles illegal pyramid scheme
On June 16, the FTC and the Arkansas attorney general filed a complaint against the operators of a “blessing loom” investment program (defendants), alleging that they acted as an illegal pyramid scheme that bilked millions of dollars from thousands of consumers. The joint complaint alleges that the defendants violated the FTC Act, Consumer Review Fairness Act, and the Arkansas Deceptive Trade Practices Act by: (i) participating in a pyramid scheme, which constitutes a deceptive act; (ii) prohibiting the ability of an individual to engage in a covered communication; and (iii) falsely representing goods and services. The complaint alleges that the defendants lured people into enrolling in their program by falsely guaranteeing investment returns as high as 800 percent, with some members allegedly paying as much as $62,700 to participate in the program. In addition, the defendants allegedly, among other things, (i) targeted Black communities and stated in the “[program’s] Bible,” which contains program membership bylaws, that all program members must, with no exceptions, be of African-American descent; (ii) targeted financially distressed consumers; (iii) falsely claimed the program provided “a means to achieve financial freedom and generational wealth”; (vi) attempted to hide their illegal activity from law enforcement and payment processors by forbidding certain payment applications to be used by members; and (v) prohibited members from publishing material related to the program online, such as comments and reviews. The complaint seeks to permanently enjoin the defendants’ illegal operation and requests that the court award redress for injured consumers. The complaint also seeks to impose civil penalties on the defendants under Arkansas state law.