FTC sues company for deceptive schemes

Federal Issues FTC Enforcement Digital Assets FTC Act Business Opportunity Rule Consumer Review Fairness Act

On November 16, the FTC announced an action against a company that markets and sells business opportunities for allegedly pitching deceptive moneymaking schemes promising big returns to consumers. Claims were also brought against the company owners. The FTC alleged in its complaint that the defendants violated the FTC Act, the Business Opportunity Rule, and the Consumer Review Fairness Act by selling business packages and business coaching through an internet retailer under various names that promised consumers they could “generate passive income on autopilot.” However, the FTC claimed the defendants charged consumers between $5,000 and $100,000 for the programs and used fake consumer reviews in their marketing and sales pitches. Few consumers ever made money from these schemes, the FTC said. Additionally, the defendants allegedly charged consumers thousands of dollars to participate in a cryptocurrency investment service, which defendants claimed could generate profits for consumers “while you sleep.” According to the FTC, the defendants harmed consumers by, among other things, (i) deceiving them about potential earnings; (ii) using fake testimonials; (iii) suppressing negative reviews and promising refunds to consumers if they removed their complaints; (iv) threatening to sue dissatisfied consumers and adding language to contracts to prevent consumers from leaving negative reviews; and (v) failing to provide required disclosures when selling their programs.

Under the terms of the proposed stipulated order, the defendants will be prohibited from making deceptive earnings claims and misleading consumers about the nature of their products, including the likelihood of profits. Defendants must also stop engaging in behavior that interferes with consumer reviews and complaints. The defendants will also be required to pay $2.6 million in monetary relief. The proposed order includes nearly $53 million in total monetary judgment, which is partially suspended due to defendants’ inability to pay.