FTC shuts down Tempe nutritional beverage company for pyramid scheme

A federal court in Arizona has temporarily shut down Vemma Nutrition Company, a multilevel marketer of energy drinks that the government described as an “unlawful pyramid”.

Oftentimes, the people the company convinced to sell their product lost money in the scheme, because they had to pay around $600 upfront for the product. The FTC’s actions come after consumer advocacy organization, truthinadvertising.org (TINA.org), which conducted a two-year investigation of Vemma’s marketing practices, filed complaints against the MLM company with the agency.

The defendants allegedly claim that affiliates’ earning potential is limited only by their own efforts and that Vemma provides young adults an opportunity to bypass college and student loan debt.

According to the FTC, affiliates are bound to lose with Vemma because rewards are given to them when they are able to recruit more members to the network instead of selling the company’s products to other consumers.

“This action against Vemma sends a clear and definitive message to the entire MLM community – stop making favorable income claims when the vast majority of your distributors are making next to nothing or worse, suffering financial loss”, said TINA.org Executive Director Bonnie Patten.

A representative from Vemma, which is based in Tempe, Arizona, did not immediately respond to a request for comment.

Vemma sells products such as energy drink Verge and protein shake Bod-e.

In an August. 21 order, a federal judge found “good cause” to believe the defendants are operating an illegal pyramid scheme in violation of Section 5(a) of the FTC Act.

According to the complaint, Vemma does not offer meaningful incentives or discounts to encourage retail sales, only for recruiting participants.

Like other multilevel marketing companies, few of Vemma’s affiliates earn enough income to enjoy a posh lifestyle of yachts, fancy automobiles and world travel.

Vemma said on its Web site that the district court had appointed a temporary receiver for the company that had suspended operations until a preliminary injunction hearing, adding: “There is no additional information at this time”.

Together with the corporate, Vemma CEO Benson Boreyko can also be named as a defendant within the grievance, as is Vemma promoter Tom Alkazin and his spouse Bethany Alkazin.