Fortune Hi-Tech Marketing, Inc.

What the receiver found

This case is unusual because an independent court-appointed receiver investigated and reported. The receiver determined that FHTM’s main business was recruiting new members, not selling products and services as it claimed, and confirmed the allegations.

The numbers the receiver produced:

• More than 98 percent of participants lost more money than they made
• At least 88 percent did not recoup even their enrollment fees
• More than 81 percent of payments to participants were for recruiting, not for selling products or services
• At least 94 percent did not renew after their first year

The pitch

FHTM promoted itself as a way for ordinary people to reach financial independence, selling products and services from companies such as Dish Network and Frontpoint Home Security, along with its own health and beauty line. It enrolled more than 350,000 people across the United States, Puerto Rico and Canada, and in some areas, including Chicago, targeted Spanish-speaking and immigrant communities.

Representatives claimed earnings more than ten times their previous income by their second year. One claimed a colleague earned more than $50,000 in his sixth month and millions afterwards. A recruiter advertised a meeting on Twitter with “Bring ur friends & learn how 2 make $120K aYR.” At the 2012 national convention in Dallas, the top 30 earners were called on stage to receive a mock-up of a $64 million check, which several then posted on social media.

What participation cost

Annual fees of $100 to $300, plus $130 to $400 per month to qualify for commissions and bonuses, plus a continuity plan billing monthly for products unless cancelled. Recruits were told they could earn high commissions selling to people outside the scheme, but only minimal compensation was paid for such sales and few products were sold to anyone who was not a participant.

As the FTC’s Midwest Region Director put it: “Pyramid schemes are more like icebergs. At any point most people must and will be underwater financially.”

The outcome

A court halted the operation in January 2013, froze assets and appointed a receiver. The May 2014 settlement bans the operators from multi-level marketing and imposes a judgment of more than $169 million, partially suspended on surrender of assets valued at at least $7.75 million, including assets of the estate of the deceased defendant Paul C. Orberson.

In November 2016 the FTC mailed 285,361 checks totaling more than $3.7 million.

What is not established

A stipulated order resolves the allegations without any admission or finding of wrongdoing.