Vemma Nutrition Company

The FTC alleged that Vemma recruited college students and young adults with images of luxury cars and yachts and claims of up to $50,000 per week, while its structure rewarded recruiting over retail sales and most participants lost money.

Resolved. Refunded, settled, ceased operating, or the claim did not hold up. Kept for the record.

Who it recruited, and with what

Vemma sold health and wellness drinks through participants it called affiliates. Its “Young People Revolution” campaign targeted college students and other young adults, presenting the programme as a profitable alternative to traditional employment and a way to bypass college and student loan debt.

Marketing materials showed seemingly prosperous young people with luxury cars, jets and yachts, and claimed affiliates could earn as much as $50,000 per week, with earning potential limited only by their own effort.

What joining cost

An initial $500 to $600 for an “Affiliate Pack” of products and business tools, then $150 in Vemma products every month to stay eligible for bonuses, and recruiting others to do the same.

Why the FTC called it a pyramid

The complaint alleges Vemma focused on recruitment rather than retail sales. Affiliates were given little guidance on selling products and were instead taught to give products away as samples while recruiting. There were no meaningful discounts or incentives to encourage retail sales at all.

The vast majority of participants made no money, and most lost money. The company took in more than $200 million a year in 2013 and 2014 and operated in more than 50 countries.

One defendant, chief executive Benson K. Boreyko, was already under a 1999 court order from an earlier FTC settlement involving a different multilevel marketing company.

The settlement

The order bans Vemma and Boreyko from any business venture that pays compensation for recruiting, that ties compensation to a participant’s own purchases, or that pays on sales in a period unless the majority of revenue in that period comes from sales to non-participants. That last clause is the structural remedy: it makes the compensation plan depend on real outside demand.

The judgment is $238 million, partially suspended on payment of $470,136 and the surrender of real estate and business assets, with independent compliance auditing for 20 years. A separate order against affiliate Tom Alkazin and Bethany Alkazin imposes more than $6.7 million, partially suspended on payment of more than $1.2 million.

In September 2019 the FTC mailed 28,224 checks averaging $78.93, totaling more than $2.2 million.

What is not established

Stipulated final orders resolve allegations without any admission or finding of wrongdoing.

Sources

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