Xocai Scam Business Opportunity Class Action Continues
Update: This lawsuit has been settled.
MXI Corporation the makers of Xocai “healthy” chocolate and the operators of a MLM business opportunity were taken to court back in May of 2015 for running a MLM scam that makes it impossible for salespeople to make any money while forcing them to continue paying membership fees and buying the product known as Xocai chocolate to advance. On March 9th, 2016 U.S. District Judge Miranda Du said if the class’ claims are proven true, it’s provided enough detailed facts to support a fraud finding.
Here is detailed information on why the MXI Corporation Xocai business opportunity is claimed to be a scam:
Pyramid schemes are fraudulent by their very nature. Although pyramid schemes may claim to sell legitimate products or provide a legitimate service, the schemes do not generate meaningful income from legitimate operations. Instead, they generate income by convincing new people to participate in and contribute to the scheme. Much of the participants’ contributions are siphoned away to benefit the scheme’s promoters and managers. To keep money flowing in, participants are encouraged to bring in more participants, whose investments are used to compensate older participants and, of course, the scheme managers. There being no or little income coming in except from participant contributions, and the scheme managers having paid themselves with participant contributions, the participants, as a group, necessarily receive less than they contribute. The vast majority of scheme participants are thus doomed to lose their investments in the scheme from the outset.
MXI is a pyramid scheme disguised as a multi-level marketer of supposedly “healthy” chocolate. Participants in the MXI MLM pay MXI fees and continuously purchase chocolate for the right to sell the chocolate at retail and to receive bonuses for recruiting new Participants.
Although the wholesale price of MXI’s chocolate is far higher than the retail price of most chocolate, MXI is able to sell its chocolate to the Participants because MXI tells Participants that its business model will provide them an income-producing opportunity “unlike any other,” “with little risk of failure,” and that will allow Participants to “pick the kind of income they want to earn.” More than just chocolate, MXI sells Participants a dream of financial prosperity.
But the supposed path to financial prosperity is not based on selling chocolate at retail. Because MXI’s wholesale prices are too high, Participants have little—if any—genuine chance of selling the chocolate at even higher retail prices. Thus, Participants earn very little money from retail sales. Instead, the money that flows through the MXI system is generated by recruiting. Participants make money, if at all, by recruiting new Participants (who pay fees and buy chocolate), and not by selling MXI’s overpriced chocolate at retail.
MXI is based on Participants endlessly recruiting. This is why MXI does not meaningfully encourage or reward retail sales. Indeed, the compensation paid to Participants by
MXI is largely unrelated to retail sales. Instead, MXI pays financial rewards to Participants based on their success in recruiting new Participants. 100% of your income comes from what? Recruiting, right. 100% of that income. The more new Participants a Participant recruits, and the more wholesale chocolate those recruits buy from MXI, the more the Participant is paid. Thus, MXI’s true business model is based on roping in more and more Participants, each of whom is required to purchase minimum amounts of chocolate from MXI at inflated wholesale prices—and to pay mandatory fees for the privilege. Retails sales are so irrelevant that MXI does not even track them.
As explained in MXI’s Compensation Plan, the “duplicative process” of having current Participants recruit new Participants (each of whom must pay mandatory fees and buy chocolate from MXI at wholesale) “is the foundation” for MXI’s “Heathy Chocolate Business.” But the business is not financially healthy for the Participants. Few, if any, Participants even cover their costs. Because the scheme promoters and managers take a significant cut for themselves, Participants necessarily make less than they invest. MXI’s own documents demonstrate that at least 95% of Participants lose money.
Despite the fact that all but a miniscule percentage of Participants are doomed to incur financial losses, MXI and their representatives disseminate false and misleading statements about MXI’s business to lure new Participants. In addition, the few promoters at the top of the pyramid scheme—the less than 5% who have succeeded in lining their own pockets at the expense of the greater than 95% of Participants who lose money—cynically display their own illgotten gains to entice new Participants.
Xocai Scam Conclusion
In my opinion, the class action is justified with the information they provide. I agree that the MXI Corporation Xocai business opportunity is a scam. I would avoid this business opportunity.