Vemma Agrees To Ban On Pyramid Scheme Practices
Under a settlement with the Federal Trade Commission, Vemma Nutrition will end the business practices that created a pyramid scheme.
Vemma, which sells health and wellness drinks through a network of distributors called “affiliates,” will be prohibited under a federal court order from paying an affiliate unless a majority of that affiliate’s revenue comes from sales to real customers rather than other distributors. The order also bars Vemma from making deceptive income claims and unsubstantiated health claims.
“Unfortunately, extravagant income claims and compensation plans that reward recruiting over sales continue to plague the MLM industry,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “MLM companies must ensure that their promotional materials aren’t misleading, and that their compensation programs focus on selling goods or services to customers who really want them, not on recruiting more distributors.”
In August 2015, the FTC brought a federal court action against Vemma Nutrition Company, Vemma International Holdings, Inc., CEO Benson K. Boreyko and top affiliate Tom Alkazin The companies’ “Young People Revolution” campaign targeted college students and other young adults with materials that presented Vemma as a profitable alternative to traditional employment and depicted young affiliates surrounded by conspicuous displays of wealth, such as luxury automobiles and yachts. Vemma allegedly failed to disclose that the program’s structure ensured that most participants would not earn substantial income, and provided affiliates with false and misleading materials for recruiting others.
Under the order announced today, the Vemma companies and Boreyko are banned from any business venture that:
- pays any compensation for recruiting new participants;
- ties a participant’s compensation or an ability to be compensated to that participant’s purchases; or
- pays a participant compensation related to sales in a pay period unless the majority of the revenue generated during that period, by the participant and others the participant has recruited, comes from sales to non-participants.
The order also bars them from involvement in any pyramid, Ponzi, or chain marketing schemes and prohibits them from making misrepresentations about the profitability of business ventures or the health benefits of products. The order imposes a $238 million judgment that will be partially suspended upon payment of $470,136 and the surrender of certain real estate and business assets. It also requires Vemma to provide compliance reports from an independent auditor for 20 years.
A separate order provides similar conduct provisions against Vemma affiliate Tom Alkazin and his wife, Bethany Alkazin and imposes a judgment of more than $6.7 million, which will be partially suspended upon payment of more than $1.2 million and the surrender of certain real estate and business assets.
– Source FTC
Vemma Scam Conclusion
I was right when I made the following statement back in July of 2013 about Vemma: “There are a few things that really make me furious. One of those things is companies that target college students with scam “Business Opportunities”. These young people are the future creators of amazing new companies that can change the world, but instead they are conned out of their time and money.”
This is the response I received from BK Boreyko about my Vemma scam claims:
October 24, 2013 at 5:26 PM
Ethan, To say I disagree with your opinion is an understatement. You are a critic, and like any critic you profess the negative side of business, culture and life. I’m sure if you focused on small business opportunities, you’d point out that there’s up to an 80% failure rate and the average small business takes an after tax investment on average of $30k. Sounds like another scam yet it is the backbone of this economy and the American Dream. You say what you think and I can tell you what I know, this network marketing industry ($30 billion domestic, $167 billion worldwide) can change a person’s life. It took a bankrupt insurance salesman (my dad) and got him debt free and wealthy. I’ve seen it happen thousands of times and you are correct, it doesn’t happen for everyone or even the majority, but what on this planet does? A job, nope, people get fired or a business closes down. Owning your own business, ugh, the odds are really against you. What else is there for the average person? Even you have to admit there’s limited options for people in this economy. I just read that 88% of the jobs created over the last 12 months are part time jobs. You say nothing good about what I do for a living, yet I pump almost $2 million a week back into this economy by putting dollars that would normally get spent with Madison Ave ad execs and instead, put it into the hands of hard working people that believe in the Vemma brands and tell their friends about them. If I wanted to make you happy, I’d ‘go legit’ and start buying traditional advertising. Sorry, I’d rather continue to make my Brand Partners happy. So, you do your videos and blogs and I’ll do my thing. My dad used to tell me we find out how big of difference we make in people’s lives by seeing how many people show up at our funerals. My dad had standing room only at his and my hope is I’ll be able to top his. He’d have wanted that.
BK did have standing room only for his court case for running a pyramid scheme.