Xocai Settles Pyramid Scheme Lawsuit
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. They have now settled this lawsuit against them.
Here are the details of the lawsuit and settlement:
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.
If you were an Associate or Distributor with MXI Corp. (“MXI”) in the United States at any time between May 1, 2011, and November 3, 2016, you could get benefits from a class action settlement, and your legal rights could be affected by the settlement.
The proposed Settlement Agreement categorizes Class Members as “Income Members” and “Consumer Members.” Income Members are Class Members who principally participated in the MXI program to earn income. Income Members may receive a cash award. Consumer Members are Class Members who are not Income Members. They may receive a Product Award.
The proposed Settlement Agreement provides that the defendants will establish two funds to provide two different types of compensation for Class Members:
- Cash Settlement Fund: $4,332,000 in cash will be used to pay Income Members. This fund will also be used to pay service awards, attorneys’ fees and costs, costs to administer the settlement and any cy pres payment.
- Product Fund: Up to $1,750,000 in MXI credits or gift certificates will be used to compensate Consumer Members.
Your legal rights are affected even if you do nothing. Read the information on this Settlement Website carefully. Your rights and options, and the deadlines to exercise them are explained on this Settlement Website.
The Court will decide whether to approve the Settlement. Proposed payments to Class Members who do not exclude themselves from the Settlement will be made if the Court approves the Settlement. Please be patient and check this Settlement Website to find out when the cash payments may be available.