A U.S. District Court in Arizona has agreed to freeze the assets and operations of supplement marketer Vemma Nutrition temporarily after the FTC filed suit against the company (it markets the Verve energy drink and Vemma Bod-e weight loss product) claiming it is an illegal pyramid scheme that uses video, online come-ons and testimonials to "lure" college students and other young people as "affiliates," most of whom end up not making money and even losing it.
The FTC is seeking a permanent injunction.
“Rather than focusing on selling products, Vemma uses false promises of high income potential to convince consumers to pay money to join their organization,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection, in announcing the court had agreed to impose a restraining order.
The marketing materials for the company show young people with luxury cars, yachts and jets, says the FTC, claiming they can earn as much as $50,000. Instead, says the FTC, it is an illegal pyramid scheme that rewards affiliates for recruiting participants rather than for selling products.
In addition to being a pyramid scheme, the company is being charged with "making false earnings claims, failing to disclose that Vemma’s structure ensures that most people who join will not earn substantial income, and furnishing affiliates with false and misleading materials to recruit others."
Vemma said on its Web site that the district court had appointed a temporary receiver for the company that had suspended operations until a preliminary injunction hearing, adding: "There is no additional information at this time."