A federal court temporarily shut down beverage distributor Vemma Nutrition Co. after federal regulators alleged that the company's multilevel marketing operation was an illegal pyramid scheme.
The Federal Trade Commission said Thursday that it filed a complaint against the Tempe, Ariz., company in U.S. District Court in Phoenix, accusing it of misrepresenting that members of the company's program, called "affiliates," were likely to earn substantial income – as much as $50,000 a week.
A Vemma spokeswoman did not immediately respond to a request for comment.
Vemma sells its products nationwide under the brands Vemma, Verve and Bod-e
FOR THE RECORD:
Vemma Nutrition: In the Aug. 28 Business section, an article about a court temporarily shutting down beverage distributor Vemma Nutrition Co. said that prospective affiliates had to make an initial investment of $500 to $600. That was not a requirement. —
In its complaint, the FTC also alleged that the company gave its affiliates promotional material with "false and misleading representations" to recruit new members.
The FTC said Vemma's claims lured college students and other young adults who were attracted to the idea of getting rich. Among the images the company promoted, the agency said, were ones of seemingly prosperous young adults with yachts, luxury cars and jets.
Prospective affiliates had to make an initial investment of $500 to $600 for a so-called affiliate pack of products, and buy $150 of Vemma products each month to be eligible for benefits, as well as encourage others to do the same, the FTC said.
According to the complaint, Vemma does not offer meaningful incentives or discounts to encourage retail sales, only for recruiting participants.
Besides ordering a halt to the company's operations, the court also ordered a temporary freeze on the company's assets.
Vemma's founder and chief executive, Benson Boreyko, and company promoter Tom Alkazin were named as defendants, along with the company. Alkazin's wife, Bethany, was named as a relief defendant, one who profited from the scheme.
Last year, the FTC launched an investigation into the practices of Los Angeles nutritional products company Herbalife Ltd. The review, which is still pending, stemmed from ongoing allegations by New York hedge fund manager Bill Ackman that the company's multilevel marketing operation amounted to a pyramid scheme that victimized its sales force.