BREAKING: Washington State Attorney General Sues Lularoe, Allege "Pyramid Scheme"

On Friday, 25-JAN-2019, the Washington attorney general filed a lawsuit against LulaRoe, the clothing marketer, for operating as a pyramid scheme that defrauded the "fashion consultants" it employs.

Without going into too much detail, LuLaRoe is best known for selling leggings (and other stuff) on a lottery system. Each consultant is expected to buy $2000 to $9000 worth of stuff upon signing up. Yet they will not know what they will receive.  Since 2014, over 3500 Washington residents signed up, but less than 2000 remain active today. Between 2014 and 2017, LuLaRoe consultants receive bonuses based on how much inventory they and their recruits have PURCHASED (not sold) from the company.  It is obvious that the more the consultants recruited (and each recruit bought THOUSANDS of dollars of stuff), the more bonuses were paid out. The compensation plan was changed in 2017 to be only based on sales of the consultant alone.

There are PLENTY of other problems with the company's practices. The leggings have to be unpacked to be show to potential customers (including for eBay), yet LuLaRoe have refused to provide refund if the package was opened. There were frequent charges of "low quality". Multiple designers have charged LulaRoe of stealing their designs and patterns without their permission. After multiple complaints, LLR seems to have moved to taking vector art and remixing them, but again, many seems to have been used without the proper license.

MLMSkeptic had penned a commentary "Is LuLaRoe eating its own tail?" in 2017, when LuLaRoe attempted to serve a "discovery" on a blog critic who goes by MommyGyver, claiming she had disclosed company secrets.

FTC shuts down Vemma for being a $200 million pyramid scheme...

It brings me no joy to see this news, which was a surprise even to me... I expect action, but not this fast. 

But to summarize, Vemma's assets has been frozen and operation stopped based on temporary restraining order as issued by court based on lawsuit brought by the Federal Trade Commission.

Quoting AP / CNBC story:

The Federal Trade Commission said Wednesday that Vemma Nutrition has been temporarily shut down for operating a pyramid scheme that promised college students riches if they sold its nutritional drinks, but most ended up losing money. 

The consumer protection agency said that Vemma told recruits that they could make as much as $50,000 per week selling its nutritional beverage Vemma, energy drink Verge or protein shake Bod-e. An initial investment of $600 was paid for products and business tools and $150 in Vemma products had to be bought each month to receive bonuses. The FTC said Vemma provided little help on how to sell its products and instead rewarded them for recruiting more people. 

Vemma earned $200 million a year in 2013 and 2014, according to the FTC.
A representative from Vemma, which is based in Tempe, Arizona, did not immediately respond to a request for comment.

A full copy of the complaint and the 5 summary points are available at BehindMLM.com:

Count 1 – Vemma is an “illegal pyramid” scheme 

Defendants promote participation in Vemma, which has a compensation program based primarily on providing payments to participants for the recruitment of new participants, not on the retail sale of products or services. 

Defendants’ promotion of this type of scheme, often referred to as a pyramid scheme, constitutes a deceptive act or practice. 

Count 2 – Income Claims 

In numerous instances in connection with the advertising, marketing, promotion, offering for sale, or sale of the right to participate in the Vemma program, Defendants have represented … that consumers who become Vemma affiliates are likely to earn substantial income. 

In truth and fact … consumers who become Vemma affiliates are not likely to earn substantial income. 

Count 3 – Failure to Disclose 

In numerous instances … defendants have represented … that individuals have earned substantial income from participation in the Vemma program, and that any consumer who becomes a Vemma affiliate has the ability to earn substantial income. 

In numerous instances … Defendants have failed to disclose, or disclose adequately, that Vemma’s structure ensures that most consumers who become Vemma affiliates will not earn substantial income. 

This additional information would be material to consumers in deciding whether to participate in the Vemma program. 

Count 4 – Means and Instrumentalities 

By furnishing Vemma affiliates with promotional materials to be used in recruiting new participants that contain false and misleading representations, (Vemma) have provided the means and instrumentalities for the commission of deceptive acts and practices. 

Count 5 – Relief Defendant 

Relief Defendant Bethany Alkazin, has received … funds or other assets from (Vemma) that are traceable to funds obtained from (Vemma’s) customers through the deceptive acts or practices described herein. 

Relief Defendant will be unjustly enriched if she is not required to disgorge the funds or the value of the benefit she received as a result of (Vemma’s) deceptive acts or practices.

But what does this mean to you, the Vemma affiliate, other MLM participants, and so on? What will happen on the hearing on September 3rd?

Here's a few layman's speculations. Remember, I'm not a lawyer, and I have no insider information. (Lack of such, however, has not stopped various Vemma "leaders" from issuing feelings, such as "Vemma doesn't deserve to be shut down" "It's just a complaint, not a lawsuit" "The lawsuit is a joke", "FTC bit off more than it can chew" and so on)

But let's be realistic here... If you want people to lie to you and tell you everything will be alright, go read whatever verbiage your upline put out. You're here for some real analysis.

Wake Up Now goes after its former head: Sues ex-CEO Kirby Cochran, et al for $70M

Only a few days ago did I report that Wake Up Now (WUN) may be heading for eternal slumber. Turns out, it's got some last gasp yet, but only to drag down somebody with it.

You heard it here, folks (thanks to BehindMLM for breaking the news)  Wake Up Now wanted to take down someone with them, and that would be their former CEO Kirby Cochran (resigned October 16, 2014), as well as Elaine Cochrane (wife of Kirby, ex-legal counsel), Nathan Cochrane (son of Kirby, also ex-WUN staff) and some guy called Juan Carlos Lozano (Mexico area WUN leader).

However, by the various titles / headings used in the complaint, this was clearly written as a PR piece, not a legal complaint, as it contains such gems as:

• Kirby Cochran Gets His Nose into The WUN Tent
• Kirby Cochran Infiltrates WUN 
• Kirby Gets "Loving Brother" Gary C. In On The Action
• and so on 

Still, looking past the titles, it's clear that WUN painted an interesting story... they claimed that Kirby Cochran basically allowed WUN to go public by merging with one of his existing companies, and in doing so, basically took it over from the inside, and proceed to give his wife and son cushy positions doing little to nothing, contracted his brother as a consultant to eat up all the profit, then spent more money scrapping the old system for a new one, which didn't work. Upon resignation, Kirby Cochran allegedly solicited many top people in and around the company to launch a new one, ignoring the non-compete agreement and went after all the foreign IBOs, mostly by allegedly spreading lies and defaming WUN. 

But how true is this? 

WSJ: T. LeMont Silver Blames Everyone But Himself for Being Sued as "Net Winner" in Zeek

Wall Street Journal article, published 2014-DEC-03 specifically named T. LeMont Silver, a Zeek "net winner" (i.e. he got more than he put in while others lost money), and serial Ponzi participant, as someone who admits he's an idiot, yet blames everybody except himself.

In the WSJ article SEC on Lookout for Web-Based Pyramid Schemes by Jean Eaglesham, it specifically named GoFunPlaces (and its parent eAdGear) as a scam shut down by the SEC.

At the end, Mr. T. LeMont Silver Sr. was mentioned by name, where the author wrote:

"Mr. Silver said he is a marketer with little knowledge of the business operations of the companies he promotes"

Yet he wants you to join him in making money.

Tsk, tsk, tsk...

News Update 01-AUG-2014: Zeek Refund Coming 30-SEP-2014; More Zeek Winners Get Sued; Zeek Heads Reach More Settlements

Yep folks, this is turning into an all Zeek Rewards Ponzi aftermath update. And yes, I have links, which you should ALWAYS CHECK to make sure I'm reporting stuff accurately. (And if you don't see links, ask)


Zeek Refund Round 1 May Be Coming 30-SEP-2014

According to court documents as reported by ASDUpdates, Judge Mullens has approved the first distribution of refunds for Zeek Rewards, tentatively scheduled for 30-SEP-2014

Stay tuned to the Zeek Rewards Receivership website for actual announcement. Speaking of which...