Vemma settles for $238 million, agrees to stop pyramid scheme
News of a potential settlement between the FTC and Vemma first surfaced back in September.
The FTC were willing to take the case to trial but Vemma and defendants BK Boreyko and Tom Alkazin wanted to settle.
Last month the FTC requested additional time to go over the proposed settlement, with a unanimous 3-0 decision reached yesterday.
The FTC initially sued Vemma for being a $200 million dollar pyramid scheme back in August of 2015.
Vemma and Boreyko denied the claims, however today have agreed to stop running Vemma as a pyramid scheme.
In addition to that commitment, Vemma agreed to a $238 million partially suspended fine.
$470,136 of the fine is payable, in addition to the surrender of real estate and business assets.
BK Boreyko and Vemma have also been banned from conducting 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.
Should the settlement terms be breached, Vemma and Boreyko will be up for the full $238 million.
Defendants Tom and Bethany Alkazin have also settled for $6.7 million. $1.2 million of the settlement is immediately payable and the rest partially suspended.
The Alkazins are also required to surrender ‘certain real estate and business assets‘.
Boreyko’s PR spin on the settlement is that he couldn’t afford to fight the FTC in court.
[0:33] First, despite the FTC’s initial allegations, the settlement contains no admission of fault or any finding that Vemma operated unlawfully or as a pyramid scheme.
Technically sure, but agreeing to stop “pyramid scheme practices” carries with it the proviso that you were running a pyramid scheme in the first place.
The rest of Boreyko’s “press-release”, in my opinion, comes off as putting the best spin on getting caught.
If Vemma wasn’t a pyramid scheme, that would have been proven in court. It wasn’t, and so here we are.
Vemma had tried to get their insurer to cover court costs but were denied. Ironically because this wasn’t the first pyramid action against Vemma.
BK Boreyko’s defence was covered by insurance, so if he truly felt he wasn’t running a pyramid scheme he could have gone to court under the protection of insurance to fight it.
Give that, trotting out the old ‘hur hur hur we didn’t admit or deny anything‘ settlement chestnut is pretty weak.
Looking forward, Vemma having to stop paying recruitment commissions has proven to be a disaster for the company.
A steady decline in traffic to the Vemma website throughout 2016 aligns with millions of dollars in losses.
Whether Vemma can survive without paying recruitment commissions remains to be seen.
The take-away? If you’re running an MLM company in the US and have little to no retail, you’re operating on borrowed time.