Financial Education Services (FES) has settled fraud charges brought about by the FTC.

On August 5th, a Michigan District Court ordered FES permanently closed and awarded the FTC a $324 million judgment.

The FTC filed suit against FES back in 2022, alleging the company “scam[med] consumers out of more than $213 million”.

Following FES’ failure to dismiss the case last year, the company has reached a settlement with the FTC.

The facts alleged in the Complaint will be taken as true, without further proof, in any subsequent civil litigation by or on behalf of the FTC, including in a proceeding to enforce its rights to any payment or monetary judgments.

As per the Michigan District Court’s August 5th orders, against FES co-founders Parimal Naik and Michael Toloff, Christopher Toloff, Financial Education Services Inc., United Wealth Services Inc., VR-Tech LLC, VR-Tech Mgt LLC, Youth Financial Literacy Foundation, LK Commercial Lending LLC, Statewide Commercial Lending LLC, CM Rent Inc. (collectively “the FES Defendants”);

  • the FES Defendants are permanently banned from selling “any credit repair product or service”;
  • the FES Defendants are banned from “advertising, marketing, promoting, of offering a pyramid scheme, Ponzi scheme, or chain marketing scheme;
  • the FES Defendants are permanently banned from operating an MLM company, making false claims about any offered business venture, using telemarketing, improperly obtaining consumer credit reports;
  • the FES Defendants are liable for a suspended $324 million judgment;
  • Gerald Thompson is liable for an individual $215,000 judgment;
  • Christopher Toloff is liable for an individual $1.7 million judgment

The FTC’s agreement to the suspension of part of the judgments is expressly premised upon the truthfulness, accuracy, and completeness of Settling Defendants’ sworn financial statements and related documents.

 

Update 25th September 2024 – Making a note that Parimal Naik is the only FES defendant that wasn’t explicitly banned from operating an MLM company. /end update

 

The FES Defendants are further subject to 12 years of compliance reporting to the FTC.

As part of his judgment and to satisfy personal financial liability, Michael Toloff was ordered to immediately surrender

  • $300,00 held in escrow;
  • the balance of funds held in VR-Tech MGT LLC and Statewide Commercial Lending LLC bank accounts;
  • a 2018 Porsche Panamera ($55,000);
  • a 2022 Lincoln Corsair ($40,000);
  • a Bennington pontoon boat ($10,000);
  • a property in The Villages, Florida ($1.2 million); and
  • a property in Petoskey, Michigan ($350,000)

Between the other FES Defendants, the following assets were also ordered surrendered;

  • $2 million held in escrow;
  • $215,000 held in escrow (Gerald Thompson);
  • $3.5 million in cash;
  • a property in Fort Myers, Florida;
  • a property in Naples, Florida;
  • a property in Novi, Michigan;
  • a 2021 Rolls Royce (Parimal Naik);
  • a 2021 Lincoln Aviator SUV (Parimal Naik);
  • a 2019 Mercedes Benz S560 sedan (Parimal Naik);
  • a 2023 Mercedes Benz G-Wagon SUV (Parimal Naik);
  • a 2019 BMW X850 XI sedan (Parimal Naik);
  • “pontoon boats” identified on a financial statement from Parimal Naik;

Cash amounts (in brackets above) may be substituted in lieu of surrender.

A previously appointed FES Temporary Monitor has been converted into a Receivership, “for the sole purpose of liquidating certain assets”.

Speaking on the FES Defendant’s fraudulent conduct, Samuel Levine, Director of the FTC’s Bureau of Consumer Protection stated;

These companies promised to clean up people’s credit but failed to deliver.

Meanwhile, honest businesses make money selling products and services, not by recruiting, and the drive to recruit, especially when coupled with inflated income claims, is the hallmark of an illegal pyramid.

The FTC is committed to stopping deceptive credit repair tactics and shutting down illegal pyramid schemes that prey on struggling consumers.

Retail sales over recruitment is a primary focal point in BehindMLM analysis of MLM companies. This is reflected in BehindMLM’s published 2018 Financial Education Services review.

Simply put: From a retail perspective Financial Education Services doesn’t make much sense.

Financial Education Services was previously fined $1 million for running a pyramid scheme by Georgia.

Outside of regulatory enforcement actions, FES was also sued for wrongful terminations and unpaid commissions in 2023.

In April 2024 the Michigan District Court denied the class-action. The parties were instead ordered to reach an agreement through arbitration.