BK Boreyko’s objection to Vemma preliminary injunction
As required by court procedure, the CEO and Founder of Vemma, BK Boreyko, today filed a response to the FTC’s allegation that Vemma is an illegal pyramid scheme.
In his response, Boreyko complains about the manner in which the FTC brought their case against Vemma, offers numerous strawman arguments seeking to weaken the Thacker declaration and ultimately fails to address the lack of significant retail activity taking place within Vemma.
There are two parts to Boreyko’s response, a filed objection to the court-granted TRO and an accompanying declaration.
Below I’ve treated the two documents as one, relying on statements from both.
In opening his objection, Boreyko (right) claims the FTC
sought and obtained ex parte relief based on an incomplete, misleading, and vastly insufficient presentation of the facts and circumstances regarding Vemma’s operations (and success).
Boreyko attempts to elaborate on how, but instead delivers supplementary information that does not address the core issues brought forward by the FTC.
One of the most obvious issues raised early on is Boreyko’s protesting of the asset freeze against him currently in place.
The FTC has ambushed Vemma and its principal, and improperly stripped Mr. Boreyko of his income, assets, and ability to earn a living.
Rather than cooperate to reach an agreeable pre-trial resolution, the FTC has prevented Mr. Boreyko from accessing funds to pay the most basis of expenses – including court-ordered family support obligations.
There is no basis to deny Mr. Boreyko access to his own funds in order to fulfill obligations to his family and creditors.
After seeking a consensual solution with the FTC and Receiver and being denied, Mr. Boreyko now respectfully requests the assistance of this Court to provide a set amount of funds, according to an approved budget to be submitted under seal, to pay for living expenses and family support.
How much Boreyko wants each month is unknown, but he claims he has
to pay child support of $8,000 per month, along with payments to my wife of approximately $13,000 per month.
Despite the TRO and asset-freeze only going into effect last month, Boreyko claims himself, his kids and ex-wife are already suffering “enormous hardship”.
Far be it from me to point out that the FTC have alleged Vemma is illegal. Boreyko, at least as far as I know, has no source of income unrelated to Vemma.
As it stands, that means the funds Boreyko wants access to are the potential proceeds of illegal activity.
Bringing up financial hardship before the ink has even dried on the TRO, and in light of the preliminary injunction hearing set early next week, seems a bit of a hollow argument against the granting of the injunction to make.
What is financial hardship after all other than a symptom of a much bigger problem. It’s certainly not an argument point either for or against the granting of a preliminary injunction (or any other injunctive relief).
Boreyko then goes on to question why the court granted the FTC’s TRO request in the first place.
Generally, courts have been extremely hesitant to grant an ex parte TRO pursuant to Rule 65.
An ex parte TRO may be granted where “notice to the defendant would render fruitless the further prosecution of the action.”
Accordingly, in order for a party seeking an asset freeze to show likelihood of irreparable harm, the party “must show a likelihood of dissipation of the claimed assets, or other inability to recover monetary damages, if relief is not granted.”
Boreyko goes on to cite case-law examples where the FTC were denied a TRO, which to me only drives home the seriousness of the FTC’s case against him.
The fact of the matter is the court has already granted a TRO against Boreyko, based on evidence presented at the ex-parte hearing.
Pointing out that courts don’t hand out ex-parte willy-nilly and then insinuating that this is what happened with Vemma seems a bit of a defeatist strategy to me.
The rest of Boreyko’s response mostly deals with why the preliminary injunction shouldn’t be granted, mostly specific to the asset-freeze.
Basically the thrust of Boreyko’s response goes like this:
The Thacker Declaration is 24 pages long, and it purports to incorporate over 1,840 pages of materials in its Appendix.
Based on statements made in the Thacker Declaration, the Commission has been investigating since at least December 4, 2014 [see Thacker Declaration ¶20] (for roughly 10 months) and very likely much longer.
Based on the applicable authorities, and the utter dearth of any evidence or even any allegation (other than pure conjecture and irrelevant speculation) to support the relief sought by the FTC, this particular asset freeze obtained by the FTC may be the most reckless asset freeze possible when considering the facts and circumstances of this Case and the applicable law.
A 24 page declaration and 1,840 pages of non-evidence? And let’s not forget the Thatcher declaration is merely one component of the FTC’s complaint against Boreyko and Vemma.
On that note, most of Boreyko’s mention of the Thacker declaration fails to directly challenge what is in the report. Instead Boreyko’s presents supplementary information, the point of which I’m not too sure of.
The highlighted excerpts from the January 26, 2015 call from Thacker to Vemma representative David Treat (“Treat”) exemplify the use of out of context “sound bites” by the FTC to try to prove its claim that Vemma’s business is not primarily devoted to the sale of products.
Sound bites or not, what was said was said. How does referring to evidence as a “sound bite” have any bearing on the content of the evidence submitted?
In this regard, Thacker highlights only an isolated statement by Treat that Vemma is “not selling the product.”
What is conspicuously absent from the highlighted portion of Thacker’s undercover call is…
Missing from the highlighted portion of the transcript of the 2/7/15 Vemma event referenced in the Thacker Declaration were (among other things) the following Vemma product endorsements…
Which are also irrelevant.
Missing from the highlighted portions of the transcript of the 4/8/15 Vemma event referenced in the Thacker Declaration were…
Even more examples of irrelevancy. And on it goes, wherein Boreyko doesn’t challenge the content of the Thacker Declaration, but merely attempts to drown it out with supplementary information.
And then there was also this:
I cannot respond to the non-salary payment claims raised in ¶16 of the Thacker Declaration because no documentation is provided.
So uh what, Boreyko himself has no idea what his non-salary payments are? Yeah, ok then.
Vemma’s financial losses are briefly discussed, with Boreyko brushing them aside as operational expenses:
Had the Receiver discussed with me continued operation of the Vemma business, he would have learned that:
(i) the company had just finished its annual convention (June 2015) at a cost of approximately $1 million; (ii) the new Bod*e Build product was launched in January 2015 at a cost of approximately $700,000; (iii) in the second half of 2014 operations in Thailand, Viet Nam, and Colombia were opened at a significant cost to the company; and (iv) I and the other shareholders of Vemma were about to inject over $1.3 million dollars into the company to cover recently experienced short falls and to cover expansion of the business.
Like any business, Vemma from time to time experienced ups and downs in its business.
Perhaps, but what – you’re going to assert Vemma losing millions of dollars in recent years was part of a bigger plan? Yes businesses go through ups and downs but since 2013’s YPR recruitment explosion in revenue, according to the Receiver Vemma’s sales revenue has continued to slump.
Former top Vemma affiliates have also gone on record to complain about shrinking commission payouts over the past 12-18 months.
As I mentioned earlier, Boreyko fails to address the lack of retail in Vemma. And when he does touch on the issue, again it’s through supplementary information.
Boreyko has attached photos of various retail outlets with Vemma in their fridge. But how that specifically addresses the Vemma Receiver’s claim that only 14% of sales revenue generated by the company was from non-affiliates (retail customers), I have no idea.
And I don’t think the Judge is either.
I cannot begin to calculate the harm caused by the TRO on the Vemma business, but it is already profound.
Among other things, Vemma’s 7 year relationship with the Phoenix Suns as the team’s official energy drink was abruptly cancelled as a result of the TRO.
After my 21 years of successfully operating as a CEO of two Direct Selling Association (“DSA”) member network marketing companies, generating hundreds of local jobs, creating part time incomes for tens of thousands of families around the world – to not even be warned by the FTC of potential problems is unthinkable in this country.
To shut down my company worldwide, freeze all my assets and accounts, to label me a flight risk without any basis whatsoever, to destroy my company, my brands and my reputation around the world in the media, should never be allowed to happen before a simple phone call.
The damage to families, the damage to my family, and the damage to my reputation cannot be undone. 21 years of very hard work, massive risk taking, and a tremendous amount of commitment deserves better.
The very nature of a pyramid scheme is to harm people. Vemma, at its core mission, exists to help people.
I know the difference, and I would never engage in the latter
We now wait for a Judge to rule on whether or not a preliminary injunction should be granted against Vemma. A hearing is currently scheduled for September 15th.
Footnote: A copy of Boreyko’s response and accompanying declaration can be viewed courtesy of Truth In Advertising (“Boreyko’s Objection to FTC’s Request for Preliminary Injunction” and “Declaration of Benson K. Boreyko in Support of his Objection to FTC’s Request for Preliminary Injunction” respectively).
It’s standard denial
* They have nothing on me
* Any thing they have they OBVIOUSLY misunderstood
* Why? Because I said so
* Why are they picking on me? I’m a REPUTABLE businessman!
* They never did that before!
He started ASSUMING he’s on the side of right, and constructed his own alternate reality based on that assumption, i.e. if you ASSUME that BK is reputable, then any evidence against him is obviously either wrong or misunderstood.
AND so on and so forth.
I’m calling it the “what about…” defense.
FTC: We alledge this based on this evidence…
BK Boreyko: Yes, but what about…
Hopefully that’ll play out in court like this:
Judge: What about it?
Maybe then we’ll get an actual answer to the FTC’s complaint.
I’m currently going through Vemma corporate’s 43 page response, article up later today.
Do you think he is all wrong? Any comments?
COPIED from MLM attorney Kevin Thompson’s Facebook group: facebook.com/mlmlegal, about his view on Vemma’s response to the FTC’s lawsuit:
If the Judge is interested in ignoring the no retail sales issue and disingenuous data provided by Vemma, then sure – they have a shot.
I’ve addressed the issue with Vemma’s autoship figures in my analysis of Vemma’s response.
I assume the FTC will equally destroy them in court next week.
Seems KT didn’t check Vemma material before replying: there’s THREE ways to qualify:
* buy $120 yourself
* buy $60 and have both of your downlines buy $60 (each)
* have both of your downlines buy $120 (each)
So affiliates buy $120 for first month (which gives them time to find suckers for NEXT month) and get on $60 monthly autoship then as long as they get two recruits next month they’re set. And the system replicates.
Can someone dig up how much sales did Vemma did in 2014?
That and price of affiliate pack would give us some idea of number of affiliates that joined, since according to vemma, “Affiliate Pack purchases accounted for 16% of total sales in 2014;” and the logic that only a prospective affiliate would buy an affiliate pack.
Compare that to number of affiliates Vemma claimed as per their income disclosure would give us an idea how much “churn” they have.
BK has a Press Release claiming they broke 200 million “again”.
Assuming 200 million sales, 14% of that, at $600 each… new affiliates are, 46667 (roughly).
Their 2014 disclosure has only graphs, no numbers. Going back to their 2013 disclosure shows:
These active** Affiliates totaling 105,251 in 2013 (only 30%, as per their own accounting)
Estimating active affiliates at 120000 for 2014 (seems reasonable) suggests 30000+ quit after joining, roughly 25% of all “active” affiliates.
Depending on how many months they lasted, that could skew Vemma’s 42% figure by a significant margin.
Page 10 in the Preliminary Report from the Receiver.
As you probably can see, I had some difficulties with the formatting, so I decided to exclude 2012 and 2011 from the list.
I totally forgot about that. So there you go, with chain-recruitment the average monthly auto-ship of 120 QV is more than enough to qualify for commissions.
I don’t think we should try to calculate that one. The Preliminary Report from the Receiver was mostly based on Vemma’s own financial data (Vemma’s own customer definitions, affiliate definitions, etc.)..
We can of course try it, but …
UNITED STATES, 2014
Number of orders, affiliates____541,279____$69,382,622__77.1%
Number of orders, customers__235,861____$20,630,446__22.9%
Total orders, both groups_____ 777,140____$90,013,068
When you see “customer sales” in the +20% range, it can be related to manipulation of data to look “legal enough, not the worst company” — in an attempt to fly under the regulatory radar.
MLM companies use that type of reasoning, so called “chased by the regulatory bear” ideas. If your group is being chased by a bear (out in the woods), you will only need to run faster than the slowest person in your group.
The bear will only manage to attack the slowest one if you all run away from it. So you won’t need to run faster than the bear. “Faster than the slowest person in your group” is usually enough.
“Look more legitimate than the worst ones” is usually enough to avoid regulatory actions.
Doesn’t work if the bear already got you in a bear hug though. The proverbial bear here won’t respond to “Oh, a puppy!” tactic.