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.
In a video response uploaded to YouTube Boreyko states;
[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.
It’s very good to see this come to a head but it would have been far better for boreyko pay a significant personal penalty or prison time to discourage others from similar scamming.
according to the settlement order :
phew! that’s three times the length of time herbalife [ 7yrs] will be under watch.
kevin thompson has posted a video on his facebook page sounding somewhat disapproving of the FTC for over-punishing vemma.
without mentioning the bill HR 5230, he hints that the political environment has changed and things may be different for the MLM industry in the forseeable future.
i have some questions:
– is boreyko allowed to restructure vemma in such a way that vemma USA can be separated from vemma international? in that case he might get away by adhering to this settlement only in the US, and continue the international business with his old self qualifying autoship compensation plan?
as we know, herbalife felt a softer FTC blow due to the FTC having regulatory power only over herbalife USA.
– if the bill HR 5230 does become a reality, by and large declaring affiliate purchases for self consumption to be retail, without ‘insisting’ on outside retail, what happens to this FTC/vemma [and herbalife’s] settlement? does it become void or what?
why do i get the feeling the MLM industry Knew the republicans would be moving in to govern?
It’s kinda hilarious that some MLMers are posting “news” they claimed FTC had been defeated and had to settle with Vemma with merely a slap on the wrist.
But then back in January 2016 MLM.com did the same thing: posting stuff with their blinders on… all the positive, none of the negative. They always zero in on “without admission of guilt” and how “FTC could have asked for more damages but didn’t”.
Oh, and Ted’s lamenting that FTC “couldn’t find a single victim” (of Vemma) after 14 months of investigation.
What Ted left out is, of course, a single victim “willing to testify (and be cross-examined, and thus, have identity exposed and be ridiculed and probably receive death threats about his/her “betrayal”).
ding ding breaking news!!
benson boreyko is launching a new MLM company called ‘Bode pro’ [pronounced body pro] on march 1st, 2017 for the US and canada, and march 15th for europe. prelaunch starts in feb 2017.
sooo, what happens to vemma and the vemma settlement requiring 51% retail? is he shutting down vemma?
boreyko says his new MLM company will be focused on real customers and he mentions the regulatory shift in the MLM environment [read: trump’s upcoming new FTC and less regulation].
is boreyko starting a new company to free himself from the vemma settlement, or just to move away from the tainted ‘vemma’ brand?
will have to wait for the comp plan to figure the answers!!
and oh! bode pro is not ‘about money’ but ‘about happiness’. i would think people join MLM to make some money, and making that money makes them happy, but i guess making cliched, pretentious, vacuous statements about ‘happiness’ sounds better than ‘make money!!’. the lead product is called ‘Happy’ in case the message is not clear to you.
youtube.com/watch?v=RNr1YNuvfHc&feature=youtu.be
Will review soon as I see a compensation plan. Sounds to me like the Vemma brand is/will be killed off.
If you want to know why, just Google “vemma”. Same reason Boreyko goes to pains not to mention Vemma by name in the video.
Either that or this Boreyko coming to terms with Vemma being unviable if it doesn’t operate as a pyramid scheme.
The Bode Pro promo vid was more like a pitch for drugs than an MLM opportunity… happy this, happy that etc.
You mean it was, right?
No. Vemma and Boreyko never went to trial.
Instead they agreed to stop running a pyramid scheme and settled for $238 million.
Yes Vemma was a pyramid scheme either way but it wasn’t actually proven at trial.