vemma-logoThere’s a lot of talk in the MLM industry now surrounding the FTC’s temporary shutdown of Vemma.

A lot of folks seem to think this was some sort of knee-jerk reaction, the setting of an example if you will, initiated through blind vengeance with a complete lack of evidence.

That couldn’t be further from the truth, and today we take a look at what went down on the 21st of August.

For those unfamiliar with the finer details of the FTC’s illegal pyramid scheme complaint against Vemma, the 21st of August marked the date the regulator was granted an ex-parte temporary restraining order (TRO).

This TRO put a halt to Vemma’s business activities and placed a Receiver in charge of the company.

Despite what you might have read elsewhere, getting a TRO is no simple task.

To get a TRO against Vemma, the FTC had to demonstrate to the court their “ultimate likelihood of success” in obtaining a preliminary injunction, and that said injunction is “in the public interest”.

This is based on evidence, the same that will be presented to the court next Thursday when the matter of the preliminary injunction comes up.

In the meantime, the court granted the FTC a TRO on the basis

The FTC has shown a likelihood that it will ultimately succeed.

Again, I’ll re-enforce that this was not some willy-nilly decision by the court.

The aim wasn’t to stick it to people earning money in Vemma, trample on entrepreneurial rights, keep you in an invisible cage, attack the MLM industry or any of the other garbage I’ve seen floating around.

In the court’s own words:

Based upon the evidence presented, there is good cause to believe that Defendants have violated Section 5(a) of the FTC Act by:

a) Operating an illegal pyramid scheme;

b) Falsely representing that members of the Vemma program (“Affiliates”) are likely to earn substantial income;

c) Representing that individuals have earned substantial income from participation in the Vemma program and that consumers who become Vemma Affiliates have the ability to earn substantial income, while failing to disclose, or disclose adequately, that Vemma’s structure ensures that most consumers who become Vemma Affiliates will not earn substantial income; and

d) Providing the means and instrumentalities for the commission of deceptive acts and practices by furnishing Vemma Affiliates with promotional materials to be used in recruiting new participants that contain false and misleading representations.

The decision by the court was based on evidence, and I cannot emphasize that enough.

The FTC has hard evidence against Vemma, which has been presented in court and convinced a Judge that immediately stopping Vemma’s business activities, till next Thursday at least, was in the public’s best interest.

Based upon the evidence presented, there is good cause to believe that:

i) Defendants are violating and, unless enjoined by this Court, will continue to violate Section 5(a) of the FTC Act;

ii) Consumers nationwide have suffered and, unless enjoined by this Court, will continue to suffer harm including economic injury as a result of Defendants’ violations of Section 5(a) of the FTC Act; and

iii) Defendants have received and, unless enjoined by this Court, will continue to receive, ill-gotten gains as a result of their violations of Section 5(a) of the FTC Act;

b) This Court finds that the public interest is served by:

i) Enjoining deceptive or unfair acts or practices that violate the law;

ii) Maintaining the status quo over assets and business documents relating to Defendants’ alleged law violations until a fair and impartial hearing may be held; and

iii) Preserving the Court’s ability to award full and effective final relief at trial or other disposition of this matter;

c) This Court further finds that, under the facts presented, the private interests of Defendants do not outweigh the public interest in enjoining future law violations, protecting assets or documents, or preserving the Court’s ability to award effective full and final relief.

And for those wondering why all of this was done in secret, without notifying Vemma:

There is good cause to believe that immediate and irreparable damage to the FTC’s ability to obtain effective final relief on behalf of consumers-including rescission or reformation of contracts, restitution, refunds of monies paid, and disgorgement of ill-gotten monies-will occur from the sale, transfer, or other disposition or concealment by Defendants of assets and/or business documents or records, if Defendants are provided with advance notice of this Order.

There was sufficient concern that advance notice of this action might impact funds recovered, which in turn would dampen the FTC’s recovery efforts. The court agreed.

In the FTC’s law enforcement experience, defendants who receive notice of the filing of an action by the FTC often attempt to immediately dissipate assets or destroy documents.

The FTC has provided, in its Rule 65(b)(l)(B) declaration, numerous examples of defendants who have or have attempted to interfere with the Court’s ability to award full and effective final relief by dissipating assets or destroying documents.

Such conduct is likely in cases such as this, where defendants have generated hundreds of millions of dollars using business practices permeated by deception.

Additionally, Corporate Defendants have connections to associated companies and bank accounts in foreign jurisdictions, including Kenya, China, Canada, Australia, Mexico, Taiwan, Singapore, and Vietnam.

Corporate Defendants can easily transfer assets to these foreign bank accounts and have done so repeatedly.

Through his control over Corporate Defendants, Defendant Benson K. Boreyko can take advantage of these connections and accounts to dissipate assets.

“Corporate defendants” refer to Vemma, who as per the FTC have multiple offshore bank accounts at their disposal.

Yes, B.K. Boreyko loves double rainbows and is piously religious. He’s also the suspected mastermind of a $200 million dollar plus illegal pyramid scheme, something the MLM industry needs to come to grips with.

We the general public have not yet seen the evidence presented by the FTC, at least not in any great detail. All we’ve seen is the allegations detailed in the FTC’s complaint, which a sizeable sub-section of the MLM industry have taken it upon themselves to mean there is no backing evidence against Vemma.

That evidence exists and will be again presented in court next Thursday.

The FTC has established that it is likely to succeed in proving that Defendants collectively have engaged in a course of conduct to deceive consumers nationwide out of hundreds of millions of dollars.

On point “A”, the illegal pyramid scheme allegation, I’ve yet to see a counter from the Vemma camp.

This is the most serious of the FTC’s allegations against Vemma, and that a concrete defense has not yet materialized is worrying.

Because the FTC is likely to succeed on the merits of its Complaint, the balance of the equities tips in the FTC’s favor considering the public interest, and immediate and irreparable harm, including the dissipation of assets, is likely absent immediate injunctive relief, this Court finds that an ex parte temporary restraining order with an asset freeze and receivership provisions is warranted.

Simply put, no amount of Kevin Thompson affidavits is going to counter the evidence the FTC have prepared against Vemma.

The only card Vemma have left to play is that of the production of retail sales figures, which would challenge the FTC’s assertion that there is no significant retail activity taking place within Vemma.

I suspect next Thursday the exact retail sales revenue figures will be made public in court, and I’d be surprised to see a figure over 10%.

That alone would clearly be enough to obtain a preliminary injunction against Vemma, leaving aside the other three issues outlined in the FTC’s complaint.

That’s where we’re currently at, and the reality is things aren’t looking good for Vemma. And if they truly don’t have significant retail sales, then rightly so.

Time to retire the cult-like “us vs. them” personas and face reality folks.


Footnote: Our thanks to Don@ASDUpdates for providing a copy of the Court’s August 21st Order granting a TRO against Vemma (available in the ASDUpdates files section).