Vemma Shut Down: FTC Says Energy Drink Company A Pyramid Scheme

In a press release yesterday, the Federal Trade Commission stated that it has asked a federal court to stop the Vemma Nutrition Company, which it alleges is a pyramid scheme, from continuing to conduct business. The United States District Court for the Arizona District filed a restraining order, effectively blocking Vemma from continuing, as well as freezing the company’s assets.

Two businesses and three individuals are named in the FTC release: Vemma International Holdings Inc, Vemma Nutrition Company, Tom Alkazin, Bethany Alkazin, and Benson K. Beroko. Beroko has been previously investigated by the FTC for a multilevel marketing company called New Vision that promised a cure to ADD/ADHD.

The FTC states that Vemma had sales of more than $200 million in 2013 and 2014 and used a distribution network comprised largely of college students with promises of getting rich without having to work regular hours. The FTC release details how Vemma promised recruits earning potential limited only by their own efforts, including the possibility of earning $50,000 per week.

Recruits would typically purchase a Vemma “Affiliate Pack” for a cost $500 to $600. To remain eligible for bonuses, Vemma recruits were required to buy $150 of Vemma products each month. Vemma recruits were also encouraged to give away samples but offered no discounts or volume incentives. These practices lead to Vemma becoming a losing proposition for the majority of participants, the FTC reports.

Vemma employed slickly produced videos in its efforts to recruit unassuming distributors.

https://www.youtube.com/watch?v=wXPPsmxKUoQ

An apparent former Vemma Diamond Leader, Mirojean Guezoumian, uploaded a YouTube video in 2013.

https://www.youtube.com/watch?v=xhEBohfFLxA

“The fact is, at a dime a liter, with 118 people in my organization, doing my best to be a leader, only four of them were breaking even, and that bothered me because a lot of people were working hard,” Guezoumian can be heard stating.

Jessica Rich, the director of the FTC Bureau of Consumer Protection, called Vemma a pyramid scheme. She spoke about the decision to shut Vemma down.

“Rather than focusing on selling products, Vemma uses false promises of high income potential to convince consumers to pay money to join their organization. We are also alleging that Vemma is an illegal pyramid scheme.”

The FTC release states that Vemma spent most of its energies toward recruitment, instead of retail sales — most Vemma affiliates expend a great deal of time, effort, and money without being able to build profitable businesses.

The FTC vote authorizing commission staff to file the complaint was 5 to 0. Vemma claimed that it held a “BBB” accreditation from the Better Business Bureau, which the consumer watchdog refutes on its website.

[Screenshot Courtesy Vemma Website]