LEGAL


Prominent Shaklee Distributor Accused of Operating Ponzi Scheme

John W. Cranney of Belmont, Massachusetts, has been accused of operating a Ponzi scheme that defrauded victims nationwide of more than $10 million. In July 2012, the Massachusetts Securities Division filed an administrative complaint charging him and three companies he operated with multiple violations of the Massachusetts Uniform Securities Act [1]. The complaint alleges that …

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Tennessee Bill Aims to Curb MLM-Based Pyramid Schemes

Bills intended to protect consumers against pyramid-based multilevel marketing schemes have been introduced in the Tennessee General Assembly. The Tennessee Multilevel and Pyramid Distributorship Act (shown below) would: Create the criminal offense of “knowingly contriving, preparing, setting up, proposing or operating an endless chain or pyramid scheme.” Require that when income is represented, prospective distributors …

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Multilevel Marketing: Advice from the US Postal Inspection Service

Multi-level marketing is a system of selling in which you sign up other people to assist you, and they, in turn, recruit others to help them. Some entrepreneurs have built successful companies on this concept because the main focus of their activities is their product and product sales. However, there are many multi-level distributorship schemes …

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USANA Embroiled in Controversy

USANA Health Sciences, Inc. and three of its top officers are facing class-action lawsuits by shareholders who allege: Its business model was unsustainable because it required the constant recruitment of new Associates due to a high level of attrition within the its sales force. Its multi-level marketing model operated as a pyramid scheme. The majority …

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Utah Legislature Passes Pyramid Scheme “Safe Harbor” Amendments

In Utah, chain-selling schemes have become a leading export. With a new bill amending Utah’s Pyramid Scheme Act, these schemes will have state protection in Utah, similar to the de facto protection that the government of Nigeria provides to the notorious Nigerian scams. On February 17, 2005, the President of the Utah State Senate signed …

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Neways Pleads Guilty to Illegal HGH Sales; Founders Subsequently Convicted of Income Tax Evasion

In October 2003, Neways International, of Springville, Utah, pleaded guilty to a felony count of illegally distributing a product containing human growth hormone. The product, called BioGevity, was was touted as having a rejuvenating effect, including having the ability to “lower cholesterol, lower triglycerides, increase IGF-1 levels [insulin-like growth factors], improve sexual frequency, decrease wrinkle …

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The SEC and Multilevel Marketing

Many multilevel marketing companies are really pyramid schemes that are pretending to be product based. Pared to their essence, MLM programs can survive legal scrutiny by making sufficient money from product sales rather than from obtaining new recruits to the programs. “Pyramid schemes” reward participants for inducing other people to join the program. However, no …

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