Tempe-based Vemma is in trouble with the Federal Trade Commission for allegedly being a "pyramid scheme," roping people into selling nutritional drinks and other products at a financial loss.
The FTC filed a complaint against the company this week, temporarily halting the business. In a press release detailing the complaint, the FTC writes that Vemma's "websites, social media, and marketing materials show seemingly prosperous young people with luxury cars, jets, and yachts, and falsely claim that Vemma affiliates can earn substantial incomes – as much as $50,000 per week."
But the Commission says the wealth Vemma advertised was not real, and instead the people recruited to sell often paid $500-$600 for "affiliate packs" of its products, which include the Verve and Bod-e energy drinks, and other drinks touting nutritional benefits.
According to the press release: "Vemma is an illegal pyramid scheme that rewards affiliates for recruiting participants rather than for selling products, the FTC alleges."
Vemma is known for its presence around college campuses — including ASU's. Al Jazeera America investigated the company last year, finding that while the company told students it was possible to earn a quarter of a million dollars a year, most ambassadors were averaging about $13,000 a year. Meanwhile, Vemma pulled in $200 million last year and in 2013, the FTC said.
Nolan Anselmi, who studies marketing at Scottsdale Community College, said he was recruited, then dropped by Vemma in 2013, when he was in high school in Montana (the company no longer enrolls minors). While he's not convinced by the FTC's pyramid scheme claims, the 18-year-old said the company goes after the young and inexperienced.
If you like this story, consider signing up for our email newsletters.
SHOW ME HOW
"I think that’s where they get their bad rep from, because there’s a bunch of kids that have no experience in the industry that are getting pulled in," he said.
Because he was still new to marketing, Anselmi said he put more money into the company than he was ultimately paid.
Vemma did not respond to requests for comment on this story, but does have a short statement on its webpage explaining that a temporary receiver is currently in control.
According to a Facebook post from Vemma's CEO, Benson Boreyko (who is named as a defendant in the complaint), a hearing is scheduled for September 3.