2Extreme, described by the Federal Trade Commission (FTC) as "a pyramid scheme disguised as a legitimate multi-level marketing business," has been permanently shut down, and settlements reached with its promoters.
On December 19, 1999, the FTC filed suit in the Maryland District against the company and three of its principles. Seeking a permanent injunction, the suit named John T. Polk, Patrick Farrah, Peter Hirsch, 2Extreme International and its successor companies USAsurance Corp/Akahi and AFEW, Inc.
The FTC charged that the company's earnings claims were false; that the company was a pyramid scheme and that consumers could not earn the incomes which were promised; and that consumers were induced to violate Federal law by using company-provided misleading literature to recruit others into the program.
The defendants are barred from "engaging in, participating in, promoting, advertising, marketing, offering for sale, selling, or assisting in any manner or in any capacity whatsoever in any multi-level marketing program."
Additionally, Polk is barred from involvement in any "business opportunity" in future, and will not be allowed to sell or transfer the names or any other identifying information about the individuals who joined 2Extreme. Polk was previously convicted in a criminal matter involving a real estate scam.
Farah is barred from misrepresenting the rewards of any business opportunity he is involved in promoting.
Hirsch is barred from involvement in any "prohibited marketing program," or pyramid scheme; and he may not engage in any multi-level marketing program activities or "business opportunity" activities without first obtaining an insurance bond in the amount of $500,000.00 as surety against his violation of any of the stipulations of the Final Order. Additionally, Hirsch may not sell or otherwise transfer identifying information about the individuals who joined 2Extreme.
Each of the defendants is required to make punitive payment to the FTC as well as payment to offset the costs of bringing suit. If it is found that defendant Hirsch did made misrepresentations in his financial statement, the Court will will immediately enter judgement against him for the sum of eighty million dollars ($80,000,000.00).
The financial judgment against Polk is $2 million, which will be satisfied by a payment of $833,000 unless it is found that Polk made misrepresentations on his financial disclosure. In that case, an immediate judgment will be entered for the entire $2 million.
The financial judgement against Farah is $500,000, which will be satisfied by payment of $25,000 unless it is found that Farah made misrepresentations on his financial disclosure.
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