Yet another member of the Direct Selling Association is at the center of pyramid fraud controversy. This time, DSA member, Talk Fusion. Earlier this year, Direct Selling Association member, Vemma, after receiving an “ethos” award from the DSA, was sued by the US government, FTC, for running a pyramid scam. Also, another attorney member of the DSA who received awards from the DSA for service in fighting against consumer protection law enforcement on MLMs was sued for his role in aiding the MLM, Zeek Rewards, which was closed down by law enforcement for running a pyramid/ponzi fraud.
The DSA has claimed regulation of MLMs against pyramid fraud is unnecessary due to its members upholding a voluntary “code of ethics.”
The lawsuit agaist DSA-member, Talk Fusion, is seeking class action status. It makes all the usual claims that similar suits against other MLMs have all made — a recruting-based “endless chain” with overpriced products serving only to camouflage a money transfer, in which virtually no one makes money, and those who try are guided to relentless recruiting of new participants’ whose money serves as the source of rewards, etc., etc.. These are the same charges brought against other MLMs when they are prosecuted. It’s an old story.
Class action lawsuits in the MLM field seldom produce any change. The usual outcome is a financail settlement with victims getting small restitution and the attorneys getting the lion’s share. At present, despite their limited impact, the class action suit remains the only option for some justice for victims since the FTC has reneged on its duties for more than three decades. They also provide insight and information for consumers to learn about the MLMs that are sued, even if the cases are misleadingly presented as if the MLM being sued is unique or signfiicantly different from hundreds of others in operation
If they were to go to trial, the class action suit has the potential for effecting change by adding to the case law on pyramid schemes. This has occurred on rare occasions but normally the MLMs offer cash sufficient to prevent the wheels of justice from moving forward. The most recent example was the absurdly small cash settlement agreed to by attorneys that had sued the large MLM, Herbalife. Victims got next to nothing but the attorneys that brought the suit received a handsome payment.
- A news story on the suit provided is here
- Blogger and and activist, Ethan Vanderbilt, has provided a good overview of the suit and a copy of the complaint on his site.