The Federal Trade Commission (the “FTC”) has recently filed a complaint against a group of affiliated companies alleging that they were engaged in fraudulent online “business coaching” schemes. By way of background, the FTC is charged with monitoring deceptive business practices and misrepresentations on behalf of consumers. This complaint is interesting as the FTC is venturing further into new ground, investigating a previously unexplored problem. The allegations claim that the companies used false, misleading and fraudulent advertising to capture and sell business owners on their “expert” coaching services. The defendants preyed on hopeful (and vulnerable) entrepreneurs through an expertly crafted scheme of pedaling misleading statements and promoting their own internal profit.
It is helpful to look at the specific allegations in order to determine best practices and avoid a similar fate. Through social media advertisements and online webpages, the defendant’s targeted their “get rich quick” schemes to at risk entrepreneurs. The advertisements touts “6 Steps to 6 Figures” (and in only 9 months – wow!). Once consumers have provided their email address, they are presented with a video message that promises the Aspire (defendant.) Business System a “powerful, done-for-you, digital business system containing all the tools you need to start making money”.
In reality, the Aspire program is little more than a series of videos promoting the benefits of purchasing more videos and higher priced memberships with such memberships gaining greater access. Equally as troubling, the “coaches” and “mentors” are truly poorly disguised salesmen, pushing customers to purchase the more expensive memberships. Their salary is based on commission and recruitment of new consumers. Members can also recruit new members and earn a commission. When looked at holistically it becomes evident that nothing is really sold; the membership model is nothing more than a quasi – pyramid scheme.
The complaint alleges that the Defendants themselves must have been aware of the high level of garbage they were pushing. Specifically, the Defendants admit to operating “a un-advertised and hard to find website”. A tiny link at the bottom of their webpage reveals a disclaimer that the majority of consumers in the program will earn less than $100 / month and that less than 1% earn six figures. This is concerning in light of the advertisements’ forceful claims. Further, the Defendants engaged in suspicious payment processing and entity structuring, shielding the true owner of accounts to avoid fraud monitoring systems.
The complaint alleges the $14 Million in damages to the consumers.
In this digital age, we all must be vigilant against online scams, but this does remove the burden of responsibility from those who are engaging in the duplicitous activities. This is a gross manipulation of the entrepreneurial spirit, and we hope the FTC will continue the enforcement action.
Read the full complaint here