FTC settles with alleged operators of Kentucky-based pyramid scheme

ID-100130082The pyramids in Egypt might be solid structures, but the other kind of pyramid–the pyramid scheme–has a lot more in common with a house of cards.

The Federal Trade Commission (FTC) just announced a settlement with the alleged operators of a Kentucky-based pyramid scheme that drew in 350,000 consumers over four years. The operators of Fortune Hi-Tech Marketing (FHTM) are banned from multi-level marketing and must surrender assets totaling at least $7.75 million, which will be redistributed to consumers.

FHTM was charged in January 2013 with deceiving consumers by claiming they would earn significant income by selling various products and services if they became FHTM representatives. The scheme targeted Spanish-speaking and immigrant communities in recent years, according to the FTC. Participants paid high start-up costs and monthly fees.

FHTM’s assets were frozen and a receiver was appointed pending a trial. The court-appointed receiver determined that the main business was recruiting members, not selling products.

substantial start-up costs and monthly fees to retain their positions with the company. The court subsequently halted the deceptive practices, froze the defendants’ assets, and appointed a receiver over the corporations pending a trial.

More than 98 percent of the participants lost more money than they made and at least 88 percent did not even recoup their enrollment fees. More than 81 percent of payments to participants were based on recruiting new members, not for the sale of products or services.

The settlement order also permanently bans Thomas A. Mills, Fortune Hi-Tech Marketing Inc., FHTM Inc., Alan Clark Holdings LLC, FHTM Canada Inc., and Fortune Network Marketing (UK) Limited from misrepresenting material facts about any product or service, including claims about how much consumers can earn.

The order includes a judgment of more than $169 million, which will be partially suspended when the defendants have surrendered assets with an estimated value of at least $7.75 million. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.