The single word in the Vemma order a buyer should hold is “majority.” An MLM can lawfully pay recruitment-driven bonuses only if at least half of the relevant volume comes from real retail customers.
1. The claim they sold
Vemma sold liquid nutrition and energy drinks through a network it called “affiliates.” Its marketing — particularly the “Young People Revolution” campaign — pitched the program as a profitable alternative to traditional employment, recruiting heavily on college campuses. Promotional materials featured young distributors surrounded by luxury cars, yachts, and travel, with the implicit and explicit message that participation in Vemma was a path to that lifestyle. Distributors were encouraged to purchase product to qualify for bonuses and to recruit others to do the same.
2. The record
On August 2015, the FTC sued Vemma Nutrition Company, Vemma International Holdings, CEO Benson K. Boreyko, and top affiliate Tom Alkazin, alleging that Vemma operated a pyramid scheme that paid affiliates primarily for recruiting rather than for retail sales to real customers.
On December 15, 2016, the FTC announced a settlement. Under the stipulated final order against Vemma and Boreyko (3-0 Commission vote), the defendants are banned from:
- paying any compensation for recruiting new participants;
- tying a participant's compensation to that participant's own purchases; and
- paying compensation in any period unless the majority of the revenue in that period (from the participant and their recruits) comes from sales to non-participants.
The order imposes a $238 million judgment that is partially suspended upon payment of $470,136 and the surrender of certain real estate and business assets, and requires Vemma to provide independent-auditor compliance reports for 20 years.
The parallel order against Tom and Bethany Alkazin imposes a judgment of more than $6.7 million, partially suspended upon payment of more than $1.2 million and the surrender of certain real estate and business assets. Vemma had taken in more than $200 million a year in revenue in 2013 and 2014, per the FTC complaint.
This is a civil settlement, not a criminal conviction.
3. What it means for a buyer
The most useful word in the Vemma order is “majority.” After the FTC settlement, an MLM can lawfully pay recruitment-driven bonuses only if at least half of the relevant volume comes from real retail customers, not from internal participants. That is the regulatory test the FTC now applies; it was the test Vemma failed. For a buyer evaluating any MLM-style offer today, that is the single question to ask: where does the “majority” of volume come from, and is the company willing to put the answer in writing?
4. Current standing
Vemma is bound by the stipulated order for 20 years. The company has continued to operate under a restructured compensation plan that purports to comply with the order.