Consumers who lost money investing in an illegal pyramid scheme on the Internet will recover their funds, under a settlement obtained by the Federal Trade Commission and the scheme’s promoters, and Fortuna Alliance. Under the settlement, every Fortuna member is entitled to receive a refund in full for their membership fees.
In the complaint detailing the charges, the FTC charged that Fortuna Alliance, L.L.C., and four officers, marketed the pyramid scheme through a home page on the World Wide Web and with printed promotional materials. Using fabulous earnings claims, they induced tens of thousands of consumers in over 60 countries around the world to pay between $250 and $1750 to join their pyramid scheme, claiming that members would receive over $5000 per month in “profits” as others were induced to “enroll.” In addition, Fortuna and its officers provided advice and promotional materials for members to recruit others to join the pyramid, both through direct contact and by setting up their own web sites. The FTC’s complaint asked the court to order a permanent halt to the alleged deceptive practices and to order redress for the people Fortuna signed up to the scheme.
The redress program will offer consumers who invested in the scheme, including foreign nationals, full refunds for membership fees they paid. The money will come from a fund initially using money frozen in the U.S. and $2.8 million transferred from Antigua, W.I. If this is insufficient to meet refund requests, defendants will pay additional money to ensure full refunds for all who seek them. Consumers who received refunds from the $2 million already distributed will not receive further payments. The FTC expects refund notices to be sent out by the end of March.
"Our expert calculated that over 95% of the people who invested in Fortuna would have lost money if we had not shut this pyramid down." said Jodie Bernstein, Director of the FTC’s Bureau of Consumer Protection. "Under this settlement, any investor who lost funds will be able to recover them. But big losses are the bottom line in all pyramid schemes. We closed down Fortuna’s web site quickly and the settlement will provide consumer redress in this case. But we hope that all consumers get the message: pyramid schemes are illegal and in the end they all fail."
Under the agreement to settle the FTC charges, Fortuna will set aside $2.8 million to fund a consumer redress program. Earlier, a federal district court directed the return of $2 million and an additional $350,000 remains frozen in U.S. banks. When the FTC’s case against the firm was filed last May, a federal district court issued a temporary restraining order and froze the company’s assets pending trial. At the same time, the FTC, with the assistance of the U.S. Department of Justice’s Office of Foreign Litigation, also obtained a court order in Antigua, freezing Fortuna funds that had been transferred to an offshore bank there. As part of its case, the FTC sought a permanent injunction against the pyramid scheme, repatriation of funds transferred offshore, and redress for consumers.
To settle the FTC charges, Fortuna Alliance and its principals also will be barred from "engaging, participating, or assisting in any manner or capacity . . . the advertising, promoting, offering for sale, or sale, of any chain or pyramid marketing program. . . ." In addition, the defendants will be barred from making deceptive earnings claims in conjunction with any marketing or investment program they offer. Bookkeeping and monitoring provisions are included to allow the FTC to track compliance with the terms of the settlement.
The Commission vote to accept the proposed consent judgment was 5-0. The FTC’s Seattle Regional Office handled the case, with invaluable early assistance from the Washington State Division of Financial Institutions’ Securities Division; the Bellingham, WA police dept.; the Nevada and Washington State Attorneys' General offices; and the Florida Comptroller’s Office, Department of Banking and Finance’s Division. of Financial Investigations. The FTC used counsel in London, Belize, and Antigua for the foreign litigation. The Department of Justice, Office of Foreign Litigation was instrumental in reaching settlement of the foreign actions.
NOTE: This consent judgement is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.
Copies of the complaint, the final judgment and order, the refund notice, and an FTC fact sheet for consumers, "Multilevel Marketing Plans," are available on the FTC’s World Wide Web Site at: http://www.ftc.gov/ro/fortuna.htm and from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the FTC’s Internet Web site.
CONSUMER INQUIRIES: 206-220-6358
(FTC File No. X96 0059)
(Civil Action No. C96-799M)
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