In its latest law enforcement action aimed at stemming fraud on the Internet, the Federal Trade Commission has obtained a federal court order temporarily halting a pyramid scheme advertised on the Internet. The scheme promised investors would earn up to $18,000 a month for a minimal initial investment and small monthly payments. It also offered investors preapproved, unsecured Visa or MasterCards with high credit limits. The court's temporary restraining order freezes the defendants' assets and appoints a receiver to preserve them. The FTC has asked the court to issue a permanent injunction and to order redress for injured the consumers who were victims of the scam.
"Internet pyramids are just electronic Ponzi schemes -- full of the same fraudulent promises as the Ponzi schemes of old," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "People are told that if they 'enroll' and send money, they'll eventually end up at the top of the pyramid, collecting money from those at the bottom. But most people never make it to the top. Early entrants may make some money, but eventually, the pyramids collapse and most of the 'members' are left with nothing but empty promises," she said.
The FTC has charged that Nia Cano, also known as Nghia F. Cano, Nina DeCano and Nina S. Cano, doing business as Credit Development International and Drivers Seat Network; and Charles Johnson and Jaime Martinez marketed the pyramid scheme through recruitment seminars and sales meetings across the country. Using the name Credit Development
International, or CDI investment program, the defendants claimed that for an initial investment of $130 and monthly payments of $30, consumers could obtain unsecured credit cards and make a much as $18,000 per month as additional participants signed up for the program. At training sessions, CDI members also provided advice and promotional materials for members to advertise to recruit others to join the scheme. Many recruited membership by sending unsolicited e-mail, a practice known on the Internet as "spamming."
The agency also charged Leaders Alliance, Inc., doing business as American Business Consultants or ABC, which processed CDI memberships and application fees.
According to the complaint detailing the charges, most participants in a pyramid scheme lose money, so the claims that consumers who pay CDI $130 initially and $30 per month thereafter will receive income of $18,000 per month are false and misleading. In addition, the FTC charged that consumers who signed up for membership in CDI did not receive the credit cards that were offered and those claims were also false in violation of the law. Finally, the FTC alleged that providing others with promotional material that contains similar false claims for use in recruiting new participants is deceptive in violation of the law. The FTC's complaint asks the court to order a permanent halt to these alleged deceptive practices and to order redress for the people who had signed up and given money to the defendants.
The Commission vote to authorize the staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Central District of California, in Los Angeles, on Oct. 29, under seal. The seal was lifted Nov. 3.
NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant actually has violated the law. The case will be decided by the court.
Copies of the complaint are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov and also 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 File No. 972 3269)