“I’ll show you how you can potentially make $24,840 dollars – or more – every single week. With … quick simple … trades that require zero market knowledge or trading experience.” A peek at a weekly paystub may explain why people were intrigued by Florida-based WealthPress’ promise that subscribing to one of the company’s services would let them in on a “system” for making big money trading in the financial markets. But according to the FTC, WealthPress was hard-pressed to substantiate its earning claims. A proposed settlement shows that the FTC is applying a “press” of its own – a full-court press against violations of the Restore Online Shoppers’ Confidence Act (ROSCA) and deceptive money-making claims. The proposed settlement with WealthPress includes the first civil penalties for ROSCA violations and for violations under Section 5(m)(1)(B) of the FTC Act for deceptive earnings claims made after receiving the Notice of Penalty Offenses Concerning Money-Making Opportunities.
The defendants – WealthPress Holdings, LLC, InvestPub LLC, Roger Scott, and Conor Lynch – typically pitched their services in YouTube videos and on other websites, targeting people looking for content about stocks. Videos often featured a purported “expert,” sometimes defendant Scott, claiming to have a “system” that reliably identified lucrative opportunities for trading in stocks and options – money-making recommendations the defendants supposedly would pass on to subscribers who paid hundreds or thousands of dollars for the information.
Let’s be clear. The defendants weren’t just offering general information about the stock market. According to the complaint, they claimed to have the algorithmic scoop on particular trades that would yield thousands of dollars in profits in just a few days. Promotional materials claimed to recap the experience of satisfied customers and featured boats and Corvettes. Defendant Scott claimed he made so much money from his system’s trades that he took vacations on chartered private planes and lived in a house in Beverly Hills with A-list celebrity neighbors.” Another one of the defendants’ “experts” said people could “collect an easy $7,000 the very next day,” putting them “on the path to millionaire status, no matter your starting point today.” But isn’t stock trading risky? The complaint quotes one video that used phrases like “low risk” and “extremely high rewards.” The FTC says that ad further implied that every trade will yield at least 300% in gains.
That’s the picture the defendants painted for customers, but according to the FTC, “In truth, in many cases the purported experts do not generate substantial income through trading in the financial markets, and do not fund their lifestyle with profits from their trading.” How did they really make their money? By “rely[ing] on income from the sale of trade recommendation services to consumers.” Indeed, according to the complaint, the defendants admitted they didn’t have substantiation for their claims that customers would likely make the advertised profits or income, but buried that key information in a purported disclaimer on their website.
What’s more, the FTC says the defendants didn’t make many of the trades they touted: “Indeed, in many cases, the trades are entirely fictional, representing nothing more than calculations based on historical price data.” But customers who did make the defendants’ recommended trades often found themselves wiped out financially, leaving them in an ever deeper hole than when they started. According to the complaint, that result was so common that when people contacted WealthPress to express frustration with losing money, the defendants had a canned email response at the ready, beginning with the sentence, “We are sorry to hear your trading experience is not off to a good start.”
The complaint alleges the defendants violated the FTC Act by making false or unsubstantiated earnings claims, as well as multiple misrepresentations about their so-called algorithms and other services. In addition, the FTC says they violated ROSCA by using online negative options without clearly disclosing all material terms of the transaction before obtaining consumers’ billing information, or without getting consumers’ express informed consent before charging their credit cards, debit cards, or bank accounts.
For businesses that have been following the FTC’s announcement of Notices of Penalty Offenses, you’ll want to pay particular attention to the complaint allegation that the defendants in this case received the Notice of Penalty Offenses Concerning Money-Making Opportunities and yet continued to make false, misleading, or deceptive earnings claims – conduct that subjects them to civil penalties.
To settle the case, defendants WealthPress, Scott, and Lynch will surrender more than $1.2 million, which the FTC will use to provide refunds for injured consumers. In addition, WealthPress will pay a $500,000 civil penalty. The defendants also must contact their customers directly about the FTC lawsuit and will be prohibited from making earnings claims in the future without written proof to support what they say.
The proposed settlement suggests some key takeaways for other companies and for prospective entrepreneurs.
Remember ROSCA. The Restore Online Shoppers’ Confidence Act bans online negative options unless the seller: 1) clearly discloses all material terms of the deal before obtaining a consumer’s billing information; 2) gets the consumer’s express informed consent before making the charge; and 3) provides a simple mechanism for stopping recurring charges. Now is a good time for a ROSCA refresher to make sure your practices won’t subject you to civil penalties.
Receiving a Notice of Penalty Offenses ups the ante for future law violations. If your company was one of the more than 1,100 businesses that received the Notice of Penalty Offenses Concerning Money-Making Opportunities, this case is an example of how making certain misleading claims can trigger financial penalties once you have “actual knowledge” that those practices violate the law.
Prospective entrepreneurs: No one can guarantee a return on stocks, options, commodities, cryptocurrency, real estate, or other investments. If someone promises guaranteed returns, chances are it’s a scam. All too often those stories of a “never work again” life of leisure are phony. The FTC has resources to help you separate the hype from the hope when evaluating investment pitches.
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