Vemma stops operations after FTC calls it a pyramid scheme, student ‘affiliates’ lose money

(Courtesy of Vemma via Flickr)

When Chris Benson signed up to sell Vemma juice drinks, he said something didn’t feel right.

The 21-year-old Scottsdale Community College student invested less than $50 to become an “affiliate” with the Tempe-based company. Vemma Nutrition Co. officials had promised quick money, and the possibility of a free car if he sold enough, he said.

“When they started talking about ranks, that’s what really got me as it’s a little bit sketch in my opinion,” he said. “I was like, yeah, no one is going to give me a free BMW.”

Still, Benson took a chance and invested $30 to $40. Benson said it was a huge mistake.

Vemma has shut down operations after a U.S. District Court in Arizona this month agreed to a temporary injunction against the company and seized its assets. A hearing is scheduled for Sept. 15.

The Federal Trade Commission had filed a complaint against the company, claiming it’s a pyramid scheme that “lures college students and other young adults with the prospect of getting rich without having a traditional 9-to-5 job.”

The nutrition company visits college campuses and recruits what it calls “affiliates” to promote its juice drinks and other nutritional products. The consumer protection agency said the company told Vemma recruits they could make as much $50,000 a week, while most students told the FTC they made nothing and actually lost money.

“The defendants’ websites, social media, and marketing materials show seemingly prosperous young people with luxury cars, jets and yachts,” according to the FTC’s complaint.

It’s unclear how many Arizona students the company had recruited to sell its product, and FTC officials did not return phone calls seeking comment by deadline.

Recruiters lured potential sellers with opportunities to make a significant income, according to FTC news release. Benson said their presentation was enticing and made people want to be a part of the company.

“They use all these things like colorful words, helping people retire early,” he said. “You know, these things that make you kind of what to join into it. And I have to admit it seems appealing, which is probably what got me.”

Benson said he didn’t have a lot of money to spend at the time, and he had just graduated from high school. He said some of his friends invested up to $500 into the company.

Vemma offered recruits package options that varied in start-up costs.

Throughout the experience, Benson said he received no help in selling the product, and the company emphasized recruiting new people.

“It’s not right, you just gotta work hard and do what most people do for money. There are no shortcuts in life,” he said.

Vemma earned more than $200 million annually in 2013 and 2014, according to an FTC news release. People can no longer purchase products on its website.

“The sad thing is that Vemma closed its doors so that those of us who really liked the product now have no place to get it,” one commenter on the FTC website wrote. “The marketing plan may have been faulty, but the product was not.”

Arcadia High School senior Musthafa Mahmood, a former Vemma affiliate, said he also stands by the product.

“Maybe the setup is wrong … but the product itself is a good product,” he said.

Mahmood said even though he put $500 into it, he doesn’t see it as a loss. He did not recruit enough people to make his investment back, but he views that as his own fault, not Vemma. He said he still has Vemma nutritional drinks and vitamins that he uses.

Vemma officials could not be reached for comment. Its website said the U.S. District Court has assigned the company a temporary receiver and that receiver has suspended all Vemma activities until a preliminary injunction hearing.

The FTC advised entrepreneurs looking for new business opportunities to check out its resources to avoid getting involved in pyramid schemes.