A federal judge on Friday ruled that Vemma Nutrition Co. cannot resume full business operations and will remain under the supervision of a monitor.
U.S. District Court Judge John Tuchi stated in his ruling that “the evidence before the Court leaves little doubt that the FTC will ultimately succeed on the merits in demonstrating that Vemma is operating a pyramid scheme.” He barred the company from any recruiting of new sales members, but he did not bar the company from selling its energy or nutrition drinks for personal consumption.
The Tempe-based energy drink company argued in a hearing on Tuesday that its operations were not a pyramid scheme. The company was forced to halt operations after the Federal Trade Commission charged that it “lures college students and other young adults with the prospect of getting rich without having a traditional 9-5 job.”
Vemma CEO B.K. Boreyko expressed confidence at Tuesday’s hearing that the company would be cleared.
“I feel like we got the facts out,” Boreyko said. “The facts support our cause, and I believe in the justice system.”
The judge, however, disagreed and appointed a permanent monitor who will oversee the operation of the business and have access to all company records.
Attorneys for the FTC presented information gathered over two years outlining the sales strategies of Vemma.
The nutrition company visits college campuses and recruits what it calls “affiliates” to promote its juice drinks and other nutritional products, according to the initial complaint. The consumer protection agency said the company told Vemma recruits they could make as much $50,000 a week.
The attorneys said they were concerned that these affiliates bought more than 70 percent of the company’s product instead of customers.
“The FTC has an incredible record in these kind of hearings,” said Bonnie Patten, executive director of Truth in Advertising after giving testimony. “They’re basically 17-0 when it comes to getting a preliminary injunction after a (temporary restraining order). But you know, it’s a really hard decision the judge has to make.”