Fortune Hi Tech Marketing (FHTM), a multi-level marketing company I’ve reported on previously (and was interviewed about) was shut down today by the Federal Trade Commission. It is being reported that federal agents raided the company’s Lexington, Kentucky office.
Law enforcement says that 100,000 people across the country were recruited into FHTM, each paying $100 to $300 per year for the right to receive recruiting and sales commissions. A complaint was filed against Fortune HiTech Marketing on Thursday, and the judge issued a temporary restraining order to shut the company down.
Steve Baker, the head of the FTC’s midwest office said “..the plan was set up so that 96% of people lose money.” He also said:
Pyramid schemes are more like icebergs. At any point most people must and will be underwater financially. These defendants were promising people that if they worked hard they could make lots of money. But it was a rigged game, and the vast majority of people lost money.
Welcome to multi-level marketing, Steve. You have described MLM very accurately. Sadly, the FTC and other government agencies refuse to take action against most MLMs.
The Kentucky attorney general Jack Conway said:
This is the beginning of the end for one of the most prolific pyramid schemes operating in North America. This is a classic pyramid scheme in every sense of the word. The vast majority of people, more than 90 percent, who bought in to FHTM lost their money.
If law enforcement believes this to be true, and if this is what makes companies like FHTM illegal, why are they not taking action against multi-level marketing in general? Time and again, it has been proven that 99% or more lose money in MLM.
And why did it take so long? FHTM has been exposed over and over as a pyramid scheme.
The FTC’s press release on Fortune Hi TEch Marketing went on to say:
Despite FHTM’s claims, nearly all consumers who signed up with the scheme lost more money than they ever made. To the extent that consumers could make any income, however, it was mainly for recruiting other consumers, and FHTM’s compensation plan ensured that most consumers made little or no money, the complaint alleged.
Again, these words could describe nearly every multi-level marketing company out there. Take Mary Kay, for example. While the products are legitimate, they are extremely difficult to sell at a profit. This is why so many consultants are dumping products for less than their wholesale cost on eBay. The plan makes it nearly impossible to profit from product sales, pushing consultants to recruit to try to make money.