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.
So does this mean other MLMs with similar compensation plans, similar spending to qualify for commissions, and similar if not worse failure rates will receive the same treatment as Fortune-Hi Tech? I’m glad to see the FTC doing something, but for every 1 they shut down, 1000 start up.
Everything I read about why Fortune Hi-Tech was shut down is the same scenario for USANA Health Sciences.
I wondered the same thing. Unfortunately, I think the FTC is going to use this as “see! we’re doing something!” And the other MLMs will do their best to tell everyone how they are NOT like FHTM. And the MLM scam will continue.
The problem with these pyramind schemes, among other things, is that there’s no one to recover against once the scheme is revealed and the participants have been severely damaged. Do you know whether there are any assets against which the damaged participants can recover?
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Well, now it’s all done but for the cryin’!! the FTC and the Kentucky Attorney General’s office raided FHTM’s offices and warehouse on 28 January 2013 and all their assets are frozen. No more paychecks, no more recruiting and no more sales. The reps need to cancel all affiliated actions.?
Do they have assets that the reps can recover from?
Yes, the government will likely seize the assets.
Does that mean that reps won’t be able to recover or will the government set up a fund for them to recover? Do you know? Also, do you know the extent of the assets?
I don’t have any information on that. Sorry.
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According to the Receiver’s first report the company had 90K in cash and another 800K in credit card receivables. From the looks of things the company had no assets and was milked since 2009 by the Orberson and Mills families to the tune of almost 50 Million. The only way that net losers will have any shot of receiving a refund would be if all assets of the founders as well as all ill-gotten gains of the net winners is taken back by the receiver.
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