Pyramid Marketing Scheme Burnlounge Shut Down, Ordered To Refund $17 Million To Consumers

Pyramid Marketing Scheme Burnlounge Shut Down, Ordered To Refund $17 Million To Consumers

Acting on a complaint by the Federal Trade Commission (FTC), the U.S. District Court for the Central District of California, Western Division, has issued orders to permanently halt marketing of BurnLounge, a misleading pyramid scheme that lured into its fold 56,000 consumers across the country.  The court ordered the promoters and operators of BurnLounge to refund $17 million to these consumers who mistook the operation as an above-board multi-level marketing program and were misled by claims regarding its potential earnings.

In 2007, the FTC filed a complaint against BurnLounge seeking to protect consumers from its fraud and deception.  The FTC charged that though BurnLounge had marketed itself as a new and innovative way to sell digital music using a multi-level marketing platform, the major part of its revenues arose not from music sales, but from payments made by consumers around the country for buying into the organization at prices that varied from $29.95 to $429.95.  These consumers were given the impression that they could earn huge incomes through BurnLounge thereafter.  In fact, though these investors did get compensation for selling music, the bulk of their income was generated by recruiting other subscribers to the scheme.

The FTC accordingly charged the defendants that their operations were in violation of federal law and constituted an illegal pyramid scheme.  It further charged them for misrepresenting the scope of earnings and leading consumers to expect that they could earn generous incomes, when in fact most consumers would end up losing money.

In its final judgment and order the defendants have been barred by the court from conducting any prohibited marketing schemes such as a pyramid sales scheme, Ponzi scheme or chain marketing scheme.  They have also been barred from making further misrepresentations with respect to their operations.  Any claims regarding earnings, sales or profits are to be accompanied with disclosures as specified by the court.

The defendants were also ordered to pay in aggregate about $17 million towards consumer redress – of this BurnLounge and Juan Alexander Arnold are to pay $16,245,799, John Taylor $620,138 and Rob DeBoer $150,000.



Enhanced by Zemanta

Leave a Reply

Your email address will not be published. Required fields are marked *