In sum, defendants promised to build websites that would make money raking in affiliate cash.
These website packages led to an expensive upsell where more effort was promised, and of course significantly more revenue.
A refund policy was in effect that defendants mostly honored for the initial purchase - but it didn't matter.
The FTC claimed most people buying the lead product did not make money, and there was little to no additional revenue gained from the expensive upsell.
The FTC filed its lawsuit under seal (ie, no one knew about it), and then without notice appeared in court to obtain an asset freeze, including a freeze on all their domains. Defendants were given 5 days to turn-over extremely detailed financial records to the FTC dating back to 2006.
There is, interestingly, an order disconnecting defendants from the Internet and requiring that all computers be unplugged.
Defendants' property was seized by the FTC and they are also barred from filing for bankruptcy.
As usual, having a corporation or LLC is not a liability shield. The corporations were quickly seized and given to a receiver, and all associated individuals were sued.
Each year the actions and requested orders by the FTC get more and more onerous. If the FTC comes knocking consider yourself completely wiped out, as if a tornado destroyed all your physical possessions and a hacker cleaned out your websites and bank accounts. It is unbelievably devastating.
Lessons and issues to consider:
- Are you make income claims?
- Are buyers making the promised money from your product (regardless of whether it is your fault or not)?
- If you have an upsell does it really provide value? Does the lead product provide value or is it an excuse for an upsell?
- Did you fall for the claim a Nevada corporation / LLC is a liability or asset shield?
- Do you believe issuing refunds will protect you from the FTC and making unsubstantiated promises?
- What proof do you have to substantiate the claims in your marketing?