FTC Stops Web Broker Business Scheme
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Two Internet-based companies offering Web brokerage services are the latest to be nabbed in a federal crackdown on illegal business opportunities and work-at-home schemes.
The Federal Trade Commission (FTC) on Wednesday said Wealth Systems, Inc., Ecommerce Network.com, LLC, and their principals, Martin Wilson and Shane Roach, will pay approximately $80,000 in consumer redress.
A judgment of almost $15 million, representing the amount of consumer injury, will be suspended due to the defendants' inability to pay. The judgment will be imposed if they are found to have misrepresented their financial condition.
According to the FTC, the two companies claimed that consumers could earn $20,000 to $50,000 within a year by purchasing Web broker packages priced from about $300 to $1,400 or more.
The FTC claims consumers responding to the site received a mailing with testimonials from alleged Web brokers, one of whom claimed to have made over $300,000 in a little over a year.
The FTC further alleges the defendants offered advertising "coaches" and advertising packages costing "as low as two dollars" to help purchasers launch their Web brokerage business.
Once consumers purchased a package, the advertising coaches allegedly used high-pressure sales tactics to persuade consumers to buy advertising services from them. The defendants allegedly claimed that one person had earned more than $12,000 in a month, and another person had invested only $300 and was receiving his first earnings check for $680.
Some of the advertising packages cost tens of thousands of dollars.
As alleged in the complaint, few, if any, consumers who purchased the defendants' business opportunity or advertising services made any money, and few consumers received refunds.
According to the Commission, the defendants violated the FTC Act and the FTC's Franchise Rule by not giving any pre-sale disclosure documents with information about Wealth Systems, such as names, addresses, and telephone numbers of Wealth Systems members and their earnings.
In addition, purchasers were not supplied, as required by law, an earnings claim document stating a reasonable basis for defendants' earnings claims or the number and percentage of prior purchasers who had achieved results as good as or better than the represented earnings.
The stipulated final order against Wealth Systems and Ecommerce Network was part of Project Biz Opp Flop, a national sweep of bogus business opportunities conducted by the FTC, the Department of Justice, the Postal Inspection Service and law enforcement agencies from 14 states.
More than 200 operations were targeted for engaging in fraud and/or violating consumer protection laws.