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'Success By Health' Pyramid Scheme Faces FTC Action

mycocafeftc1 jan17 lt

The Federal Trade Commission has been granted permission by a federal district court to shut down an alleged pyramid scheme known as "Success By Health," and freeze the assets of the company and its executives.

In a complaint filed in the U.S. District Court for the District of Arizona, FTC alleged that Success By Health and its executives James "Jay" Dwight Noland, Jr., Lina Noland, Scott A. Harris, and Thomas G. Sacca, Jr., are operating a pyramid scheme that uses false promises of wealth and income to entice thousands of potential investors to join.

The court granted FTC's request to temporarily shut down the network marketing firm.

FTC alleges that the operators of the network marketing scheme have pocketed more than $1.3 million from $7 million they raised.

Less than 2 percent of participating consumers allegedly received more money from the company than they paid to them.

Those lucky few were paid an average of less than $250 per month, which was a far lower amount than what they were promised.

FTC alleged in the filings that after accounting for the costs of the program, products, and events, those enrolled in the scheme lost millions of dollars, despite being offered "financial freedom."

Success By Health was launched in 2017. Its flagship product is an instant coffee called "MycoCafe", which includes a mushroom that its promoters claim has health benefits.

However, FTC alleges that the company was focusing on recruiting more affiliates rather than selling the product to coffee drinkers.

Company training materials allegedly show that affiliates were pressured first and foremost to recruit more affiliates. The company's "Four Steps to Success" pointedly do not include any advice on selling the product, but instead prioritize spending lots of money on products and recruiting others to "duplicate" the same spending and recruiting.

The affiliates were told that they could earn more than $1 million each month in sales commissions. But to achieve that level of commissions, an affiliate would have to recruit more than 100,000 affiliates working under them, failing which, the vast majority of whom would be losing money at any given time.

This condition was not known to the affiliates, FTC said in its complaint.

Success By Health sells its products directly to the public for the same "wholesale" price paid by affiliates, according to FTC. It severely limited the latter's ability to follow the instruction to apply a 50 percent "markup" before selling to the public, the complaint said.

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