Thirty-three law enforcement actions were filed against 67 defendants promoting Internet pyramid schemes, the Federal Trade Commission and other state and federal agencies announced this month.
The groups recently took part in a nationwide law enforcement sweep dubbed “surf days,” designed to police the Internet for additional illegal pyramid schemes. It identified more than 650 sites that may be conducting illegal practices.
“We know these illegal pyramid schemes are being promoted out on the Net,” said Jodie Bernstein, director of the FTC’s Bureau of Consumer Protection. “We’re using these surf days to remind the promoters that we’re out on the Net, too. We’ve swept for pyramid scams in the past, and we promised pyramid promoters that we’d be back. We’re committed to taking on the con artists who think they can use the Internet to promote illegal schemes.”
The FTC and state law enforcement officials have pledged to continue the sweep and said they will announce additional actions targeting Internet pyramid schemes in the next few months. The North American Securities Administrators Association, U.S. Postal Inspection Service, Securities and Exchange Commission, 27 state attorneys general, and other state and local law enforcers are all taking part in the sweep.
In conjunction with the sweep, the FTC said it filed suit in federal district court charging that Five Star Auto Club Inc., Poughquag, NY, and two of its principals lured online consumers to invest in a pyramid scheme by saying an annual fee and $100 monthly payments would give consumers the opportunity to lease their “dream vehicle” for “free” while earning between $180 and $80,000 a month by recruiting others to join the scheme.
The FTC said the vast majority of participants could neither lease a “free” car nor earn money from joining the scheme. On March 8, a federal district court halted the offer and froze the defendants’ assets, pending trial.
The FTC will seek a permanent injunction on the conduct and ask the court to order consumer redress for victims. The New York State Attorney General, in coordination with the FTC, has filed a suit against 5 Star Auto Club in New York State Supreme Court.