Six named class representatives in the Visalus securities fraud case will split $450,000 under a proposed settlement filed May 23rd, concluding a lawsuit that began in 2017. Plaintiffs accused the multi-level marketing company of selling unregistered securities through its Founders Equity Incentive Plan.
The lawsuit, initiated in federal court in 2017, centered on Visalus's Founders Equity Incentive Plan. This program offered top distributors the chance to purchase "units" in the company, promising returns tied to Visalus's future performance and growth. Plaintiffs Caprece Byrd, Bryant Williams, and Renae White alleged these units constituted unregistered securities, sold without proper disclosure, defrauding investors.
This securities fraud settlement follows an earlier resolution of a separate class-action lawsuit accusing Visalus of operating an illegal pyramid scheme. Both cases underscore persistent legal challenges faced by the company's business model.
Under the terms awaiting judicial approval, victims of the alleged securities fraud can choose between two compensation options. The Cash Option provides a single lump sum payment ranging from $1,500 to $4,000. This amount adjusts based on the claimant's former rank within the Visalus distributorship structure. Original court filings indicated some investors poured as much as $65,000 into the Founders Equity Incentive Plan, making these payouts a partial recovery at best for many.
Alternatively, the Benefits Option allows an affiliate to retain their distributorship. It includes a package of incentives: a 25% commission rate on product sales for one year, free basic enrollment for a year, and complimentary tickets to one Visalus event, usable within 18 months. Claimants also receive 12 months of free Vi-Net subscription if they were existing subscribers, or 6 months if they were not.
The six class representatives, Caprece Byrd, Bryant Watts, Renae White, Laura Herl, Frank McWhorter, and Connie Bates, receive a total of $450,000. Each representative is allocated $75,000 before the deduction of legal fees and expenses.
Class membership is open to Visalus affiliates who acquired units in the Founders' Equity Incentive Plan between January 1, 2015, and March 1, 2017. Individuals named as defendants in the prior pyramid scheme class-action are excluded from this settlement.
A federal judge granted preliminary approval for the settlement on June 14th. A Fairness Hearing is scheduled for October 1st, where the court will consider final approval. This mirrors the procedural timeline established for the earlier pyramid scheme settlement.
The Securities and Exchange Commission (SEC) has not publicly commented on the Visalus securities fraud allegations or its settlement. Similarly, the Federal Trade Commission (FTC) has remained silent regarding the pyramid scheme claims, despite the significant class-action settlements. Both agencies typically oversee different aspects of corporate conduct. The SEC regulates the offer and sale of securities, ensuring investor protection through disclosure requirements. The FTC investigates unfair or deceptive trade practices, including illegal pyramid schemes. Their absence from public discourse, even after private legal resolutions, has drawn scrutiny from observers of the multi-level marketing industry.
The limited recoveries for individual investors in this settlement underscore the difficulties faced by those who allege fraud in complex financial arrangements within multi-level marketing companies. Cases against MLM firms often involve protracted legal battles, with settlements frequently falling short of making all victims whole.