A Texas court dealt a significant blow to the Federal Trade Commission this week, rejecting allegations that skincare company Neora operates an illegal pyramid scheme.

The Northern District Court of Texas issued its ruling on September 28th, ending a legal battle that stretched back to 2019. The FTC had sued Neora—formerly known as Nerium—on five separate counts under Section 15 of the FTC Act. The agency accused the company of running a pyramid scheme, making false claims about potential earnings, and misrepresenting the effectiveness of its flagship product, EHT. The FTC also alleged Neora gave distributors the tools to deceive others.

But the court sided with Neora. The decision came after a bench trial last October where both sides presented evidence about how the company actually operates.

The FTC originally sought monetary damages but that claim was killed earlier by a Supreme Court ruling. That left the Texas court to decide only whether the company should face an injunction, a court order restricting its business practices.

The court's decision hinged on financial data showing where Neora's money actually comes from. The company operates with roughly 30,000 to 35,000 active Brand Partners—the industry term for distributors. That number has remained stable since 2018. The company also maintains around 163,000 Preferred Customers, people who buy products regularly but don't recruit others.

Here's what matters: over 90 percent of Neora's revenue comes from product sales to actual customers. The remaining 10 percent comes from starter packs sold to new Brand Partners and other miscellaneous sales. Of those product sales, somewhere between 75 and 80 percent go to Preferred Customers and regular retail buyers—not to distributors buying inventory they can't sell.

Less than 1 percent of product sales go to retail customers with no distributor involvement, which suggests the company has real customer demand outside its distribution network.

The FTC applied what's known as the Koscot test—the standard legal framework for determining whether a sales organization is an illegal pyramid scheme. Under that test, the burden falls on the government to prove that the company primarily profits from recruiting rather than selling actual products to real customers.

The median tenure for Brand Partners is roughly eight months, while Preferred Customers stick around for about two months. Over the company's history, roughly 400,000 people have been Brand Partners and 1.7 million have been Preferred Customers at some point.

The court made a key distinction that proved crucial to its decision. Preferred Customers and regular retail customers simply buy products. Brand Partners are the ones with a financial stake in recruiting others. That distinction matters legally because pyramid schemes profit primarily from recruitment, not product sales.

The data didn't support the FTC's theory. When a company genuinely sells products to genuine customers—and those sales account for the vast majority of revenue—it's operating as a direct sales business, not an illegal pyramid scheme.

The ruling doesn't mean Neora faces no restrictions. But it does mean the FTC failed to convince the court that the company's fundamental business model is fraudulent.

🤖 Quick Answer

What was the Texas court's ruling regarding Neora and the FTC's pyramid scheme allegations?
The Northern District Court of Texas rejected the Federal Trade Commission's allegations on September 28th, ruling that skincare company Neora does not operate an illegal pyramid scheme. The court's decision concluded a legal dispute initiated in 2019, where the FTC had sued Neora on five counts, including accusations of operating a pyramid scheme and making false earnings claims.

What specific accusations did the FTC make against Neora in its lawsuit?
The Federal Trade Commission accused Neora of operating an illegal pyramid scheme, making false claims about potential earnings for distributors, and misrepresenting the effectiveness of its flagship product, EHT. The FTC additionally alleged that Neora provided distributors with tools and resources designed to deceive consumers about the company's business practices and product benefits.

**When did the legal battle between Ne

🔗 Related Articles

- DSA supports pyramid schemes in FTC v. Neora amicus brief
- Awakend launches recruitment promo, no retail customers
- Nasgo hitches itself to Ryze unregistered securities opp
- Receiver: Digital Altitude cannot operate “in a lawful and profitable manner”
- Auvoria Prime Review: Eaconomy securities fraud reboot