Ocean Avenue filed a lawsuit in Utah on October 29th, accusing Visalus of racketeering, espionage, and blackmail. The suit claims Visalus engaged in hacking and threats to stop its salespeople from defecting. This legal action details how one multi-level marketing (MLM) company allegedly went to extreme lengths to prevent its distributors from joining a competitor.
The dispute began when Visalus distributors started leaving to join Ocean Avenue. The lawsuit alleges Visalus used tactics more common in a spy thriller than in corporate competition.
Visalus began in 2005, founded by Nic Sarnicola, Mallen, and Ryan Blair after their previous company failed. By 2008, the company struggled financially. Blyth, Inc., a Connecticut firm, acquired a significant stake. By late 2012, Blyth owned approximately 80% of Visalus Holdings, which held Visalus outright.
Visalus sells weight management products and nutritional supplements through an MLM structure under the Visalus Sciences brand. The company saw strong sales in 2010 and 2011. Blyth announced plans for a Visalus initial public offering (IPO) in August 2012.
Then, conditions changed. Moody's Investor Service downgraded Blyth's stock to negative in September 2012. Blyth quickly pulled the IPO, citing "uncertain market conditions." This move suggested Visalus's value was not as high as previously stated.
The company's numbers fell sharply. Visalus sales declined significantly by the third quarter of 2012 compared to prior years. On November 7, 2012, Visalus confirmed its distributor count had shrunk from the second to the third quarter. The company was losing its sales force.
So, the exodus began. As compensation plans tightened and distributors grew frustrated, many looked for other opportunities. Ocean Avenue offered an alternative.
Ocean Avenue's lawsuit details the alleged response. Instead of accepting the distributors' right to leave, Visalus reportedly escalated its actions. The company allegedly hacked into Ocean Avenue's systems, accessing confidential information and gathering intelligence on departing affiliates.
Visalus then used this stolen information, according to the suit, to threaten former distributors. Some faced personal threats. Others were blackmailed with illegally obtained data. The company allegedly coordinated extortion rings to intimidate people into silence or compliance.
This case differs from typical MLM disputes due to the alleged scale of the criminality. Distributors were not just competing. They were reportedly stalked, hacked, and threatened by the parent company.
The lawsuit claims this was not random harassment by rogue employees. It was systematic. It was coordinated. It describes racketeering, organized crime disguised as business competition.