A court-appointed receiver's report has laid bare Vemma's hollow compliance efforts, revealing a system designed to look legitimate while actively disregarding anti-pyramid regulations. The findings detail how the company's internal controls, meant to monitor affiliate conduct, were a mere facade, failing to hold even a single distributor accountable.
The receiver's investigation delved into Vemma's operational procedures and field compliance. The evidence pointed not to oversight failures due to inexperience, but to deliberate circumvention of rules. Interviews with Vemma's Vice President of Legal Affairs and Manager of Field Compliance confirmed these individuals possessed the requisite qualifications and experience. Their testimony suggested the company's malfeasance stemmed from its operational design, not a lack of regulatory knowledge.
Vemma's compliance structure involved a third-party social media monitor, Momentum Factor, and a claimed adherence to the "70% rule." This rule supposedly ensured affiliates sold 70 percent of what they purchased, preventing inventory hoarding. The reality of the 70% rule enforcement was farcical. Each month, the IT department generated a list of 100 randomly selected purchasing affiliates. Field compliance personnel then contacted only 15 of these individuals. Once 15 calls were completed, the process stopped, leaving the remaining 85 uncontacted.
Those 15 affiliates were asked a single question: "Are you consuming or retailing at least 70 percent of your purchases?" Their verbal affirmation was recorded, a confirmation letter was sent, and the matter was closed. There was no verification of their claims, no follow-up inquiries, and no mechanism for accountability.
The receiver found zero documentation of any affiliate ever being disciplined for violating the 70% rule. Across Vemma's entire operational history, not one affiliate reportedly answered "no" to the compliance question and faced repercussions. The investigator could not uncover a single instance of disciplinary action. This suggests the system was intentionally designed to avoid identifying or penalizing rule-breakers.
A compliance program that relies solely on self-reporting, accepts responses without scrutiny, and never imposes penalties is not a functional system. It serves as a mere pretense of adherence. Both the qualified professionals overseeing this process and the company leadership who mandated it were aware of its superficial nature.
Vemma's internal financial data from 2013 and 2014 indicated that the vast majority of its affiliates earned negligible income. However, the company consistently represented to prospective recruits that substantial earnings were achievable. The receiver's examination of marketing materials, consumer complaints, and overall marketing practices corroborated widespread suspicion: Vemma not only failed to enforce anti-pyramid regulations but actively operated in contravention of them, all while projecting an image of compliance. The qualified personnel understood the rules but chose not to apply them.
The receiver's report indicates that Vemma's failure to comply with federal laws under the FTC Act, specifically regarding deceptive earnings claims and pyramid scheme operations, led to its downfall. The company was ultimately shut down by the FTC in August 2015.