The Federal Trade Commission (FTC) announced a $238 million settlement with Vemma Nutrition Company, its founder BK Boreyko, and distributors Tom and Bethany Alkazin. This agreement resolves allegations that the company operated an illegal pyramid scheme. Vemma and its executives have agreed to cease these practices.
The FTC sued Vemma in August 2015, claiming the company’s business model generated approximately $200 million through illegal pyramid scheme activities. Vemma and Boreyko initially denied these claims. However, the settlement requires them to stop operating Vemma as a pyramid scheme. The agreement includes a $238 million partially suspended fine. Vemma must pay $470,136 of this fine, along with surrendering real estate and business assets.
BK Boreyko and Vemma face significant operational restrictions. They are prohibited from any business venture that compensates participants for recruiting new members. Compensation cannot be tied to a participant’s purchases, nor can participants earn based on sales in a pay period unless the majority of revenue comes from non-participants. Breaching these terms would trigger the full $238 million fine.
Separately, defendants Tom and Bethany Alkazin settled for $6.7 million. $1.2 million is payable immediately, with the remainder partially suspended. The Alkazins must also surrender specified real estate and business assets.
Boreyko has publicly stated that the settlement includes no admission of fault. He framed the agreement as a business decision, citing the inability to afford a prolonged legal battle with the FTC. However, agreeing to cease pyramid scheme practices implicitly acknowledges the existence of such practices. The settlement terms suggest Vemma was operating a pyramid scheme, as proven by its agreement to stop the conduct.
Vemma’s insurer denied coverage for Boreyko’s legal costs, noting Vemma’s prior involvement in pyramid scheme actions. This suggests Boreyko could have contested the FTC’s claims under insurance protection if he genuinely believed Vemma was compliant.
The requirement for Vemma to stop paying recruitment commissions has had a severe impact on the company. Website traffic declined significantly throughout 2016, coinciding with millions of dollars in reported losses. The company’s survival without its previous compensation structure remains uncertain.
The FTC has a history of taking action against companies accused of pyramid scheme operations. In similar cases, regulators have imposed substantial fines and business practice restrictions. Consumers who believe they have been victimized by fraudulent schemes can find resources and filing information on the FTC’s website.