Family fraud, false advertising, and unfair competition: a 2018 IMPOTUS* Ponzi-scheme case proceeds


Like opposition-information for political campaigns, real products of value often have ambiguous, intangible content. See Trump University.

While there’s no RICO violation, the recruitment of suckers remains the actionable issue in the latest case of the Trumps’ ACN. Because like today’s church proclamation, Trump puts the cult in culture wars.

Fraudulent pyramid schemes — like Ponzi schemes — are illegal but often try to disguise themselves as MLM (multi-level marketing) programs. Traditional MLM programs are legal because there is a real product that is being sold through the channel.

An MLM, or pyramid selling scheme, typically requires you to pay upfront charges for either joining the scheme or buying a product or service (like collector's items or software, training programmes, e-zine etc). Then they ask you to get more investors …


…an allegedly fraudulent investment scheme promoted by Trump and his kids, made headlines (again) earlier this week when a New York judge allowed the case to proceed.


The lawsuit goes back to October 2018, when plaintiffs filed a federal class action suit against Trump, his three eldest children (Don Jr., Eric, and Ivanka), and the family business for their role in an alleged pyramid scheme that caused them to suffer significant financial losses. The lawsuit initially included a civil RICO claim—essentially claiming that the Trump Organization operated as a criminal enterprise—which was dismissed by the court in July 2019.

White collar defense lawyer and former federal prosecutor Ken White explained to me that the dismissal of the RICO claim is not surprising, given both the complexity of the civil RICO statute and the reluctance of judges to entertain such claims outside the criminal context. However, the judge allowed the plaintiffs to proceed on their remaining claims of fraud, false advertising, and unfair competition—which ultimately constitute the real meat of the lawsuit.


The crux of the plaintiff’s 160-page complaint centers around a company called ACN, which offered a “business opportunity and training programs” for aspiring entrepreneurs. ACN had a multi-level marketing business model which required investors to pay a hefty membership fee to join as an “independent business owner” (IBO), and then additional fees for ongoing training seminars and conventions. IBOs could make commissions by selling ACN’s products, which included reselling third-party telephone and internet plans and proprietary ACN “videophones.”

But IBOs were told they could earn the most money by recruiting new people to join up as IBOs and earning commissions on their recruits’ “downline” sales. These new IBOs, in turn, would pay the initiation fee, attend in the trainings, recruit more members… and so on, rinse and repeat. In short, the model is alleged to be a textbook pyramid scheme, which the Federal Trade Commission describes as a business where the focus is on members recruiting new people to continue to generate income for the top-level owners, rather than on selling actual products. Most of the plaintiffs allege that they made no money at all; one made $38.…




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