A $2.6 million settlement addresses business opportunity win claims and crypto bots, the Consumer Review Fairness Act — and more

It’s rare that we compare an FTC complaint to a pizza with the works or an all-around bagel, but the breadth of the alleged violations in the FTC’s lawsuit against DK Automation, Kevin David Hulse, David Shawn Arnett and affiliates is loading for a comparison. The proposed $2.6 million settlement resolves allegations that the defendants made misleading profit claims, failed to comply with the Business Opportunity Rule, violated the Consumer Review Fairness Act and unfairly distorted consumer reviews. In addition, one complaint alleges that the defendants made false or unsubstantiated money-making claims when they actually knew they had breached previous commission findings.

Use of company names like DK Automation, THATLifeStyleNinja, Digital Ninjaz and AMZ Automation, the defendants posed an intriguing question to consumers: “What if I told you that if you qualify, we’ll do 100% of the work while you sit back and relax and watch us give you an Amazon.” -Build an empire?” They ran ads online – including on Google, Facebook, Instagram and YouTube – and presented a variety of business opportunities and training programs, including a “100% TURNKEY AMAZON EMPIRE BUILT BY US FOR YOU!” In addition, the defendants presented testimonies from individuals who allegedly made “$96,000 in a single month”, “$50,000 IN ONE MONTH SELLING ON AMAZON” and “$150,000 in sales in just one month”. , more than the consumer “would deserve”. Years in the Marines.”

But the defendants didn’t stop there. In January 2022, they began promoting a program they touted as the “#1 Secret Passive Income Crypto Trading Bot” that will “build CRYPTO WEALTH” and “trade for you 24/7 so you can earn your Make profits while you sleep.” Videos described it as “an easy way to make $1,000 in profits every day”.

Depending on the program, consumers paid anywhere from several hundred dollars to $100,000 or more for the defendants products and services, but according to the FTC, “most buyers are unlikely to earn the advertised income and many, if not most, are losing money.” Thus, the lawsuit alleges that the defendants’ claims for earnings were false or unsubstantiated.

The FTC also says the defendants violated several provisions of the Business Opportunity Rule, including misrepresenting how much potential buyers might earn, failing to promptly provide them with the disclosure document required by the rule, and failing to provide mandatory profit disclosures consumers and in media advertisements and misrepresenting the cost, performance or effectiveness of their business opportunities.

Two other charges challenge the defendants’ tactics regarding consumer reviews. The FTC alleges that the defendants violated the Consumer Review Fairness Act by including a non-disparagement clause in their form contracts that attempted to stifle consumers’ ability to voice their opinions about their experiences with the defendants. In fact, the complaint cites a case where the defendants threatened a consumer who had expressed his opinion and told him that they would “sue for damages . . . that will far exceed the original joining fee.” The FTC says the consumer paid the defendants more than $150,000 but made no profit in two years.

The FTC also says the defendants used unfair tactics to skew reviews on third-party websites. For example, the reviews site Trustpilot told the defendants that it had received hundreds of fake positive reviews about its programs. Additionally, the FTC says the defendants routinely reported negative reviews, which automatically resulted in TrustPilot removing those reviews until the consumer provided documentation. The result: The tedious process resulted in many of those negative reviews permanently diminishing.

For those pursuing the FTC’s issuance of notices of criminal offenses, count nine of the complaint deserves particular attention. The FTC alleges that in April 2022, the defendants received the Criminal Offenses Notice relating to money-making opportunities and endorsements, ceased certain unlawful allegations, and yet continued to make others, which violate Section 5(m)(1)(B) violates ) the FTC statute.

The proposed mandatory order includes injunctions that require defendants to support their merit claims with solid evidence, comply with the business opportunity rule, and respect consumer rights under the Consumer Audit Fairness Act. The proposed order also results in a nearly $53 million monetary judgment, which — based on the defendants’ default — will be partially stayed if they pay $2.6 million, which will be used toward consumer reimbursements. If the defendants did not tell the truth about their finances, the full amount is due immediately.

The case should send three clear messages to companies filing claims.

Conduct a business opportunity compliance review. If your promotion falls under the Opportunity Rule, now is the time for a line-by-line refresher to ensure you’re in compliance.

The FTC is suspicious of attempts to suppress consumers’ right to review. The Consumer Review Fairness Act protects people’s ability to express their honest opinions about a company’s products, services or conduct in any forum, including social media. Make sure your form contracts and agreements do not contain provisions that violate this law. Additionally, companies that take steps to suppress negative reviews or encourage fake positive reviews may engage in unfair or deceptive practices.

“We feel the need – the need for attention.” If you have received or are receiving a fine, take it seriously. The law gives the FTC the power to seek civil penalties for knowledge of violations of the law.

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