Operation Income Illusion cracks down on illusory income claims

There’s a standard movie trope of a group stranded in the desert. Parched and burned, their spirits soar when they see an oasis on the horizon. With their last ounce of energy, they crawl toward the lush palms and beckoning pool. But as they dip their hands in the water, they realize it was just a mirage. For consumers looking to supplement their income and gain financial independence, promoters’ promises may seem like that oasis on the horizon. But in many cases, those money-making promises are an illusion. That’s the theme of Operation Income Illusion – a just-announced crackdown by the FTC and 19 federal, state, and local law enforcement partners.

According to a new FTC Data Spotlight, since 2016 consumers have reported to the FTC that income scams have cost them more than $610 million. As consumers struggle with financial uncertainly in the COVID economy, promoters of questionable work-at-home offers, coaching programs, and other scams and schemes are contributing to the problem – with a big-time emphasis on the con. In just the first nine months of 2020, people have already reported more than $150 million in losses to the FTC.

As part of Operation Income Illusion, the FTC announced four new law enforcement actions and a settlement in a pending case:

• Randon Morris. An FTC complaint alleges a Utah-based network of companies owned by Randon “Randy” Morris placed millions of robocalls pitching an affiliate marketing program and falsely claiming to be associated with Amazon. The FTC says that with the pandemic, the defendants pivoted to play on consumers’ financial fears. People paid for storefront websites the defendants said would yield thousands of dollars in monthly income. That was the illusion, but what was the reality? In a lawsuit pending in a Utah federal court, the FTC alleges the sites were defective and promised advertising never materialized.
• RagingBull.com. A lawsuit filed in federal court in Maryland alleges that a group of defendants marketed investment-related services with deceptive claims that people would make consistent profits and beat the market. With eye-catching representations like “Learn how you could DOUBLE or TRIPLE your account in One Week!” the defendants claimed that for people trained in their purported technique, the global pandemic “might be the most exciting opportunity in decades!” The FTC alleges that consumers have lost at least $137 million from the scheme. The lawsuit names RagingBull.com, LLC, Jeffrey M. Bishop, Jason Bond (formerly known as Jason P. Kowalik), Kyle W. Dennis, Sherwood Ventures, LLC, Jason Bond, LLC, MFA Holdings Corp., Winston Research, Inc., and Winston Corp.
• Moda Latina. In Spanish-language TV ads, the FTC alleges defendants Moda Latina BZ Inc., Esther Virginia Fernandez Aguirre, and Marco Cesar Zarate Quíroz targeted Latina consumers with false earnings promises like “Want to have your own business and earn up to a thousand dollars per week?” and “You too can earn a lot of money.” According to the complaint, the defendants generated more than $7 million by luring consumers into buying a work-at-home business with the false promise they would earn “large profits” by reselling luxury goods – for example, designer perfume. The complaint also alleges the defendants’ telemarketers threatened consumers, in violation of the Telemarketing Sales Rule. The case is pending in a California federal court.
• Digital Income System. In a case filed in Florida, the FTC alleges the defendants made deceptive money-making claims – for example, “Consumers will earn between $500 and $12,500 per sale,” and “Every time one of our professionals closes a sale on your behalf, we will send you a huge commission check right to your doorstep” – to sell memberships in their purported “program.” According to the complaint, consumers shelled out between $1,000 to $25,000, but the vast majority didn’t make anything even approaching the advertised earnings while many made nothing at all. The lawsuit, which alleges violations of the FTC Act and the Business Opportunity Rule, named Digital Income System, Inc., Derek Jones Foley, William Foley, Christopher Brandon Frye, Jennifer Hedrick, and Kaitlyn Scott.
• 8 Figure Dream Lifestyle. According to a 2019 FTC lawsuit, the defendants falsely claimed that consumers who followed their “proven business model” would earn between $5,000 to $10,000 in just 10 to 14 days, and consistently make money within 60-90 days of buying into the program. Far from experiencing an “8 figure dream lifestyle,” most consumers paid between $2,395 to $22,495 and never earned substantial income. In fact, many people lost money, ending up in an even deeper financial hole by taking out loans and racking up credit card debt. In addition to a partially suspended $32 million judgment, the settlement bans the defendants for life from either selling money-making methods or business coaching programs, and nine of the defendants are banned from using robocalls for most purposes, including marketing or advertising. The defendants include 8 Figure Dream Lifestyle, LLC, JL Net Bargains, Inc., Kappy Enterprises, LLC, Millionaire Mind Enterprises, LLC, Spirit Consulting Group, Inc., John A. Bain, Alex Dee, Brian M. Kaplan, and Jerrold S. Maurer.

In total, Operation Income Illusion includes more than 50 actions from the FTC and partners SEC, Commodity Futures Trading Commission, the U.S. Attorney’s Office for the Eastern District of Arkansas, and state and local agencies in Arizona, Arkansas, California, Florida, Indiana, Maryland, New Hampshire, Oregon, and Pennsylvania.

What’s the message for marketers and consumers?

Deceptive income claims may be an illusion, but there’s nothing illusory about law enforcers’ commitment to challenge misleading money-making promises. Whether you’re selling a “system,” a work-at-home “opportunity,” “coaching” services, or any other variation, you need solid proof to back up your earnings representations before you convey those claims to consumers.

Problematic pandemic pitches are likely to attract close scrutiny. There’s hardly a household that isn’t feeling the economic pinch of the pandemic. Many of the cases filed as part of Operation Income Illusion make it clear that promoters shouldn’t exploit consumers’ current financial hardship by targeting them with allegedly bogus money-making representations.

Let’s look at the data. The FTC is committed to protecting every community from false earnings promises. That’s why it’s important to learn what we can from empirical data. In addition to the new Data Spotlight, which evaluates the expanding universe of money-making pitches, an FTC Consumer Blog post includes information about an economic analysis of certain FTC income scams showing that those promotions affected different communities at different rates.

Evaluate your options carefully before taking a swing at a money-making pitch. The FTC has new sharable resources for consumers, including articles on how to spot a job scam, what to look for in evaluating a potential investment, and when to blow the whistle on a business coaching promotion. In addition, consider sharing with your social networks infographics on 4 things to do before accepting a business offer and tips on how to Spot an income scam. We also have a new video with advice on protecting yourself from deceptive income promotions.