The Federal Trade Commission (FTC) has been handed a major courtroom setback in an anti-pyramid case that shut down a direct seller back in May. According to an article from Social Selling News (SSN) …
FTC Takes Swift Action: Michigan-Based Direct Selling Company Faces Shutdown
“On May 23, the Federal Trade Commission (FTC) took swift action against a Michigan-based direct selling company that offers credit repair services, when it issued a motion to shut it down and freeze all assets. Just over a month after the closure, a judge has reversed this order allowing the company to continue operating under the observation of a monitor.
Financial Education Services Inc. (FES), also doing business as United Wealth Services among others, offers services including credit restoration, wills, living trusts, smart credit, travel, LifeLock, Debt Zero, credit builder, financial literacy, youth financial literacy, and power of attorney, according to a company LinkedIn page.
After hearing oral arguments in the U.S. District Court for the Eastern District of Michigan, U.S. District Judge Bernard A. Friedman issued an order on June 30 denying a motion for preliminary injunction, vacating the temporary restraining order he issued on May 24 to Financial Education Services Inc. and some of its executives. In addition, the order terminated the asset freeze and converted the receivership to a monitorship. According to the company’s legal team, it will take some time to bring the company back online so it may conduct business again under the assigned monitor, who will report back regularly to the court and the FTC.
The May 24 order was immediately issued after the FTC filed a complaint on May 23 alleging that FES and its owners, Parimal Naik, Michael Toloff, Christopher Toloff and Gerald Thompson, as well as a number of its related companies, bilked consumers for more than $213 million. The complaint alleged that, since 2015, FES has operated an unlawful credit repair scam that has deceived consumers across the country, and its investment opportunity is an illegal pyramid scheme. The FTC alleged that the company’s practices violate the FTC Act, the Credit Repair Organizations Act and the Telemarketing Sales Rule.
The complaint against FES contained several unfounded accusations, according to the company’s legal team, and in their opinion, it did not follow ordinary administrative actions prior to filing the complaint.
“They did no investigation here. They did no investigation of the company. They did a background investigation secretively, but they never reached out to the company,” says Richard Epstein, a partner with the litigation practice group at Greenspoon Marder LLP and a member of the FES legal team.
According to Epstein, typically the FTC might have issued a Civil Investigation Demand, or CID—a legal document that does not require court approval and seeks documents or other information related to an FTC investigation.”
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