Skip to main content

BurnLounge – Alleged Online Pyramid Scheme Settles With FTC

BurnLounge was accused by the FTC of operating a pyramid scheme that primarily paid for the recruitment of new participants instead of retail sales of music and video. According to the FTC,

“The BurnLounge compensation program primarily provided payments to participants for recruiting of new participants, not on the retail sale of products or services, which the FTC alleges would result in a substantial percentage of participants losing money.

The FTC specifically alleges that the defendants operate an illegal pyramid scheme, make deceptive earnings claims, and fail to disclose that most consumers who invest in pyramid schemes don’t receive substantial income, but lose money, instead. These practices violate the FTC Act, the agency alleges.”

The company announced that it is ending its pyramid program and claims to have settled with the FTC.

Remember that networking marketing/MLM companies are legal. However, whether brick-and-mortar or online ventures, the BurnLounge compensation-type plan is an invitation to get nailed by the government for running an illegal pyramid scheme.

Mike Young, Esq.

Author Mike Young, Esq.

Mike Young has been practicing business and technology law since 1994 and is an angel investor in startups. He's been an entrepreneur since 1988. To get legal help from Attorney Young, click here now or call 214-546-4247 to schedule a phone consultation.

More posts by Mike Young, Esq.