FTC Halts Pyramid Scheme
2Xtreme and USAsurance Group/Akahi Claim 60,000 Recruits
FTC News Release
April 10, 2000
At the request of the Federal Trade Commission, a US District Court Judge has halted the operation of an alleged pyramid scheme and frozen the defendants' assets, pending trial. The FTC alleges that consumers lost substantial sums of money to the scheme and has asked the court to order consumer redress after a trial on the merits of the agency's charges. On December 9, 1999, the FTC filed suit in US District Court for the District of Maryland seeking a Preliminary Injunction and an asset freeze, pending trial. After a two-day preliminary injunction hearing that concluded February 25, 2000, Judge J. Frederick Motz found that based on the FTC's preliminary evidence, it is likely to succeed in proving in a full trial that the defendants deceived consumers. Judge Motz issued preliminary injunctions prohibiting the defendants from operating illegal pyramid schemes and from making various misrepresentations pending trial. The injunctions also froze the individual and corporate assets to preserve them for consumer redress.
The FTC complaint alleges that Dallas-based 2Xtreme Performance International, and its successor, Denver-based USAsurance Group/Akahi, used Web sites, direct mail, infomercials, telemarketing and seminars to convince consumers they could make substantial income by investing in their multi-level marketing scheme, which marketed nutritional supplements, beauty, weight-loss and other products. Marketing materials represented that consumers could expect to earn enough income to retire in two to five years.
The FTC alleged that the earnings claims are false and that 2Xtreme's practices violated federal law. The FTC charged that since 2Xtreme is actually a pyramid, consumers will not earn the specific levels of income touted in the marketing materials. In fact, most consumers will lose money, the complaint says. In addition, by providing promotional materials containing the misrepresentations about income to its participants, 2Xtreme was providing them with the "means and instrumentalities" to violate federal law.
A trial date has not yet been set by the court.
The injunctions named John T. Polk, Patrick Farah, Peter Hirsch, 2Xtreme Performance International, USAsurance Group, Inc., Akahi Corp., Akahi.com Inc., and AFEW, Inc. Prior to the hearing, defendants Peter Hirsch, John T. Polk, and AFEW, Inc. stipulated to the entry of a preliminary injunction against them. The businesses were based in Englewood, Colorado; Dallas, Addison, and Carrollton, Texas.
- Federal Trade Commission, Plaintiff, vs. John T. Polk, Patrick Farah, and Peter Hirsch, USAsurance Group, Akahi Corporation, Akahi.com, 2xtreme Performance International, and Afew, Defendants. United States District Court, District of Maryland, Northern Division, Civil Action No. 99CV3679, FTC File No. 992-3103.
This page was posted on November 28, 2005.