Herbalife and FBI
It is clear that there re many scams in MLMs, but FBI going after Herbalife is a surprise even for people most skeptical about MLMs.
Preet Bharara is well know as the “Man Busting Wall Street”, he took part in busting Madoff’s Ponzi scheme, Bank of America suit, SAC Capital, tracking insioder trading. In 2012, Bharara was one of “The 100 Most Influential People in the World” accorifng to Time, and 2011 Person of the Year by India Abroad
According to NYPost sources New York Attorney General Eric Schneiderman is investigating Herbalife over claims it is a pyramid scheme.
And Reuters reports that Herbalife was hit with a shareholder class lawsuit on Monday, Apri 14th 2014, that accuses Herbalife of failing to disclose to investors that its operations were based on a pyramid scheme. It was filed by Abdul Awad, an Herbalife shareholder. He claims that he bought Herbalife stock at inflated price, and Herbalife misrepresented and failed to disclose that it operated a pyramid scheme in which distributors primarily generated revenue by recruiting other distributors rather than selling products. and that Herbalife failed to disclose to investors that it engaged in “deceptive trade practices” to pressure customers to buy more products as distributors (case: Awad v. Herbalife Ltd, et al, U.S. District Court, Central District of California, No. 14-02850.)
Herbalife denies knowledge of FBI actions:
“We have no knowledge of any ongoing investigation by the DOJ or the FBI, and we have not received any formal nor informal request for information from either agency.”
Herbalife does not intend to make any additional comments regarding this matter unless and until there are material developments
Herbalife is currently not accused of any wrongdoing by FBI
At Friday (April 11th, 2014) afternoon, when the news was out, Herbalife stocks dropped 14%, – $8.36 to $51.48, with heavy trading volume. That was the biggest one-day decline since Bill Ackman accused company of being a pyramid at 21 Dec 2012.
Is it really a pyramid scheme, or is it just an accusation of Bill Ackman who wants Herbalife shares to drop? Ackman accused Herbalife more than a year ago of running a pyramid scheme in which salespeople make more money recruiting new sales agents than selling products. Was Abdul’s case connected with Bill too? He states similar claims.