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The Federal Trade Commission is suing Addison-based multilevel marketing company Neora, alleging it operates as a pyramid scheme and deceives the public about the benefits of its brain health supplements.
Neora — formerly known as Nerium before a global rebrand at the start of 2019 — sells supplements, skin creams and other wellness products through representatives it calls “brand partners.”
Neora falsely promised people who joined the multilevel-marketing company that they could achieve “lifestyle-changing income” when, in actuality, the majority of recruits actually lost money, according to the FTC lawsuit filed Friday in US. District Court.
As part of the alleged pyramid scheme, Neora pushed its distributors to recruit new distributors rather than sell the retail product.
“Participants in legitimate multilevel marketing companies earn money based on actual sales to real customers, rather than recruitment,” said a statement from Andrew Smith, director of the FTC’s Bureau of Consumer Protection. “But pyramid schemes depend on recruitment of new participants to pay out to existing participants, meaning that the vast majority of participants will ultimately lose money.”
Neora said in a release Friday that it had “rejected an offer from the FTC to settle a threatened lawsuit.”
“We are the real deal; in the business of making people better, whether it is a hardworking parent or the budding entrepreneur looking to represent the industry’s leading products,” Neora founder and CEO Jeff Olson said in a statement. “Our brand partners work hard, and now it is our job to stand for them and protect the businesses they worked so diligently to develop.”
The company claimed the FTC “refused” to provide Neora with its own analysis of its business practices, and that the company saw roughly 60% of its total sales through non-business participants called “Preferred Customers.”
Neora also filed suit in U.S. District Court, challenging the FTC’s recent actions against companies like its own, claiming “no direct sales company is safe under the FTC’s new arbitrary retroactive standards.”
In the FTC’s lawsuit, it accused the company and its suppliers of deceptively advertising “EHT” supplements as a treatment for concussions, as well as Alzheimer’s and Parkinson’s disease, the FTC alleges.
Neora, its CEO and suppliers recruited former pro athletes like Sidney Rice, Steve Weatherford and Cory Redding Jr. to pitch the product to football coaches and concerned parents in order to capitalize on growing awareness of concussion-related injuries in sports, according to the FTC.
The FTC said it reached a settlement with Neora suppliers Signum Biosciences and Signum Nutralogix that prohibited unsubstantiated claims about the “EHT” supplements.
In May, Neora released a statement that it was seeing “double-digit growth,” thanks to new customers and product sales.