The Federal Trade Commission charged BurnLounge, a company that sold opportunities to operate online digital music stores via the Internet, telephone calls and through in-person meetings with providing most of its benefits to participants who recruited other members, as opposed to actually selling music downloads.
Such structures are illegal under the FTC Act.
In addition to BurnLounge, the complaint named Juan Alexander Arnold, John Taylor, Rob Deboer; and Scott Elliot as defendants. The papers were filed in the United States District Court Central District of California, Western Division.
The FTC also alleged that despite claims made by some of the defendants during live recruitment presentations (“J.T. made $50,000 two weeks ago. He’s going to make probably $700,000 this year, and he’s a good old boy from Texas that can’t read”), live teleconferences (“We’ve got residual checks in the company right now that are a six-figure income…”) and Internet pre-recorded messages (“Our professional BurnLounge team is then available to answer all questions on your behalf until we drive your personal income to $1,000 per week”) consumers who joined the program were not likely to make substantial incomes.
The FTC is seeking temporary and permanent injunctions, as well as an order freezing assets and requiring an accounting. It is also requesting compliance with the FTC Act, as well as redress to consumers injured as a result of the defendants’ alleged violations.
