The FTC’s request to stop Financial Education Services from doing bad things has been turned down.
The decision makes it more likely that the $467 million pyramid scheme will not be regulated. The Financial Education Services preliminary injunction hearing took place on June 30, which is listed in the case docket.
Minute Entry for a hearing in front of District Judge Bernard A. Friedman in person: A Showcase CauseOn June 30, 2022, there was a hearing.
The court will make a decision and give an order. The FTC’s request for a preliminary injunction was turned down by that order, which came out on July 17.
The FTC’s request for a preliminary injunction is turned down for the reasons that were stated at the hearing on June 30, 2022 and are now part of the record. We still don’t know what happened at the June 30th hearing, which is a shame.
The only information the court has made public about the June 30 hearing is the case docket quote above. This means that the preliminary injunction you asked for was turned down, but I can’t tell you why. It doesn’t look good for consumers to not know why an injunction against a nearly $500 million pyramid scheme wasn’t granted.
On August 8, the public will be able to read a transcript of the hearing from June 30. Then, hopefully, we’ll know what to do.
While we wait, The Financial Education Services TRO has been taken away, the Temporary Receivership has been turned into a Monitor, and the company’s assets have been unfrozen.
There are some restrictions in place when it comes to money. The FES Defendants aren’t allowed to “dispose of any material assets beyond ordinary course sales and related transactions,” move less than $500,000 worth of assets without telling the Monitor, or send assets overseas without telling the Monitor.
If the monitor doesn’t agree with any of the above proposed ways to get rid of assets, the entities being watched won’t do it until the court says it’s okay. What makes a receivership different from a monitor is pretty much what it sounds like.
The FES Monitor will “monitor and review” business activities such as marketing (both written and in-person events), training materials, policies and procedures, document retention and preservation policies (including financial records and transactions), and interviews with FES staff and related entities.
The FES Defendants have been told to work with the Monitor and not get in the way of his or her job. The fact that the FES will pay for the monitoring is good for consumers.
In order to pay any fees, costs, or other expenses approved by the Court, the corporate defendants must keep at least $500,000 in the corporate receivership account set up by the Receiver before the TRO.
Just like with receiverships, the monitor will give the court regular reports. Unless something important comes up, this is usually done every three months. The FES Defendants tried to get the FTC’s case thrown out on July 25.
They seemed to feel more confident after their win against the FTC. When it comes to how the FTC regulates MLM companies, it goes without saying that this is new territory. First, I wanted to thank the Supreme Court again for letting consumers get hurt and add $467 million to the total amount of money consumers have lost since AMG.
But since the case is still going on and the Temporary Receivership is now a Monitorship, I don’t know how this will turn out. I’m hoping that the June 30th transcript will help me understand why the court let a pyramid scheme go on.
The court agreed with what the FTC said and gave a TRO. This is not a final decision, but it gives a good idea of how the case will go.
We talked about some of the details of the FTC’s case against FES, and they are pretty bad.
There’s a chance that Georgia will fine FES for running a pyramid scheme in 2021.
If FES stops running a pyramid scheme, the company will no longer be in business. If there isn’t a preliminary injunction and asset freeze in place, it only hurts the consumer.
Cases with the FTC can take years to settle. When it becomes clear that FES is not a legal business, watch the money go away.
There’s also the Monitor. A receiver’s job is to look over the business and figure out if it can be run legally and make money.
Most pyramid schemes fail this test, which is why receiverships choose to stop doing business. The alleged pyramid scheme benefits the FES Defendants financially, so where does that leave the Monitor? Running out of court every five minutes to report the same fraud that the FTC described in their complaint? How does that make sense?
Without seeing the transcript, I think the idea is to give FES some breathing room while the FTC case plays out. When your illegal business is shut down and you can’t get to the money you’re accused of getting from it, it’s much harder to start a defense than when it’s the other way around.
The problem is that these good intentions don’t work out in the real world when it comes to doing something illegal, especially if it costs close to $500 million.
The only thing that happens is that customers get ripped off. And this is a result of the Supreme Court’s decision to put scammers’ needs before those of consumers.
I’ve set August 8 as the date for our next case docket check.