FTC Calls Web Deal an Illegal Pyramid

Thursday Jul 10th 2003 by Roy Mark
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The U.S. federal agency takes Internet 'shopping mall' operators to court to halt alleged scam. NexGen3000.com marketed Web-based malls that they claimed would enable investors to earn substantial income and commissions on products purchased through the Internet.

The Federal Trade Commission (FTC) has charged the operators of an Internet "shopping mall" network with operating an illegal pyramid scam.

In a complaint filed Monday in an Arizona U.S. District Court, the FTC alleges that Tucson, Arizona-based NexGen3000.com and its principals marketed Web-based malls that they claimed would enable investors to earn substantial income and commissions on products purchased through the Internet.

The malls contained a collection of links to retail Web sites maintained by merchants. Consumers paid a registration fee to join the NexGen program, and most also purchased a "WebSuite" including the Internet mall and related goods and services.

A basic WebSuite cost $185, including the registration fee, and a "Power Pack WebSuite" cost $555. The FTC's complaint states that NexGen assured consumers that buying the WebSuite qualified them to earn significant commissions for every WebSuite sold.

NexGen allegedly claimed that "each activated business center has the potential to earn up to $60,000 per week."

In fact, the FTC alleges, most consumers lost money in the operation.

According to the FTC, the defendants advertised their business opportunity through the NexGen Web site, live presentations, and telemarketing calls, and maintained a network of affiliates to help promote and sell the malls.

The complaint also states that the defendants provided deceptive marketing material to affiliates, providing them with the means to deceive others.

The agency alleged that the defendants failed to disclose that a substantial percentage of participants would lose money, and that the scheme was actually an illegal pyramid.

The FTC has asked the court to bar permanently the corporate and individual defendants from engaging in the violations of the FTC Act alleged in the complaint. The FTC is seeking a permanent ban on the deceptive acts, and consumer redress for victims of the scam.

The FTC complaint named NexGen 3000.Com Inc; Globion, Inc.; Infinity2, Inc.; David A. Charette; Jennifer K. Charette; Robert J. Charette, Jr.; Marta H. Charette; Stephen M. Diamond; Christine A. Wasser; and Edward G. Hoyt.

Adapted from internetnews.com.

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