Posted on 03/13/2014 1:59:34 PM PDT by mgist
Is this George Soros and Carl Icahn-backed firm running a "pyramid scheme"? 13 March 2014 | By Sophie Hobson
George Soros and Carl Icahn both hold stakes in it, but controversial US firm Herbalife has come under consistent fire from rival investor William Ackman over its allegedly dubious operations.
Now it’s being investigated by the US Federal Trade Commission (FTC) over claims it might be running a “pyramid scheme”.
The key accusation against Herbalife, which makes weight loss and nutritional supplements and is listed on the New York Stock Exchange, is that it makes most of its money from signing up new distributors rather than from sales.
Herbalife’s shares dropped by as much as 17% following the news.
>> Six of the worst Ponzi schemes in history
Herbalife itself said the following in a statement: “Herbalife welcomes the inquiry given the tremendous amount of misinformation in the marketplace, and will cooperate fully with the FTC.
“We are confident that Herbalife is in compliance with all applicable laws and regulations.”
So what’s going on?
Activist investor Ackman has taken a $1bn position against Herbalife, and long called it a “pyramid scheme”.
This week his hedge fund Pershing Square Capital Management made further allegations that Herbalife was violating direct sales regulations in China.
But up until this week’s news, Herbalife stock has been performing quite nicely.
Soros may have reduces his stake in the company last year, but he didn’t pull out: he still holds stock through his firm Soros Fund Management.
>> George Soros makes $5.5bn as fund becomes world #1 again
Icahn still owns nearly 17%, according to the BBC, and been going head-to-head with Ackman over his allegations.
We’ll have to wait and see what the FTC’s final ruling is, but this case is definitely one to watch.
Anything Soros is involved with is a scheme.
My bet is FTC does absolutely nothing. Im glad Soros is getting a taste of his own medicine.
It’s fun to watch hedge fund titans square off.
I remember back in the early 70s when Amway was making some folks some pretty good money in Michigan. There was a competitor that sprung up called Bestline Products.
My buddy jumped on it with dreams of wealth and wound up with a garage full of laundry soap he couldn’t sell.
Agreed
This is just another go at the network marketing industry, from a guy who has a lot riding on destroying it. Why is that even legal?
The answer is no. It’s multi-level marketing, but not a pyramid scheme or a scam.
The people pushing this are short sellers.
Costco readily admits it makes 95% of its profit from the sale of memberships, not from the sale of products.
You mean like Amway, Tupperware, Avon
Well one wonders.
Truth is, if the money is made off initiates, then it’s a pyramid while
If the money is made from selling actual products then it qualifies as simply distributorship or master agent/sub agent.
Much like my businesses
Didn’t AMWAY win such a case in 1978?
They did...
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