Operation used false celebrity endorsements and bogus news stories to promote sales
The operators of a work-from-home scheme and the CEO of their main affiliate marketing network will pay nearly $1.5 million to settle Federal Trade Commission allegations that they used misleading spam emails to lure consumers into buying work-from-home services.
In its complaint, the FTC alleges that Nevada-based Effen Ads, LLC and its owners, Jason Brailow and Brandon Harshbarger, worked with an affiliate marketing network called W4 LLC to promote a work-from-home scheme by sending bulk unsolicited email, or spam, to consumers, which generated more than 50,000 sales of the Effen Ads program. The emails included “from” lines that falsely claimed they were coming from news organizations like CNN or Fox News, and “subject” lines that falsely suggested the opportunity was endorsed by celebrities such as investor Warren Buffett and personal finance expert Suze Orman.
“Effen Ads used phony celebrity endorsements, made-up news reports, and spam email from fake senders to push a work-from-home scheme,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “Consumers should be on alert for scams promising lots of income for little or no effort—if it sounds too good to be true, it probably is.”
The emails linked to websites displaying fake news stories and false celebrity endorsements that were previewed in the spam emails, according to the complaint. Consumers who clicked on the links in these fake online news stories were then routed to Effen Ads’ sales websites, which pitched the company’s work-from-home schemes. The schemes typically cost $97 and operated under numerous brand names such as Secure Home Profits, Paydays At Home, Home Cashflow Club, Home Cash Code, Home Payday Center, Snap Web Profits, Complete Profit Code, Global Cashflow Center, Global Payday System, Your Income Gateway, Home Payday Club, Web Payday Center, and Home Payday Vault.
Effen Ads also made money by selling consumers’ contact information to third-party telemarketers who tried to sell those same consumers business-coaching services that cost thousands of dollars. One of the third-party telemarketers who bought consumer contact information from Effen Ads reached a settlement in 2018 with the FTC.
The FTC’s complaint alleges that Effen Ads perpetuated the scheme by using shell companies and straw owners to obtain merchant accounts used to process consumer credit card payments. This improper practice, known as credit card laundering, helps unscrupulous merchants evade merchant monitoring programs by the credit card associations.
In addition to violations of the FTC Act’s prohibition against unfair and deceptive practices, the FTC also alleges that Effen Ads, Brailow, and Harshbarger, as well as Jason Walker, who was CEO of W4, violated the CAN-SPAM Act by disseminating spam emails containing misleading header information and subject lines.
As part of the settlement, Walker will pay $1.3 million, is permanently banned from marketing or selling any work-from-home program, and is prohibited from providing any affiliate marketer with ads containing false or misleading representations about celebrity endorsements, objective reviews, or news-source affiliations.
The settlements with Harshbarger, Brailow, and Effen Ads impose an $11.3 million judgment, which will be suspended upon payment of $25,000 by Harshbarger and $121,948 by Brailow because of their inability to pay the full amount. In addition, they are permanently banned from marketing or selling business opportunities or business coaching products and are prohibited from making any misrepresentations in the marketing or sale of any product or service. Harshbarger, Brailow, and Effen Ads are also permanently prohibited from violating the CAN-SPAM Act and engaging in credit card laundering.
The Commission vote authorizing the staff to file the complaint and stipulated final orders was 5-0. The FTC filed the complaint in the U.S. District Court for the District of Utah, Central Division. The Court approved the stipulated final orders on December 20, 2019. NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated final orders have the force of law when approved and signed by the District Court judge.