“Yet another real estate seminar scam,” is how the Federal Trade Commission characterized a recent case. “Remember, if someone says you can earn a lot of money on an investment with little or no risk, that’s probably a scam,” warned the nation’s consumer watchdog.
FTC Slams “Flipping” Educational Company
Regulators sued a real estate investment business for allegedly peddling empty promises. The claimants have requested an operational injunction and asset freeze.
The Utah Division of Consumer Protection and the FTC joined forces in a civil complaint against Nudge LLC and its executives for allegedly pocketing more than $400 million in a “deceptive scheme.”
Andrew Smith, director of the FTC’s Bureau of Consumer Protection, explained: “These defendants presided over a sales process that started with empty promises of future wealth and ended with many consumers left in financial ruin.”
How the Real Estate Educational Program Supposedly Worked
According to the FTC, Nudge held free seminars to pitch $1,100 workshops where attendees would learn a “system” for finding “lucrative” real estate deals. Supposedly, the second-tier workshops offered little more than Google-able information about real estate investing, plus another sales pitch for $20,000 advanced training.
Defendants Plan to Fight Charges
For their part, the defendants insist that they offer “valuable real estate education, training, and experience.” Additionally, they argue that the “FTC’s groundless lawsuit and overreaching rush to shut down a legitimate company operating lawfully for many years are grossly unfair and do not reflect reality.” Nudge plans to “fight these allegations,” and it looks “forward to telling their side of the story and setting the record straight.”
The Golden Marketing Rule: Don’t Deceive or Exaggerate
At face value, the Federal Trade Commission’s marketing rules are simple: Don’t lie and don’t exaggerate. But when it comes to marketing lawsuits, the simple often becomes nuanced.
In the Nudge case, promotional language triggered the claim. The company touted “proven…formulas for success” that lead to “amazing profits.”
You may be thinking: Hey! That’s how selling works!
But here’s the legal rub: If Nudge can’t prove that a portion of workshop participants made bank with its system, then the operation could be deemed “unfair and deceptive.” To bolster its claim, the FTC contends that 95% of seminar participants paid Nudge more than they made in real estate deals.
It will be interesting to see how this case resolves, however. After all, if 5% of participants profited under Nudge’s program, the company can point to success stories and reasonably argue that lack of effort is to blame.
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