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According to the FTC, the Supreme Court’s AMG ruling has cost consumers $1.5 billion.

The losses were incurred through a variety of fraudulent techniques, with the FTC unable to hold fraudsters accountable as a result of the AMG judgment.

If you’re not familiar with the Supreme Court’s AMG ruling or need a refresher, the FTC went after payday loan fraudsters in a nutshell.

The fraudsters brought the matter to the Supreme Court, which determined in April 2021 that the FTC is unable to seek monetary remedies under FTC Act rule 13 because it is unconstitutional (b).

The FTC’s monetary remedies are all the agency can do to hammer fraudsters in the pocketbook. Damages, civil fines, disgorgement, restitution, and other remedies are available.

For the previous forty years, the regulator had successfully used 13(b) against fraudsters. The FTC’s MLM cases that we’re following have grown substantially more convoluted as of late.

Scammers get away with millions in duped customer cash even if they lose an FTC lawsuit.

In a May 31st statement, FTC Commissioner Kelly Slaughter (yep, that’s her real name) and FTC Chair Lina Khan addressed the present post-AMG situation.

When a firm breaches the FTC Act, the Supreme Court’s decision destroyed the Commission’s principal and the best weapon for seeking monetary remedies.

The FTC used this tool, known by its statutory provision as Section 13(b), to provide billions of dollars in relief—$11.2 billion from 2016 to 2022—in a wide range of cases, including telemarketing fraud, anticompetitive pharmaceutical practices, data security and privacy, and scams targeting seniors and veterans.

The FTC has faced two foreseeable effects in the year after the Court determined that we cannot get monetary remedy under Section 13(b): consumers who have been mistreated are not receiving money back, and corporate wrongdoers are emboldened.

The following are examples of cases where the FTC won but was unable to adequately penalize defendants:

Consumers were scammed of “at least $137 million” as a result of a fraudulent investment scheme.

The FTC won the lawsuit but was only able to recover $2.4 million because they were compelled to negotiate a settlement after losing 13(b).

Consumers were robbed of “almost $1.5 billion” by a lending firm. The FTC was obliged to negotiate a settlement after losing 13(b), with just $18 million in consumer redress.

The rest was sent to the lending firm.

A pharmaceutical corporation deceived consumers to the tune of $493 million by inflating medicine costs.

The FTC filed a lawsuit against the corporation. According to the AMG ruling, the court rejected monetary remedies, and the firm was consequently shut down.

Consumers did not receive a single dollar back, even though they were allowed to pocket approximately $500 million in unlawful gains.

The list goes on and on.

According to reasonable estimates, AMG has already cost customers more than $1.5 billion in relief that the agency might have gotten under Section 13(b), and the losses are growing by the day.

FTC v. Redwood Scientific Technologies is a case in the MLM sector.

The FTC’s complaint against Redwood Scientific and its owner, Jason Cardiff, was dismissed on all counts. However, because of Article 13(b), no damages or restitution were required.

Cardiff crowing about not having to pay back anything in our comments, confirming the FTC’s opinion that AMG has “emboldened” fraudsters.

Even though he lost, Cardiff considers the case a win because he didn’t have to pay any damages or reparations.

FTC v. Neora and FTC v. Success by Health are two more MLM cases that have been reduced to shambles as a result of AMG. Both lawsuits are currently in progress.

The FTC didn’t pursue a big MLM-related fraud action until last month. The 13(b) violation is still there in FTC v. Financial Education Services, but it is accompanied by a slew of additional infractions.

We don’t know if monetary relief will be provided because this is the first large FTC lawsuit launched since AMG (nearly half a billion in alleged fraud).

Commissioner Slaughter talks about the improvements the FTC has had to make in initiating lawsuits against scammers:

The FTC’s staff has done an outstanding job of pivoting in terms of tools and methods to mitigate the negative impact on consumers.

Despite these valiant attempts, our finest outcomes nevertheless result in justice being harmed and justice being delayed. The extent of relief provided by our other instruments is frequently far less.

Section 19 of the FTC Act is one of the FTC’s alternative strategies. However, due to the length of time, it takes to investigate a consumer complaint and bring a lawsuit, the statute of limitations governing Section 19 has generally passed by the time the case is filed.

This restriction has a particularly painful impact on customers who are early victims of unlawful practices—their complaints typically kick off an inquiry, but they are shut off from receiving remedy.

That is ludicrous from the perspective of consumer protection.

Long-term enforcement measures, such as issuing penalty violation warnings to businesses and initiating regulation actions, require time.

When compared to our prior federal court procedure, going via our administrative process can add years to the timetable for restoring ill-gotten earnings to consumers’ pockets, and it is also subject to Section 19’s shorter statute of limitations.

Finally, for competition breaches, the FTC has no other options for monetary redress or disgorgement of ill-gotten earnings.

The FTC has put its confidence in Congress acting until the result of test cases like FTC v. Financial Education Services, at least for the MLM business (I don’t follow FTC cases outside of MLM).

Congress must act quickly to amend Section 13(b) to clarify what has been a well-established, black-letter law for more than four decades—namely, that when companies or individuals violate laws enforced by the Commission, the agency can seek equitable monetary relief under Section 13(b) (b).

We were pleased this summer when the House of Representatives enacted a measure that would accomplish just that.

We urge the Senate to take up and approve the bill as quickly as possible.

Senator Cantwell introduced the Consumer Protection Remedies Act of 2022 on May 4th. “Referred to the Committee on Commerce, Science, and Transportation,” according to the bill.

The Committee “ordered [the measure] to be reported favorably with an amendment” on May 11th.

I’m not familiar with the many stages of bill legislation in the United States. However, the bill’s page on Congress’ website indicates that it is still in the early stages of development.

The Consumer Protection Remedies Act of 2022, if approved into law, will reinstate the FTC’s existing remedies through 13 new provisions (b).

If it fails, I presume MLM fraud regulation in the US goes the way of the dodo bird?

Thankfully, none of this has an impact on SEC and CFTC securities fraud proceedings. However, the prospects for direct pyramid fraud appear to be dismal.

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