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A preliminary injunction against Financial Education Services has been rejected by the FTC.

The ruling jeopardizes the regulation of the alleged $467 million pyramid scam.

The Financial Education Services preliminary injunction hearing took place on June 30, according to the court docket.

Minute For court appearances before District Judge Bernard A. Friedman in person: On June 30, 2022, a show cause hearing was held. The court will make a ruling and issue an order.

On July 17, a decision was made that rejected the FTC’s request for a preliminary injunction.

The preliminary injunction request from the FTC is accordingly rejected for the reasons that were noted in the record at the hearing on June 30, 2022.

Sadly, we still don’t even know what transpired at the hearing on June 30.

The court has only released the information included in the case docket excerpt above regarding the hearing scheduled for June 30. This means that while I may inform you that the proposed preliminary injunction was declined, I am unable to explain why.

It’s not healthy for consumers to remain in the dark about the reasons why an injunction against an alleged pyramid scheme worth roughly $500 million wasn’t granted.

On August 8th, a transcript of the hearing from June 30th will be made available. Then, hopefully, we receive some responses.

While waiting,

Financial Education Services’ previously issued TRO has been revoked, its assets have been unfrozen, and the Temporary Receivership has been changed to a Monitor.

There are certain proviso limitations in place about money. Neither the FES Defendants nor

transfer assets overseas without notifying the Monitor, relocate assets worth less than $500,000, or “dispose of any major assets outside regular course sales and associated activities.”

The Monitored Entities will not dispose of any planned assets as described above if the Monitor objects, and will instead wait for the Court’s approval before doing so.

The distinction between a Receivership and a Monitor is mostly what it implies. Business actions will be “monitored and reviewed” by the FES Monitor, including:

Interviewing FES personnel and associated businesses, document retention and preservation rules, training materials, policies and procedures, financial records and transactions, and marketing (both written and active in-person events).

The FES Defendants have been told to comply completely with the Monitor and refrain from interfering with the court’s mandated tasks.

The fact that FES would finance the Monitorship is a gain for consumers;

To pay any fees, charges, or other expenditures authorized by the Court, the Corporate Defendants shall keep a minimum balance of Five Hundred Thousand Dollars ($500,000) in the corporate receivership account created by the previously appointed Receiver under the TRO.

The Monitor will provide the court with periodic reports, much like with receiverships. Unless there is a pressing need, this usually occurs quarterly.

The FES Defendants filed a motion to dismiss the FTC’s lawsuit on July 25th, appearing to be encouraged by their victory over the FTC.

This is unexplored ground in terms of the FTC’s regulation of MLM businesses.

My immediate instinct was to once again thank the Supreme Court for permitting customer injury and to raise the total amount of post-AMG consumer damages by $467 million.

However, the matter is still pending, and the Temporary Receivership has been changed to a Monitorship, so I’m not sure how this will ultimately turn out.

I’m hopeful that the June 30th transcript would clarify the reasoning behind the court’s decision to permit the operation of a pyramid scheme.

The FTC’s testimony was accepted by the court, and a TRO was issued. Although not a verdict, this provides a reliable prediction of how the case will go.

The FTC’s FES lawsuit has some elements that BehindMLM highlighted, and they are fairly damning. Georgia will find FES in 2021… for operating a pyramid scam.

The company will cease operations if FES ceases operating a pyramid scheme. Consumers only lose out by not having a preliminary injunction and asset freeze in place.

Resolution of FTC lawsuits might take years. When it becomes clear that FES is not a commercially viable enterprise, watch the money go.

The Monitor is another option. Examining the company to determine whether it can be operated lawfully and financially is one of the responsibilities a Receiver performs. Pyramid schemes frequently fail this criterion, leading receiverships to decide to shut down their businesses.

Where does it leave the Monitor because it is in the pecuniary interests of the FES Defendants to continue the alleged pyramid scheme? Leaving the court every five minutes to disclose the same fraud that the FTC described in its complaint? How will that function?

Without having read the transcript, I believe the purpose of this is to allow FES some wiggle space while the FTC’s lawsuit is resolved. When your unlawful enterprise is shut down and you no longer have access to the claimed ill-gotten earnings, it is far harder to mount a defense than it is in the opposite situation.

The issue is that these intentions don’t always materialize, especially when it comes to illicit activity that is close to $500 million in value. Customers just suffer as a result.

And this is the ongoing effect of the Supreme Court prioritizing the interests of con artists over those of customers.

Our following case docket check is set for August 8th.

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