FTC Triumphs: $40 Million Crackdown on Fraudulent CBD and Keto Schemes Safeguards Consumers!

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WASHINGTON, D.C. — The Federal Trade Commission (FTC) has successfully secured court-approved settlements totaling approximately $40 million. This significant financial resolution stems from allegations against a group of defendants involved in deceptive marketing practices, which included enrolling consumers into continuity plans for CBD and keto-related products without their consent.

The U.S. District Court for the Middle District of Florida, Tampa Division, approved these settlements on September 17, 2024, following allegations that the defendants orchestrated unauthorized billing scams and engaged in business impersonation strategies. The defendants include individuals such as Harshil Topiwala, Kirtan Patel, and Manindra Garg, alongside several companies including Legion Media, LLC, KP Commerce, LLC, Pinnacle Payments, LLC, and Sloan Health Products, LLC.

Central to the FTC’s complaint were accusations that the Legion Media defendants facilitated unauthorized charges by creating shell entities to secure merchant accounts, thus enabling them to process unapproved online transactions. Moreover, Sloan Health Products allegedly collaborated by managing the distribution of these deceptively marketed products and handling the substantial customer returns, all while concealing the true identities of the entities behind the scheme.

The legal action cites violations of Section 5 of the FTC Act, the Restore Online Shoppers’ Confidence Act (ROSCA), and the Electronic Funds Transfer Act (EFTA). The court’s orders not only enforce monetary judgments but also impose stringent conduct provisions. These provisions permanently ban the defendants from engaging in negative option marketing strategies or “forced upsells,” which often exploit consumers through pre-checked boxes or bundled offerings without explicit consent.

Additionally, the orders mandate the defendants to disclose critical information regarding costs, refund policies, and endorsements, ensuring transparency in their marketing tactics. They are also prohibited from making unsubstantiated health claims about CBD, skincare, or weight-loss products, thus reinforcing the need for evidence-based marketing in the dietary supplement industry.

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From a financial standpoint, the settlements require the turnover of various assets. Topiwala and his enterprises face a $30 million judgment, temporarily suspended upon relinquishing claims to luxury items, including a notable Michael Jordan jersey and a Richard Mille watch. Similarly, Garg and Sloan Health Products are subject to a $30 million judgment, contingent on surrendering valuable assets such as luxury vehicles and jewelry. Meanwhile, Patel and KP Commerce must transfer approximately $100,000 in cryptocurrency assets to fulfill their $3 million judgment.

These settlements underscore the FTC’s unwavering commitment to protecting consumers from deceptive business practices, highlighting the agency’s role in maintaining fair and transparent online marketplaces. The broader implications of this case serve as a stern warning to companies employing unethical marketing strategies. It reinforces the necessity for stringent regulatory compliance and ethical business conduct, emphasizing that consumer rights and transparency must remain paramount in the digital economy.

The unanimous 5-0 vote by the Commission to authorize the filing of these orders reflects the FTC’s dedication to safeguarding consumer interests and ensuring that fraudulent entities are held accountable. This decision marks a pivotal step in the ongoing effort to eradicate deceptive practices from the burgeoning market of online health and wellness products.

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