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HolidayBuyer's Guide
Internet

Pyramid case settled

A majority of consumers who fell prey to an alleged Internet pyramid scheme will get their money back, the Federal Trade Commission says.

A majority of consumers who fell prey to an alleged Internet pyramid scheme will get their money back, the Federal Trade Commission said today.

The FTC reached a settlement with Fortuna Alliance, which the agency said ran the online pyramid operation until the commission shut it down last May. Fortuna will give full refunds to 30,000 to 40,000 consumers in 60 countries who paid between $250 and $1,750 each to become a part of the venture.

The consent judgment is for settlement purposes only and does not constitute an admission by the defendant of any law violations. Officials at the Fortuna Alliance could not be reached for comment.

Consumers shelled out $6 million to $11 million to Fortuna, the FTC estimates, but the settlement today only covers $5 million in losses. Consumers were promised $5,000 a month each in "profit" for joining, according to the agency.

"More than 95 percent of the people lost money in this scheme," Charles Harwood, the regional director for the FTC's Seattle office, said today. The agency described the Fortuna "investment program," run out of Bellingham, Washington, as a classic pyramid operation.

In pyramid schemes, investors buy into an operation and recruit additional members, making profits from the incoming monies. Eventually, however, the schemes collapse as the money given to investors at the top of the pyramid exceeds the funds coming in from new members on the bottom.

The FTC has been cracking down on online schemes, sending out 500 warnings to sites it suspected were running illegal pyramid operations in December. Last summer, the FTC sued four officers who ran Fortuna's operation for nine months.

Today's settlement includes $2 million awarded to consumers by a federal district court last year, as well as $350,000 frozen in the United States and $2.8 million transferred from a Fortuna bank account in Antigua, West Indies. Defendants will have to find a way to pay the additional money.

To be eligible to receive a refund consumers have to fill out a claim form and return it within 90 days. "Please do not expect a refund notice before March 15. We will post instructions here for people not receiving notices by that time," the site says.

In November, the FTC shut down the Mentor Network, a Newport Beach, California, company that allegedly used Web sites to solicit money for a children's charity, promising profits to donors. The FTC charges that, while the Mentor Network did give some funds to a charity, it also swindled more than 2,300 subscribers out of anywhere from $800,000 to $1.5 million through a pyramid scheme.