Burnlounge promoter Scott Elliot has agreed to pay $20K towards a $117,000 settlement with the FTC over the companies pyramid practices.
n another "I told you so" moment, Grant Johnson, the new CEO and Chairman of BurnLounge announced in a press release through the Mi2n.com music network the company will abandon its MLM model for a more traditional affiliate model. BurnLounge affiliates will be able to participate directly in the revenue upside from the sales of music, movies, tickets and other online transactional services without having to invest high fees to use the companies software tools.
This is a 180 degree turnaround since the company dumped Alex Arnold (a former executive of another bankrupt MLM, Excel Communications) in the face of criticism about its MLM structure and the Federal Trade Commission building its case against the company.
BurnLounge has announced that CEO, Alex Arnold, will step down from his post effective immediately. Grant D. Johnson, one of the company's Board of Directors and founding investor will take the helm. Johnson is also founding managing partner of Benevolent Capital, a hedge fund investing in private and public companies.
The Federal Trade Commission went to court this week to ask for an immediate shutdown of the controversial music service, but the court granted the company a stay. Although it still remains operational, the damage has been done. I think you'll see a number of members canceling their memberships.
I hate to say that I was right, but I’m going to say it anyway. And, not only am I going to say it, I’m going to say it loud: I TOLD YOU SO!
Today, I learned through Mi2n’s music industry news service that Burnlounge, a company I’ve railed against here on this blog (click on link to see original story), is the target of the United States Federal Trade Commission. The FTC is moving against Burnlounge to shut down is operations, citing the companies business model as a “pyramid” scheme.
So…to Barry, whom I’ve parried with over the last four months or so on this subject, I say: I told you what this was from the get go, and you adamantly refused to capitulate that the service is a ponzi scheme. Now, the federal government has confirmed just that. Burnlounge will be gone before you know it and thousands of people will be out of their hard earned dollars this scam stole from them. You should be ashamed of yourself, my friend. Because you were one of the people who were out there spreading the message of false hope yourself. Now, where are you? Now, what do you have to say for yourself?
Anyone in the business of music who got involved with Burnlounge should be taken to task. There is one woman in particular who posted to this very blog, that was directly involved in BurnLounge. That woman works for an independent record company. I’m not going to point the finger directly at you, because you know who you are. My question to you is, how can you live with yourself knowing that you misrepresented artists, music fans and your friends who trusted you and supported this idea based on your word? Now, what are you going to do?
Here is the link to the article on Mi2n.com and I’ve republished below as well:
On June 6, 2007, the FTC filed a complaint in the U.S. District Court for the Central District of California against BurnLounge, Inc. The complaint charges that BurnLounge sold opportunities to operate on-line digital music stores that was, in fact, an illegal pyramid scheme. The agency is seeking a permanent halt to the illegal pyramid practices as well as other illegal practices alleged in the complaint.
According to the FTC, BurnLounge recruited consumers through the Internet, telephone calls, and in-person meetings. The sales pitch represented that participants in BurnLounge were likely to make substantial income. BurnLounge recruited participants by selling them so-called “product packages,” ranging from $29.95 to $429.95 per year. More expensive packages purportedly provided participants with an increased ability to earn rewards through the BurnLounge compensation program.
The BurnLounge compensation program primarily provided payments to participants for recruiting of new participants, not on the retail sale of products or services, which the FTC alleges would result in a substantial percentage of participants losing money.
The FTC specifically alleges that the defendants operate an illegal pyramid scheme, make deceptive earnings claims, and fail to disclose that most consumers who invest in pyramid schemes don’t receive substantial income, but lose money, instead. These practices violate the FTC Act, the agency alleges.
The FTC has asked the court to halt the deceptive practices and misrepresentations and to freeze the defendants assets, pending a trial, to preserve them for consumer redress. At a hearing on the FTC’s request for a temporary restraining order, on June 8, 2007, BurnLounge’s attorneys asked for more time to respond fully, and U. S. District Court Judge George Wu ordered that a full hearing on the FTC’s request for a preliminary injunction and asset freeze be held on June 19, 2007, after which he will rule on the FTC’s requests.
In addition to naming BurnLounge, Inc., a Delaware corporation based in New York City, the Commission’s complaint also names: Juan Alexander Arnold, of Studio City, California; John Taylor, of Houston, Texas; Rob DeBoer of Irmo, South Carolina; and Scott Elliott of Forney, Texas.
This case was brought with the invaluable assistance of the Office of the Attorney General of South Carolina.
Over the last 10 years, the Commission has halted 17 pyramid schemes and has collected almost $90 million in consumer redress and tens of millions of additional dollars in suspended judgments.