11/05/2019 | Press release | Distributed by Public on 11/05/2019 16:46
The Federal Trade Commission and the Utah Division of Consumer Protection sued Nudge, LLC and affiliated companies, alleging that they make empty promises about earning money by 'flipping' houses, to convince consumers to buy real estate training packages that cost thousands of dollars. In a filing today, the FTC and the Utah Division of Consumer Protection requested that a court prohibit Nudge and its affiliates (Nudge) from selling the packages.
According to the complaint, Utah-based Nudge markets its training through real estate celebrities who promise to reveal strategies for making 'amazing profits' at seminars included in the packages. One celebrity endorser quoted in the complaint, for example, promises he will share his 'formula for success' that is 'proven' to get results. As alleged in the FTC's complaint, however, the seminars are mostly designed to sell additional training, not to help consumers make money. According to a survey included in the FTC's court filings, more than 95 percent of consumers who attended Nudge's seminars paid more to Nudge than they netted in subsequent real estate transactions.
'These defendants presided over a sales process that started with empty promises of future wealth and ended with many consumers left in financial ruin,' said Andrew Smith, director of the FTC's Bureau of Consumer Protection. 'The lure of easy income is strong, but consumers should stop and evaluate the facts behind any money-making promise.'
Nudge began selling real estate training packages at least as early as 2012. In its complaint, the FTC alleges that Nudge's revenues from late 2014 to late 2017 alone were more than $400 million.
According to the complaint, the scheme starts with advertisements featuring real estate television celebrities, including Scott Yancey from A&E's 'Flipping Vegas,' Doug Clark from Spike TV's 'Flip Men,' Drew Levin and Danny Perkins from HGTV's 'Renovate to Rent,' and Josh Altman from Bravo's 'Million Dollar Listing Los Angeles.' These advertisements, which promise celebrities' insider tips on how to make money in real estate, allegedly have enticed thousands of consumers to attend free 90-minute seminars.
The FTC's complaint charges that the free seminars are predominantly a sales pitch to spend more than $1,100 to attend a three-day workshop, where consumers will supposedly get access to a 'system' for finding 'lucrative' deals. Those promises also prove empty, as the three-day workshops largely consist of general information about real estate investing, misrepresentations about services offered by Nudge, and a sales pitch for 'advanced training' that costs as much as $40,000, according to the complaint.
Until at least 2016, according to the complaint, the advanced training pitched by Nudge included access to so-called 'Buying Summits' or 'Investor Expos.' At these events, consumers were promised special access to properties at discounted prices for purchase. However, as alleged in the complaint, defendants typically sold or brokered the properties to consumers at inflated prices.
The complaint was filed by the FTC and Utah Division of Consumer Protection against Nudge, LLC and two of its affiliates, Response Marketing Group, LLC and BuyPD, LLC. The defendants also include five individuals who are principals or executives of one or more of those companies: Brandon B. Lewis; Ryan C. Poelman; Phillip W. Smith; Shawn L. Finnegan; and Clint R. Sanderson. The real estate celebrities featured in Nudge's marketing are not named as defendants.
The complaint alleges the defendants violated the FTC Act and the FTC's Telemarketing Sales Rule, as well as three Utah statutes: the Utah Consumer Sales Practices Act; the Business Opportunity Disclosure Act; and the Telephone Fraud Prevention Act.
The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the District of Utah.
NOTE: The Commission files a complaint when it has 'reason to believe' that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.
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