FTC Sues Burnlounge For Being A Pyramid Scheme
The Federal Trade Commission is suing Burnlounge, alleging that the company is a pyramid scheme and that some of its largest retailers have misrepresented the income investors made with the company. Burnlounge sells downloads via affiliate stores set up by individuals who buy in and profit from a multi-level marketing style arrangement.
Burnlounge, which allows music aficionados to open their own digital stores and sell music to their site’s visitors. They can either purchase a “franchise” or they can download music downloading software, sell music, and earn points to be redeemed for their own music purchases.
Former USC football star Rob DeBoer confirmed Friday he has been sued by the Federal Trade Commission for his involvement with Burnlounge and misrepresenting how much money he earns from the concern ($300,000). DeBoer is not only a retailer for Burnlounge, but also pimps Burnlounge franchises. The former running back said he has recruited about 45 other people to open their own Burnlounge music Web sites, for which DeBoer earns a commission for each song they sell.
South Carolina Attorney General Henry McMaster became suspicious of Burnlounge after hearing a sales pitch for the company with his wife and began his investigation of the company about a year ago. Information about Burnlounge was then presented to federal authorities.
Burnlounge responded publicly to the suit by stating that “it has conducted its business lawfully and will defend itself vigorously in Court at the appropriate time.” Despite the suit, Burnlounge’s main site and download stores remain open and pacts with high profile partners like Live Nation remain intact.
