Kyani Hit with Pyramid Scheme Complaint

A nationwide class-action lawsuit has been filed against Kyani, Inc., an Idaho-based Multilevel Marketing – a way of distributing products or services in which the distributors earn income from their own retail sales and from retail sales made by their direct and indirect recruits. company selling nutritional supplements, along with its CEO and 100 unknown co-conspirators, who are alleged to be operating a pyramid scheme. The suit, which was filed Monday in California federal court alleges that “Kyäni emphasizes recruitment over product sales,” and that “Kyäni and its executives make a host of unrealistic financial promises ranging from getting a company car to making millions of dollars.” The complaint states, “the Distributors are primarily feeding off each other.”

With claims of false labeling, Inventory loading is the practice of requiring participants to purchase merchandise in order to receive commissions., foreign law violations, illegal health claims, and foreign government actions against Kyani, the 50-page amended complaint is chock full of alleged bad behavior on the part of defendants. But its main allegation is that defendants, which include founder Michael Breshears, and 100 unknown defendants that are allegedly part of the leadership team, “run an illegal pyramid scheme.”

Specifically, the complaint claims (emphasis in original):

Kyäni . . . and its cohorts represented to Plaintiff . . . that Kyäni provides a business opportunity ‘for a lifetime,’ and a ‘lifestyle you have always dreamed of.’ Plaintiff and hundreds of thousands, have joined Kyäni and have become distributors. Plaintiff did not make money as promised. As with the case of hundreds of thousands of Kyäni distributors before and after her, the Plaintiff failed. Plaintiff and those similarly situated, failed even though they were committed and put in the time and effort. They failed because they were doomed from the start by a Kyäni marketing plan that systematically rewards recruiting Distributors over the sale of products.

The complaint goes on to state (emphasis in original):

Over 99% of Kyäni Distributors average net losses. No persons, except the promotors [sic] and owners of Kyäni, and secretly placed individuals into the ‘representative’ tiers of the company, make any money.

The suit, which seeks to hold defendants liable for fraudulent business practices, false advertising, unjust enrichment and violations of the Federal Racketeer Influenced and Corrupt Organization Act (RICO), was brought by a California woman who claims to have lost more than $1,500 as a Kyani distributor. The plaintiff also alleges “Kyäni is and has been duping Plaintiff and the class out of billions, or at least hundreds of millions, of dollars.” Plaintiff seeks to represent a class estimated to include more than 100,000 members whose damages are alleged to range from $50 to more than $20,000.

TINA.org has seen an uptick in federal complaints alleging that an MLM is a pyramid scheme this year, with this being one of many lawsuits that TINA.org is tracking. This is also the fifth pyramid action brought by the Lindemann Law Firm this year, which also filed complaints against World Ventures, Sunrider, MarketAmerican and Nerium International, that TINA.org is aware of.

Over a year ago, TINA.org alerted Kyani, the FTC, and the Idaho Attorney General that improper health and income claims about Kyani littered the internet. At that time, TINA.org provided more than 100 examples of illegal disease-treatment claims being made that asserted Kyani products could treat, prevent and/or cure everything from asthma to multiple sclerosis, and more than 100 exaggerated income claims.

In response to this lawsuit, Kyani stated:

Not only is the complaint legally baseless, but it also contains what appear to us to be deliberate (or at least extremely careless) misstatements of fact. The plaintiff’s counsel in this case does not appear to us to have a good understanding of our company, the direct selling industry, or the parameters of federal pyramid scheme law.  The firm has recently targeted a large number of direct sellers without any apparent regard for the specific features or characteristics of any particular direct seller’s products, compensation plan, or methods of doing business.

For more on TINA.org’s coverage of Kyani, click here.