MLM Companies That Failed And Why It Happened

mlm companies that went out of business

Businesses come and go. There are various reasons why businesses fail; it could be financial management, government regulations, the business leadership, etc… MLM companies are no different. When 3 MLM companies start, 1 company may fail and close its doors. I am going to examine MLM companies that failed. I will determine the primary reason, or reasons the company failed.

Why am I telling you about MLM companies that failed?

The primary reason is to educate you on certain things you should look for before choosing a MLM company to affiliate yourself with. Also, it can help anyone who may be considering starting a MLM company. They can look at MLM companies that failed and use wise tactics and strategies so they do not make the same mistakes.

If you were a distributor with an of these MLM companies that failed and you lost money, I am really sorry to bring up bad memories, but I believe you can work through the bad, learn from the experience and move forward on the path of entrepreneur success.

Let's look at these MLM companies that failed.

MLM Companies That Failed – WakeUpNow

In 2009, Troy Muhlestein founded this MLM company that offered a variety of products and services. Based in Provo, Utah, they offered:

  • WUN Fit
  • Vacation Club travel discounts
  • Thunder energy drink
  • WUN Protect identity theft protection
  • and many more

The WakeUpNow MLM was closed in 2015. The primary reason was the fact that people could get many of the same products or services at much lower costs elsewhere and the CEO, Kirby Cochran used terrible business management practices.

MLM Companies That Failed – Equinox International

This MLM company was founded by Bill Gouldd in 1991. The company had a wide array of products including vitamins, air filters and many more. Equinox International climbed to the top of the MLM mountain even hitting #1 on Inc's top 500 list.

In 1996, the FTC began an investigation into the practices used. There were many complaints about the recruitment process used and in 2000, Equinox International settled the class action lawsuit for $40,000,000.

All assets were liquidated and Bill Gouldd was ordered to never participate in network marketing again for life.

When we examine the methods Equinox International used, it was an illegal pyramid scheme.

MLM Companies That Failed – Fortune Hi-Tech Marketing

Know to many as FHTM, Paul Orberson and Thomas Mills founded this MLM company in 2001. The headquarters was in Lexington, Kentucky. Independent representatives would pay a membership fee of $99 to $299. They would then be able to sell a variety of services and products that were made by other brands.

Some of the items were mobile phone service, satellite television, hair and skin care products and much more.

Due to many complaints, several States began to investigate FHTM and then the FTC raided the main offices. It was discovered the bulk of profits were not made from selling products or services, but by recruiting people.

In 2014, FHTM agreed to a settlement of $7,750,000 and leaders are not allowed to participate in MLM again.

MLM Companies That Failed – United Sciences of America

Back in the 1980's, this MLM company gained quite a following because the Star Trek captain, William Shatner endorsed the health and wellness MLM company.

Bobby Adler founded the company and it was based in Carrollton, Texas. They made various nutritional supplements and weight loss items.

The downfall of United Sciences of America came when they made claims that the products could prevent cancer, aids and other diseases. This led to NBC uncovering these claims and suddenly lawsuits began to pour in. The company filed bankruptcy in 1987.

MLM Companies That Failed – Excel Communicationsmlm companies that fail

Kenny Troutt founded Excel Communications back in 1988 in Dallas, Texas during the height of telecommunications deregulation. Using a MLM business model, the company bought blocks of long distance service from major telecom companies such as AT&T, Sprint and MCI. They would then allow independent representatives to sell these services to customers.

Excel Communications grew to extreme proportions quite quickly. As a matter of fact, Excel Communications was the youngest company to reach 1 Billion dollars in revenue.

No one can say the exact downfall of Excel Communications, but so many companies were entering the communication area and through merging and leadership changes, Excel did file bankruptcy and was defunct in 2004.

MLM Companies That Failed – BurnLounge

While the idea was a unique one and had the possibilities of success, the plan was not law abiding.

Founded in 2004, BurnLounge was an online MLM where members could sell their own music and customers could purchase and download music.

People could pay anywhere from $30 to $430 per year to sell music using the site and their own storefronts.

The majority of money made was not from the sale of music, but recruiting others to open their own BurnLounge storefront. The FTC filed charges and in 2012, a court determined BurnLounge to be an illegal pyramid scheme.

MLM Companies That Failed – Mona Vie

In 2005, Henry Marsh and Dallin Larsen founded Mona Vie. The primary products offered through this MLM company and its distributors were fruit juice concentrates, powder drinks and other products of a similar nature.

The downfall of Mona Vie came when independent representatives began making health claims that could not be backed. This brought on a series of lawsuits and Mona Vie defaulted on a $1,800,000 loan.

They foreclosed in 2015 and it seems Jeunesse purchased the Mone Vie distributorship.

Dallin and his wife Karree recently launched a new MLM called Vasayo. Dallin says the lessons learned from Mona Vie will help Vasayo succeed.

MLM Companies That Failed – Dynamic Essentials

Based in Lake Mary, Florida, Dynamic Essentials MLM company was centered around Royal Tongan Limu. Royal Tongan Limu is a seaweed extract that was used in drinks and supplements.

While a great product, the downfall came when the company and representatives made unsubstantiated health claims about the product. Complaints brought the Food and Drug Administration to file proceedings against Dynamic Essentials.

The company was shut down in 2003, and the parent company had to pay a $2,000,000 class action settlement.

MLM Companies That Failed – Fortuna Alliance

I really hope you never was involved in this quite obvious pyramid scheme when it originated.

Starting in the 1990's, Fortuna Alliance was an online MLM scheme that promised a fibonacci scale of profits.

To join, you had to pay $250 and you could sell vouchers for travel and weird products on the storefront like:

  • Zero Point Wand that supposedly generated energy. You could put it in your refrigerator or freezer to make food taste better. Only $168.
  • The Tungsten Bracelet supposedly improved your circulation and cost only $135.

The FTC shut this company down and grabbed money from the Antigua based accounts.

I'm surprised they didn't try to sell the Brooklyn Bridge online too.

MLM Companies That Failed – Metabolife

He was a former cop and also was caught manufacturing methamphetamine. Michael Ellis discovered he could essentially sell meth legally and have many other people selling it too.

No, it wasn't a methamphetamine MLM, but close. The main ingredient in meth was ephedrine and he used that in the Metabolife weight loss products.

Many people who used the Metabolife products began experiencing adverse medical complications and lawsuits, as well as State governments banning ephedrine forced Ellis and Metabolife to shut down. Ellis also had to spend 6 months in Federal prison for lying to the FDA.

MLM Companies That Failed – 2Extreme Performance International

This MLM was started in Texas in the 1990's. They sold nutritional supplements using the MLM business format. But, selling products was not the priority; getting new distributors who would pay $600 up to $1,300 for a start up kit was the main method of gaining profits.

Complaints upon complaints rolled in and the Better Business Bureau sent these on to the Federal trade Commission.

Soon after, 2Extreme was shut down for operating an illegal pyramid scheme.

MLM Companies That Failed – Boston Finney

The reason this energy supplying MLM company was shut down was basically fraud.

During the boom of energy deregulation, this MLM company was started in Pennsylvania.

Prospects could pay $295 to own their own Boston Finney home based energy supplying business. The State of California caught on to the fraud quickly. It seems Boston Finney was having people sell energy they didn't have. They had not even contacted any energy companies to purchase wholesale energy.

You cannot sell something you don't have. Does anyone want to buy Air Force 1?

MLM Companies That Failed – Solavei

This was a company that some described as a MLM company and others didn't.

In 2012, Ryan Wuerch founded Solavei in Bellevue, Washington. The primary product was prepaid mobile phone service through a contract with T-Mobile. The company also operated a social commerce website.

Due to mismanagement of finances, Solavei filed for Chapter 11 bankruptcy in 2014. Soon after, T-Mobile terminated its agreement and this drove Solavei to go defunct in 2015.

You should read these too:

  1. MLM Essential Oil Companies Set For Growth in 2017
  2. MLM Recruiting on Twitter to Rock Your Network Marketing Business
  3. The 10 Best MLM Books to Grow Your Network Marketing Business

MLM Companies That Failed – Five Star Auto Club

Michael and Angela Sullivan had what they thought was the perfect idea for a unique MLM company. People could pay a monthly fee to lease the car of their dreams and as they brought other people in, they would make money from their monthly payments.

What happened is some of those people's credit was not good enough to get the vehicle they desired, but they still had to pay their fees to Five Star Auto Club.

The Federal trade Commission immediately stepped in, and in 2000, a Federal Court ruled that Five Star Auto Club was an illegal pyramid scheme and it was shut down and liquidated.

Michael and Angela were ordered to pay $2,900,000 in restitution and they are barred for life in participating in any multilevel marketing business.

Those are just a few MLM companies that failed

As you can see, one of the top reasons for shut downs of MLM companies is illegal pyramid operations.

Now just because a company operates in a pyramid style does not mean it is illegal. Almost every business and organization operates in a pyramid fashion if you really consider it. What made these illegal were they were more focused on taking the money of the independent representatives than they were selling products or services.

There are some important things you should always examine before joining a MLM company.

Look at these aspects before signing up with any MLM companymlm companies that are in trouble

  • Products first – Make sure the company is focused mostly on selling products or services. If they are more focused on gaining new distributors, they may be operating illegally.
  • Look at the MLM company's financial statements – If the company is barely able to pay their overhead, when will they neglect paying you your commissions?
  • Medical claims – If the company is making medical statements that the product can cure or relieve diseases, is there absolute proof backing those statements? Many MLM companies that failed did so from making false medical claims.

If it is just too good to be true…

It probably is.

The best advice I can give you before joining any MLM company is to use common sense and follow your intuition. If your “gut” is saying it wouldn't be a good idea, I suggest you look for a different opportunity.

Conclusion

I really hope this post helps you when you are trying to decide what MLM company to join. If you have any questions, feel free to leave a comment and I will get an answer for you.

If this post did help you, please tell me. It always helps to know when the writings I provide help others.

Will you also do me one other favor? Please share this post on social media so others can have this information. The more people that read it, the more that will be helped and maybe we can put a stop to bad MLM practices.

Thank you.

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