July 2023

Today, Federal Trade Commission Chair Lina M. Khan announced that an open meeting of the Commission will be held virtually on Thursday, July 20, 2023. The open meeting will commence at 11am ET and will begin with time for members of the public to address the Commission.

The following items will be on the tentative agenda for the July 20 Commission meeting:

Business Before the Commission:

Statement Withdrawing Prior PBM Advocacy: The Commission will vote to issue a statement cautioning against reliance on prior advocacy statements and studies related to pharmacy benefit managers (PBMs) that no longer reflect current market realities. The statement is a response to PBMs’ continued reliance on older FTC advocacy materials that opposed mandatory PBM transparency and disclosure requirements, and it warns against reliance on the Commission’s prior conclusions given its ongoing examination of the PBM industry to update its understanding.

Staff Presentation on Military Consumer Protection Efforts: In connection with Military Consumer Month, FTC staff will provide a presentation highlighting the FTC’s consumer outreach efforts and extensive network of partnerships with military organizations. It will include discussion of how the FTC’s law enforcement work helps protect members of the military community from unfair and deceptive practices and spotlight the Commission’s data analysis on fraud affecting military consumers.

At the start of the meeting, Chair Khan will offer brief remarks and will then invite members of the public to share feedback on the Commission’s work generally and bring relevant matters to the Commission’s attention. Members of the public must sign up for an opportunity to address the Commission virtually at the July 20 event.

Each commenter will be given two minutes to share their comments. Those who cannot participate during the event may submit written comments or a link to a prerecorded video through a webform. Speaker registration and comment submission will be available through Tuesday, July 18, 2023 at 8 pm ET.

A link to the event will be available on the day of the event, shortly before the meeting starts via FTC.gov. The event will be recorded, and the webcast and any related comments will be available on the Commission’s website after the meeting. The Commission retains discretion to make public comments available following the event on ftc.gov.

The Federal Trade Commission announced a settlement with bankrupt cryptocurrency platform Celsius Network that will permanently ban it from handling consumers’ assets and charged three former executives with tricking consumers into transferring cryptocurrency onto the platform by falsely promising that deposits would be safe and always available.

“Celsius touted a new business model but engaged in an old-fashioned swindle,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Today’s action banning Celsius from handling people’s money and holding its executives accountable should make clear that emerging technologies are not above the law.” 

The proposed settlement with Celsius and its affiliates will permanently ban the companies from offering, marketing, or promoting any product or service that could be used to deposit, exchange, invest, or withdraw any assets. The companies also agreed to a judgment of $4.7 billion, which will be suspended to permit Celsius to return its remaining assets to consumers in bankruptcy proceedings. The former executives—ex-CEO and co-founder Alexander Mashinsky along with Celsius’s other co-founders Shlomi Daniel Leon and Hanoch “Nuke” Goldstein—have not agreed to a settlement and the FTC’s case against them will proceed in federal court.

New Jersey-based Celsius—which filed for bankruptcy in July 2022—marketed a variety of cryptocurrency products and services to consumers, including interest-bearing accounts, personal loans secured by their cryptocurrency deposits, and a cryptocurrency exchange. According to a complaint filed by the FTC in federal court, Mashinsky, Leon and Goldstein marketed the platform as a safe place for consumers to deposit their cryptocurrency, claiming in online videos and other forums that its platform was safer than banks because “we have less risk, we have much less risk.”

The FTC says the company and its top executives deceived users by falsely promising them that they could withdraw their deposits at any time, that the company maintained a $750 million insurance policy for deposits, that it had sufficient reserves to meet customer obligations, and that those in its Earn program could earn rewards on deposits of cryptocurrency assets as high as 18 percent annual percentage yield (APY). They also repeatedly claimed that the company did not make any unsecured loans.

Many consumers reported that these promises were important factors in their decision to deposit cryptocurrency with Celsius. In opening accounts with Celsius, consumers were required to provide access to sensitive information including their bank account and other financial information.

Far from securing customers’ cryptocurrency deposits, Celsius took title to and misappropriated these deposits totaling more than $4 billion, according to the complaint. The company used consumer deposits to fund its operations, pay rewards to other customers, borrow from other institutions, and make high-risk investments, which even the company acknowledged often lost money.

And contrary to its executives’ promises, Celsius routinely made unsecured loans, totaling $1.2 billion as of April 2022, the FTC says. At the same, the complaint charges that Celsius only had a small capital reserve that would have allowed a fraction of its customers to withdraw their cryptocurrency within one week. And, Celsius did not hold a $750 million insurance policy for deposits. The company also lacked, until mid-2021, any system to track its assets and liabilities, according to the complaint.

The FTC says that Celsius and its top executives also failed to deliver the returns they promised on consumers’ cryptocurrency. The company only provided the highest returns to those who enrolled in its loyalty program and invested in a handful of lesser-known cryptocurrencies, and gave most participants far less than promised.

Even as its fiscal health declined, the company’s top executives concealed this information from the public, telling consumers that customers’ deposits were safe and soliciting new customers just days before it froze customer accounts and filed for bankruptcy, according to the FTC. In May 2022, Mashinsky falsely claimed in an online video that “Celsius is stronger than ever, we have billions of dollars in liquidity.” And just a few days before freezing consumer withdrawals, Celsius falsely promised that it had “more than enough” assets to satisfy its consumer obligations.

While lying to their customers to keep them from withdrawing their cryptocurrency deposits, Leon, Goldstein, and Mashinsky protected themselves by withdrawing significant sums of cryptocurrency from Celsius two months before the company filed for bankruptcy. Consumers subsequently lost access to their life savings, college funds, and money saved for retirement.

In addition to banning Celsius and its affiliated companies from handling consumers’ assets, the proposed settlement prohibits the companies from misrepresenting the benefits of any product or service; from making false, fictitious, or fraudulent representations to any customer of a financial institution in order to obtain or attempt to obtain their financial information; and from disclosing nonpublic personal information about consumers without their express consent.

The Commission voted 3-0 to authorize staff to file a complaint against the Celsius enterprise, Leon, Goldstein, and Mashinsky and to approve a stipulated order with Celsius and its affiliated companies. The complaint was filed in the U.S. District Court for the Southern District of New York.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the named defendant is violating or is about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated orders have the force of law when approved and signed by the District Court judge.

The lead staff attorneys on this matter are Katherine Aizpuru, Katherine Worthman, and Stephanie Liebner from the FTC’s Bureau of Consumer Protection.

The Federal Trade Commission testified today before the House Judiciary Committee on the agency’s work to ensure open, competitive, and fair markets and to protect consumers from fraud, scams and other deceptive practices.

In Commission testimony delivered by Chair Lina M. Khan, the FTC highlighted its activities and initiatives as well as challenges facing the agency as it works to fulfill its dual mission of promoting competition and protecting American consumers from unfair or deceptive practices in the marketplace.

On the competition side, the FTC has renewed its commitment to use all of the authorities provided by Congress to target illegal mergers and conduct. Over the past 18 months, the FTC has moved to challenge major transactions in critical sectors of the economy, including semiconductors, defense, energy, healthcare, mortgage technology, digital markets, and pharmaceuticals. This includes filing suit to block nine mergers outright,^{as well as scrutinizing 13 other anticompetitive mergers that parties have abandoned after the agency indicated competition concerns but before it filed a complaint.}

Given a heavy merger workload, the FTC continues to maintain and develop a robust program to identify and stop anticompetitive practices. Last year, the FTC worked with a bipartisan coalition of 10 state attorneys general to charge the two largest pesticides manufacturers, Syngenta Crop Protection and Corteva, Inc., with paying distributors to block competitors from selling cheaper generic products to farmers—which cost farmers billions of dollars. And in January, the Commission proposed a rule that would ban employers from imposing noncompete restrictions on workers in all but a limited set of circumstances.

The Commission has also used its authority to conduct market-wide inquiries examining new business practices and market trends. For example, in June 2022, the Commission authorized a 6(b) study of the contracting practices of pharmacy benefits managers aimed at shedding light on the opaque operations of these large pharmacy middlemen who can dictate pricing and access to life-saving drugs for so many Americans.

On the consumer protection side, the FTC is redoubling its efforts to use all the tools Congress has provided the FTC to combat fraud and protect consumer privacy. In the last year and a half alone, the FTC brought its first enforcement actions under the Opioid Addiction Recovery Fraud Prevention Act; the Health Breach Notification Rule; the Military Lending Act; and the Made in USA Labeling Rule.

The FTC also has brought multiple actions using authority under existing rules such as the Children’s Online Privacy Protection Act (COPPA). For example, in December 2022 the FTC announced a law enforcement action against Epic Games, Inc., the maker of the popular video game Fortnite, and obtained novel relief for consumers and a record civil penalty of $275 million over charges the company violated COPPA and imposed unfair default privacy settings on children and teens. In a related action, the FTC obtained $245 million for consumer refunds from Epic for allegedly engaging in unfair billing practices.

Given the limitations on the FTC’s ability to get money back for consumers following the Supreme Court’s 2021 AMG decision, the FTC has also proposed rules and is currently seeking comment on potential rules to address some of the most widespread scams.

To help support our competition and consumer protection missions, the FTC has also taken steps to broaden the agency’s institutional skillsets. Earlier this year, the FTC launched a new Office of Technology to strengthen the agency’s ability to keep pace with technological challenges in the digital marketplace.

The Commission voted 3-0 to approve the Commission’s testimony before the House Judiciary Committee.

The Federal Trade Commission has issued a new blog post warning consumers about scammers who are impersonating FTC staff members.

The post highlights a number of key lies that scammers tell when they’re pretending to work for the FTC, including that consumers have won a contest and must pay to collect their prize or owe money to the agency. The post also notes that scammers have used the names of real FTC employees when they reach out to consumers.

The post includes three key facts about communication from the FTC: The FTC will never call you to demand money; the FTC will never threaten you with arrest; and the FTC will never promise you a prize.

Consumers who receive calls from scammers pretending to work for the FTC should report them immediately to the FTC at reportfraud.ftc.gov.

A Federal Trade Commission lawsuit against the operators of a telemarketing scam that called hundreds of thousands of consumers nationwide pitching “extended automobile warranties” will result in a lifetime ban from any outbound telemarketing business and from any involvement with extended automobile warranty sales.

The FTC first charged Kole Consulting Group and its owner, Daniel Kole, as some of the defendants running the American Vehicle Protection (AVP) operation that scammed consumers out of millions of dollars in February 2022. In its complaint, the FTC charged that AVP made unsolicited calls in which it claimed to be affiliated with vehicle makers and deceptively claimed its products, which cost thousands of dollars, offered “bumper to bumper” protection.

“Kole and AVP blasted consumers with illegal calls and made bogus claims about bumper-to-bumper warranties,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Today’s order bans Kole and his company from the extended auto warranty industry and imposes a monetary judgment of $6.6 million, continuing the Commission’s aggressive crackdown on telemarketing fraud.”

The proposed court order in the case, which the defendants have agreed to, includes the bans from extended automobile warranty marketing and outbound telemarketing. The order also includes a monetary judgment of $6.5 million, which is partially suspended based on the defendants’ inability to pay; Kole will be required to surrender $500,000. If the defendants are found to have lied to the FTC about the financial status, the full judgment would be immediately payable.

The FTC previously announced a settlement with the other defendants in the case in March 2023.

The Commission vote approving the stipulated final orders was 3-0. The FTC filed the proposed order in the U.S. District Court for the Southern District of Florida.

NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge.

The staff attorneys on this matter are Harold Kirtz, Hans Clausen, and Chris Gleason of the FTC’s Southeast Region.

The Federal Trade Commission and the Florida Attorney General are sending refunds totaling more than $540,000 to consumers nationwide who were defrauded by Life Management Services of Orange County, LLC, and related companies who tricked them into paying for worthless credit card interest rate reduction and debt elimination programs. The average check amount is $117.

The FTC is sending checks to more than 4,600 consumers. Recipients should cash their checks within 90 days, as indicated on the check. Consumers who have questions about their refunds should contact the refund administrator, JND Legal Administration, at 1-877-381-0342, or visit the FTC website to view frequently asked questions about the refund process. The Commission never requires people to pay money or provide account information to get a refund.

According to the FTC’s June 2016 complaint, brought jointly with the Florida Attorney General, the Life Management defendants bombarded consumers with illegal robocalls trying to sell them bogus credit card interest rate reduction services. The defendants made phony guarantees about lowering consumers’ credit card interest rates and saving them thousands of dollars in interest payments. Customers made up-front payments but rarely, if ever, got the promised services.  The defendants also pitched a bogus credit card debt elimination service, falsely claiming that they could access funds from the government or from a lawsuit against the credit card industry to pay off consumers’ credit card debt.

A court order announced in June 2019 as part of a law enforcement effort to halt illegal robocalls  partially settled the Commission’s complaint by permanently barring 17 Life Management defendants from engaging in telemarketing and debt relief services and requiring them to pay money to provide refunds to defrauded consumers. The district court awarded the FTC and Florida summary judgment against the scheme’s ringleader, Kevin Guice, in December 2018, and the United States Court of Appeals for the Eleventh Circuit affirmed the district court’s judgment in March 2022. 

The Commission’s interactive dashboards for refund data provide a state-by-state breakdown of refunds in FTC cases. In 2022, Commission actions led to more than $392 million in refunds to consumers across the country.

The refunds being sent today are the result of a settlement resolved before the U.S. Supreme Court ruled in 2021 that the Commission lacks authority under Section 13(b) to seek monetary relief in federal court. Because of that ruling, the Commission no longer has its strongest tool to return money to consumers, and it will become harder to provide refunds to consumers harmed by deceptive and unfair conduct. The Commission has urged Congress to restore the Commission’s ability to get money back for consumers.

As part of its ongoing monitoring of health-related advertising claims, the Federal Trade Commission today sent cease and desist letters – jointly with the U.S. Food and Drug Administration (FDA) – to six companies currently marketing edible products containing Delta-8 tetrahydrocannabinol (THC) in packaging that is almost identical to many snacks and candy children eat, including Doritos tortilla chips, Cheetos cheese-flavored snacks, and Nerds candy.

“Marketing edible THC products that can be easily mistaken by children for regular foods is reckless and illegal,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Companies must ensure that their products are marketed safely and responsibly, especially when it comes to protecting the well-being of children.”

“Children are more vulnerable than adults to the effects of THC, with many who have been sickened and even hospitalized after eating ‘edibles’ containing it. That’s why we’re issuing warnings to several companies selling copycat food products containing delta-8 THC, which can be easily mistaken for popular foods that are appealing to children and can make it easy for a young child to ingest in very high doses without realizing it,” said Janet Woodcock, M.D., Principal Deputy Commissioner, FDA.

The agencies sent letters to the following companies: 1) Delta Munchies LLC (Los Angeles, California); 2) Exclusive Hemp Farms (Gilroy, California) and Etienne-DuBois, LLC/Oshipt (Henrico, Virginia); 3) North Carolina Hemp Exchange, LLC, dba NC Hemp Shoppe (Raleigh, North Carolina; 4) Dr. Smoke, LLC, aka Dr. S, LLC (Kansas City, Missouri); 5) Nikte’s Wholesale, LLC (Albuquerque, New Mexico); and 6) The Haunted Vapor Room (Franklin, New Jersey).

According to the letters, after reviewing online marketing for Delta-8 THC products sold by the six companies, the FTC has determined that their advertising may violate Section 5 of the FTC Act, which prohibits unfair or deceptive acts in or affecting commerce, including practices that present unwarranted health or safety risks. The letters stress that preventing practices that present such risks, particularly to children, is one of the Commission’s highest priorities, and that imitating non-THC-containing food products that children consume is misleading.

The companies’ Delta-8 THC products mimic a range of food that appeal to children. Dr. Smoke, LLC, for example, sells THC-infused “Doritos” that are marketed in packaging that is nearly the same as that of Doritos Nacho Cheese Flavored Tortilla Chips (see graphic), including using the same red background, the use of the Doritos name and triangle logo, and the depiction of two tortilla chips in the same position. In addition, Dr. Smoke’s THC-infused “Cheetos” are sold in packaging that is nearly identical to that of Cheetos Crunchy Flamin’ Hot Cheese Flavored Snacks, right down to the use of the Chester Cheetah mascot.

^{Dr. Smoke THC-infused Doritos}

Another company, The Haunted Vapor Room, sells Delta-8 THC products called Rope 500mg Delta-8 Nerds Candy and Medicated Dope Rope Bites (see graphic) that closely resemble Nerds Rope candy, with both comprising multi-colored crunchy candies attached to a gummy rope, and packaging for the former using what appears to be the Nerds candy mascot.

^{The Haunted Vapor Room, Dope Rope Bites}

A third company, Delta Munchies, LLC, markets Delta-8 THC gummies that look like conventional gummy candies that are often consumed by children (see graphic). The brightly colored packaging includes images of the products in fruity and sour flavors that the FTC contends enhance their appeal to children and increases the likelihood that they will mistakenly eat them, thinking they are traditional gummy candies.

^{Delta Munchies LLC, Delta-8 THC gummies}

In the letters, the FTC demands the companies stop marketing edible Delta-8 THC products that imitate conventional foods using advertising or packaging that is likely to appeal to young children. The FTC also strongly encourages the sellers to review all of their marketing and product packaging for similar edible THC products, and to take swift action and steps to protect consumers, especially young children, from these products.

Finally, the FTC has asked each company to contact agency staff within 15 days to detail the specific actions it has taken to address the Commission’s concerns. The primary staff attorney on this matter is Christine DeLorme in the FTC’s Bureau of Consumer Protection.

Prior Joint FTC/FDA Letters

In March 2019, the FTC and FDA issued similar joint letters to three sellers of cannabidiol (CBD), a chemical compound derived from the cannabis plant. The agencies sent a second round of letters to three additional CBD sellers in September 2019, warning them that that it is illegal to advertise that a product can prevent, treat, or cure human disease without competent and reliable scientific evidence to support such claims.