As previously blogged about here, providers of online training and business coaching programs have increasingly found themselves on the receiving end of unwanted Federal Trade Commission scrutiny.  A recently announced settlement with Online Training Academy requiring its principals to turn over millions of dollars in cash and assets further illustrates the dangers of operating such programs out of compliance.

Online Trading Academy will be required to offer debt forgiveness to thousands of consumers who purchased its “training programs,” while the company’s founder and other individuals will together pay between $5 and $9.1 million and turn over assets under the terms of a settlement with the FTC.  The settlement is expected to result in more than $10 million to benefit injured consumers.


In February 2020, the FTC initiated a lawsuit against the California-based investment training provider OTA.  The FTC alleges that OTA uses false or unfounded earnings claims to sell “training programs” costing as much as $50,000.  According to FTC attorneys, OTA has collected more than $370 million from consumers nationwide within the last six years.

The FTC asserts that OTA misrepresents that it has a patented “strategy” that anyone can use to generate substantial income from trading in the financial markets.  According to the FTC, OTA claims that its strategy is designed to generate income in any market, “whether it’s going up, down or sideways.”  The company’s claims are often targeted at older consumers, asserts the FTC.

Additionally, the FTC alleges that OTA “instructors”—salespeople on commission who market OTA’s training and strategy to consumers in live events across the county—often hold themselves out as successful traders who have amassed substantial wealth using OTA’s strategy.

The FTC alleges that OTA does not track the trading results of its customers, and that OTA’s own surveys indicate that its customers are not making the type of income OTA advertises. In a press release, the FTC states that trading data from a platform used by OTA customers also suggest that the vast majority of OTA’s customers do not make any money, and many lose money on top of the money they pay OTA.  According to the agency, evidence it obtained also indicates that instructors’ claims of amassing wealth by using OTA’s strategy are false or unsubstantiated.

“It is illegal to make earnings claims in marketing investment opportunities or training, unless the seller has a reasonable basis to make such claims,” said FTC lawyer Andrew Smith, the Director of the FTC’s Bureau of Consumer Protection.  “OTA has used unfounded earnings claims to bilk Americans out of their savings.”

Smith also states that “OTA pitched a get-rich-quick investment strategy using fake or unrepresentative testimonials, depictions of wealth, and implied promises of profits.”  “OTA had no support for its lavish earnings claims, and that’s illegal.”

The Settlement

Under the terms of the settlement, the defendants will be prohibited from making claims about potential earnings unless the claims are truthful and the defendants have written documentation to support them.  They will also be prohibited from making claims without adequate support about how quickly consumers can become proficient in the defendants’ trading “strategy” or the amount of time or money needed to generate significant income.

In addition, the defendants will be prohibited from calling their salespeople “education counselors,” and from misrepresenting that instructors are active or successful traders.

The settlement also prohibits the defendants from using contracts that prevent their customers from interacting with law enforcement or posting reviews about the defendants online. It also requires the defendants to notify consumers of their right to post honest reviews and file complaints.

The settlement includes a monetary judgment of $362 million, which is partially suspended due to the defendants’ inability to pay.  If the defendants are found to have misrepresented their financial status, the full amount of the judgment would become due immediately.

The settlement requires one individual to pay $8.3 million and surrender a number of vehicles to the Commission, including a Cessna 400 airplane, a 2006 Bentley Mulsanne, a luxury motor home, a Cadillac Escalade, and six minivans.  Another individual must pay $736,300 and surrender a 2017 Land Rover.  Another individual must pay $158,000.

The cash and the proceeds of the vehicle sales will be used to provide refunds to affected consumers, according to the FTC.

In addition, the settlement will require the company to offer debt forgiveness to consumers who have debt owed to OTA for its training.  The company will be required to give these consumers notice of the offer of debt forgiveness and consumers will have 45 days to request forgiveness.  Consumers who elect forgiveness will lose access to any OTA courses they have purchased.

Supreme Court to Decide Scope of FTC Enforcement Authority

The U.S. Supreme Court recently granted petitions to review the matters of AMG Capital Management v. FTC, in consolidation with the case FTC v. Credit Bureau Center.

Section 13(b) of the Federal Trade Commission Act authorizes the FTC to bring an action in federal court against any person who “is violating, or is about to violate, any provision of law enforced by” the FTC to “enjoin any such act or practice” and obtain a permanent injunction. Many courts of appeals have held that a district court’s authority to grant a permanent injunction under Section 13(b) includes the authority to require wrongdoers to return ill-gotten gains.

However, in August 2019, in FTC v. Credit Bureau Center, the Seventh Circuit reversed long-standing precedent by holding that Section 13(b) “does not authorize restitutionary relief.”  In other words, the FTC’s argument that Congress permits it to seek “equitable monetary relief” has been placed in jeopardy.

“The resolution of that question is critically important to the Commission’s ability to carry out its consumer protection and antitrust enforcement missions,” the FTC stated in its petition.  According to the FTC, the Seventh Circuit’s decision “threatens the FTC’s ability to carry out its mission by eliminating one of its most important and effective enforcement tools.”

As previously blogged about here and here, the AMG and Credit Bureau matters share similarities with the high-profile Liu v. SEC Supreme Court decision.  In Liu, the Court affirmed the Securities and Exchange Commission’s authority to seek profits obtained from fraudulent schemes.  However, limits were placed upon the scope of such disgorgement authority.  FTC defense lawyers and their clients anxiously await a determination as to whether the Supreme Court in the consolidated matters will rule similarly with respect to a wrongdoer’s net profits and deduction of “legitimate” business expenses.

This matter should be of interests to digital marketers and those that they do business with (e.g., payment processors and merchants).  Contact an experienced FTC defense attorney if you are interested in discussing theories related to potential limits upon the FTC’s enforcement authority, if you are the subject of an FTC investigation (CID) or have been named in an enforcement action.

Richard B. Newman is an advertising practices attorney at Hinch Newman LLP.  Follow him on Twitter @ FTC defense attorney.

Informational purposes only. Not legal advice. May be considered attorney advertising.