Earlier this month Paparazzi abruptly terminated its Washington State consultants.
Paparazzi made no point out of any pending enforcement motion, however it felt like the corporate was withholding data.
A February twenty seventh judgment reveals Paparazzi settled pyramid fraud allegations in Washington for $1.9 million.
As per the filed consent judgment, the State of Washington carried out an investigation into Paparazzi.
The investigation centered on violations of the Client Safety Act and Antipyramid Promotional Scheme Act.
Upon concluding its investigation, the Washington AG’s Workplace determined to pursue the matter in court docket. Somewhat than defend Washington’s allegations, Paparazzi opted to settle.
As per the phrases of the settlement, Paparazzi consented to a thirty-one day injunction. The injunction prohibits Paparazzi from
promoting, advertising and marketing, selling or providing a enterprise alternative to Washington residents or within the state of Washington.
After the thirty-one day injunction interval, Paparazzi is prohibited from advertising and marketing a “enterprise alternative” that
- determines a Advisor’s Compensation, or eligibility to obtain Compensation, based mostly totally on that Advisor’s buy of products or companies or different Advisor’s buy of products or companies;
- Requires any obligatory purchases so as to qualify for rank or compensation.
- Bases compensation, qualification, or rank on any of the next components: (1) the variety of individuals in a Advisor’s downline; (2) the depth of a participant’s downline; or (3) a Advisor’s private quantity; or (4) the acquisition quantity of the Consultants in a Advisor’s downline.
In different phrases “pay to play” and autoship recruitment, each of that are hallmarks of an MLM pyramid scheme.
As famous in BehindMLM’s printed Paparazzi assessment (2021);
Aside from customary retail commissions, there’s nothing in Paparazzi’s compensation plant to recommend retail is a spotlight.
Residual commissions and the generational bonuses are shallow, conserving Paparazzi Equipment associates centered on recruitment over leverage.
And once more, there’s nothing to discourage this habits in Paparazzi Equipment’ compensation plan. Nor does the corporate point out whether or not it verifies retail gross sales are being made because the month-to-month affiliate orders pile up.
Paparazzi is permitted to run a compensation plan that
set up[es] a minimal quantity of month-to-month Retail Gross sales obligatory so as to take part within the compensation plan.
Thirty-one days hasn’t handed but so it stays to be seen whether or not Paparazzi implements this, or continues to run a pyramid scheme with little to no retail gross sales exterior of Washington.
Along with the above circumstances, if Paparazzi needs to proceed working in Washington, they will even have to:
- present potential Consultants with an Revenue Disclosure Assertion;
- prohibit recruitment of potential Consultants till seven days after they’ve been supplied with an Revenue Disclosure Assertion (no contact is allowed throughout this cooling-off interval);
- stop paying compensation “on the idea of purchases made by Consultants”;
- accumulate gross sales information from Consultants;
- confirm claimed retail gross sales via “random and focused audits”;
- a 60-day cooling off interval for brand spanking new Consultants, permitting them to return any bought product stock;
- implement a 12-month buy-back program for bought stock;
- stop making deceptive misrepresentations about Paparazzi as an MLM alternative, together with revenue representations, the quantity of effort and time required and blaming Consultants for enterprise failure; and
- undergo compliance monitoring until 2030.
The takeaway is that if Paparazzi resumes MLM operations in Washington state, they have to give attention to retail gross sales.
In the event you’re studying this submit March thirtieth, 2025 or so and Paparazzi hasn’t resumed operations in Washington state, they’ve mainly admitted that they will’t function legally.
Paparazzi’s $1.9 million judgment can be used to compensate former Washington-based Paparazzi consultants.
Lawyer Common Nick Brown will ship 7,100 Washingtonians who offered jewellery for the corporate checks of a mean of $180 within the close to future.
Pyramid schemes are unlawful on the federal stage however it’s unclear whether or not the FTC will take motion. At time of publication the FTC is sadly pushing quid professional quo political agendas over client safety.