Burnlounge was held to be an illegal pyramid scheme by the U.S. District Court in California. (See below for the full decision or click here).
There’s an incredible amount of information to learn from this case. The judge, after sitting on this case for over two years, illustrated a number of factors he used while analyzing the Burnlounge model. In yet another case, the court held that the participants inside the program (distributors) cannot be counted as “customers” for purposes of pyramid scheme analysis. It’s imperative for companies to have solid customer numbers from people outside the program. The judge spent a lot of time in this opinion discussing the marketability of the Burnlounge offering. At the end of the day, the true test for marketability is customer usage. In Burnlounge’s case, they only had 3% of their revenue come from customer sales. Burnlounge tried arguing that their sales force should count as customers and that their service was legitimate and well worth the price. The judge was not persuaded by either arguments. In the video below, I do my best to discuss the highlights. If you like this story, “Like” it or +1 it! Enjoy.