The FTC has recently obtained a TRO against the Online Trading Academy to halt, at least temporarily, its alleged illegal practices. The complaint, filed in the Central District of California, asserts that the defendants use false and unfounded earnings claims to sell expensive investment “training programs” to seniors. The complaint alleges that defendants, targeting older adults, purported to teach consumers how to “invest like the pros on Wall Street” and how to find “low-risk, high-potential investing opportunities” by applying a “patented strategy to any asset class including stocks, options, futures and currencies.” The defendants charged tens of thousands of dollars for their programs, promising their students through aggressive marketing techniques that they would generate substantial income. The complaint alleges that the defendants have pulled in hundreds of millions of dollars in this scheme.

While we’ve seen (and blogged about) many of these fraudulent earnings claim cases, two of allegations in the complaint in particular caught my eye: first, the complaint describes, and quotes from, disclosures that the defendants used in their marketing materials about the high risk inherent in all trading, and trading in crypto currencies in particular. However, the FTC describes these “disclaimers” as “dense and wordy” and alleges that they “do not cure the impression created by Defendants’ extensive use of earnings and related claims that purchasers of OTA Training are likely to earn substantial income.”

Second, the complaint alleges that defendants, in response to consumer complaints, would issue refunds, but only if the dissatisfied purchasers signed a form contract with a non-disparagement provision, prohibiting consumers from communicating with others about their experience with the Online Trading Academy, including law enforcement agencies and the Better Business Bureaus. This conduct, FTC alleges, unsurprisingly, violates the Consumer Review Fairness Act. The FTC has been active in enforcing the CRFA but this may be the first case involving a defendant’s use of a form contract with silencing provisions in connection with issuing refunds.