Trades of Hope (ToH), a multi-level marketing company (MLM), sells fair-trade goods made by artisans around the world. However, a major lawsuit, followed by scrutiny from the FTC, exposed practices harming the financial well-being of those joining as “Compassionate Entrepreneurs”.
Understanding MLM Structures
- Resellers vs. Recruiters: MLMs rely on representatives selling products but make extra money by recruiting others who sell and further build teams of sub-recruits.
- Income Promises: Companies promote financial independence and entrepreneurialism, emphasizing potential earnings while downplaying risks involved.
- FTC Scrutiny: The Federal Trade Commission closely monitors MLM operations, as some verge on illegal pyramid schemes by rewarding recruitment over sales.
The Core Allegations against Trades of Hope
A 2017 lawsuit brought by several former ToH Compassionate Entrepreneurs claimed:
- Misleading Income Claims: Plaintiffs argue ToH misled them about the ease of profiting and actual achievable income levels.
- Focus on Recruitment, Not Sales: Pressure to recruit others allegedly downplayed or even discouraged focusing on individual product sales.
- Financial Harm: They faced substantial investment losses (inventory buy-in, membership fees), debt, and personal stress from attempting to succeed in the model.
| Complete Date | Case | Citation (if available) | Court | Short Summary |
|---|---|---|---|---|
| 2017 | Doe et al. v. Trades of Hope, Inc. et al. | Unknown, Initial Complaint | California, San Diego County Superior Court | Primary lawsuit filed, outlining core allegations |
| 2017 | FTC Investigates ToH Practices | N/A | N/A | Regulatory agency scrutinized ToH model and marketing claims |
Outcomes and Impact
- Case Dismissed The initial lawsuit was dismissed without determining whether ToH’s actions met the strict definition of an illegal pyramid scheme.
- Increased Scrutiny on Income Claims Despite the dismissal, the FTC and consumer protection agencies released findings indicating most MLM participants earn little.
- ToH Continues, But With Changes Trades of Hope modified some sales materials and income disclosure statements in response to the attention.
Why Understanding MLMs Matter
The ToH case offers important lessons:
- Realistic Expectations: MLM structure means most individual participants end up losing money, despite working hard.
- Independent Research: Always seek objective income analysis from external agencies like TINA.org ([[invalid URL removed]]([invalid URL removed])) when assessing potential involvement with any MLM.
- Recognizing Warning Signs: Companies emphasizing recruitment-based bonuses as the focus for profit, downplaying products, and having high start-up investment requirements are high-risk.
Navigating the Landscape
- Legitimate MLMs Exist: Some have good products and are clear about income limits. However, promises of rapid financial growth within such business models remain a red flag.
- Prioritizing Goals If starting your own business interests you, consider traditional routes with verifiable profits and lower initial investment required.
