Herbalife’s stock price has plummeted to 34, 6% following allegations against the nutrition and weight loss company being a pyramid scheme.
The company reported sales of $4.8 billion last year, selling powders and shakes in over 80 countries, including South Africa.
According to sources, FBI agents are reviewing Herbalife documents, which they obtained from former distributors, to find out more about their business practices.
But Herbalife seems to be blissfully unaware of the probe, claiming that they hadn’t received any inquiries from the FBI or Justice Department. Herbalife has firmly denied allegations which claim Herbalife distributors earn more money recruiting new members into the scheme compared to product sales, targeting minorities. One Massachusetts resident, Michael Araujo, claims to have lost about $85,000 on the scheme, while Texas distributor Tish Rochin claims to have become a millionaire thanks to Herbalife.
Hedge fund manager William Ackman of Pershing Square Capital Management, who first accused the company of fraud in 2012, exposed a $1 billion short position against the company. Pershing Square has published dossiers of Herbalife’s top distributors claiming they lure new recruits with videos that feature big houses and expensive cars, despite company statistics showing most distributors never earn a cent from Herbalife.
– via Yahoo News