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SALT LAKE CITY — The pitch sounded good: "We'll teach you how to be a real estate investor and you'll get rich!"
A company that offered such real estate investment coaching has been shut down and, according to a settlement announced Wednesday, will now pay back some of the money.
It was sort of a made-for-Hollywood scheme, with celebrities shilling it and massive piles of money changing hands. But by the end, regulators say "thousands" of people were deceived and lost more than $100 million.
The Federal Trade Commission and the Utah Division of Consumer Protection say that a company called Zurixx, which was based in Utah, invited people to "free" coaching seminars. Zurixx promoted its seminars by partnering with television celebrities, famous for its work in the home-improvement and house-flipping world. Those celebrities included Tarek and Christina El Moussa, Hilary Farr, Peter Souhleris and Dave Seymour, and others according to a press release from the Utah Department of Commerce.
Once people were in the door, they faced high-pressure sales tactics to pay a few thousand dollars for the coaching. They were also upsold to more expensive coaching, said Utah Department of Commerce Executive Director Margaret Busse.
"There's this sense that you've got to take advantage of this opportunity. Don't miss out. You're going to make all this money," Busse said. "It didn't work out that way. Almost none of (Zurixx' customers) saw any kind of return."
The regulatory lynchpin seems to be that Zurixx' clients were lied to about how long it would take to make their money back, or how successful the Zurixx coaches had actually been in real estate investments.
"Making grand claims about return on investment with nothing to back it up is against the law," said Utah Division of Consumer Protection Director Daniel O'Bannon.
Busse said that it's caused "overwhelming harm to individuals legitimately trying to earn money."
The Federal Trade Commission and Utah Division of Consumer Protection also say that Zurixx gagged customers as a condition of getting a refund, requiring them to sign agreements barring them from speaking with regulators or posting negative reviews online.
A refund is coming, but it will be a far cry from an amount that would make victims whole. Court filings allege Zurixx and its owners took in more than $111 million through the scheme. The settlement will mean it returns just $12 million to jilted customers.
"Funds recovered from these settlements will help redress consumer harm, but it's pennies on the dollar when compared to the harm done to those involved," O'Bannon said.
Time was a factor. By the time Wednesday's settlement was reached, the vast majority of that money was gone and spent, Busse said. Still, she said she hopes it sends a clear message to others who may think of operating schemes in Utah.
"I think the bigger impact is this sends a very strong message to those types of folks that are engaged in this kind of fraudulent and deceptive behavior, that we take this seriously. And we're not going to tolerate it."
Busse said some of the celebrity endorsers could also be in legal hot water, "depending on their involvement," but she stopped short of saying any lawsuits were imminent against the scheme's promoters.
