United States v. The Zaken Corp, 2:12-cv-09631

Background

Zaken Corp. sold a $148 "QuikSell" kit and upsell tools promising a home-based "wealth building" business and specific earnings (e.g., $3,000–$6,000 for 2–4 hours/week) and a refund guarantee if $4,000 was not earned in 30 days.
The program required purchasers to locate liquidation opportunities and notify Zaken; Zaken would negotiate purchases and, if it bought and resold merchandise at a profit, pay purchasers 50% of net proceeds.
Over ~10 years, Zaken sold QuikSell to ~113,596 consumers; fewer than 1% earned any commissions, total commissions paid were ~$259,656, and consumers spent an additional ~$10.13M on upsells.
FTC sued for violations of Section 5 of the FTC Act and the Business Opportunity Rule (revised in 2012 to remove the $500 threshold and target deceptive work‑at‑home schemes).
After discovery, the court found the record showed widespread, material misrepresentations about earnings and that consumers reasonably relied (as evidenced by mass purchases).
The court granted summary judgment to the FTC, awarded restitution of $25,406,781, and ordered injunctive relief including a lifetime ban on Zaken marketing work‑at‑home business opportunities.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Zaken's marketing violated Section 5 by making deceptive, material earnings claims	Zaken made express, material earnings claims and guarantees that were false; reliance is shown by purchases	Denies violating Section 5; offers no persuasive evidence rebutting FTC figures	Court: Violations established; misrepresentations were material and likely to mislead reasonable consumers
Whether QuikSell is a "business opportunity" under the Business Opportunity Rule	QuikSell meets the Rule: seller solicited purchasers, required payment, and represented it would provide outlets/customers or act as purchaser	Implicitly argued program did not furnish outlets/buy‑backs to purchasers	Court: QuikSell falls within the Rule because Zaken was the sole outlet/customer for purchasers’ services and implicitly represented it would provide that outlet
Individual liability of Tiran Zaken for equitable monetary relief	Zaken had authority and made/approved marketing; acted with knowledge or reckless disregard	Zaken claims lack of scienter; points to testimonials and some high‑earner anecdotes	Court: Zaken had control and displayed at least reckless indifference/intentional avoidance; individually liable for restitution
Scope and amount of relief (injunction and restitution)	FTC seeks permanent injunction and ~$25.66M in consumer losses (sales minus refunds; court subtracts commissions)	Argues lifetime ban punitive and $25M estimate overbroad; disputes scienter and time frame of misrepresentations	Court: Lifetime ban appropriate; awards restitution of $25,406,781 after deducting documented commissions; orders proposed judgment/injunction filing

Key Cases Cited

Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burden shifting framework)
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (genuine issue and summary judgment standard)
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (no genuine issue where record cannot support nonmoving party)
Stefanchik, 559 F.3d 924 (standards for individual liability under the FTC Act)
Network Servs. Depot, Inc., 617 F.3d 1127 (Section 5 remedies and standards)
Cyberspace.Com LLC, 453 F.3d 1196 (courts consider overall impression in deception cases)
Commerce Planet, Inc., 878 F. Supp. 2d 1048 (restitution calculation and injunctive relief principles in FTC cases)
Figgie Int’l, Inc., 994 F.2d 595 (mass purchases can show reliance in consumer fraud cases)
John Beck Amazing Profits LLC, 888 F. Supp. 2d 1006 (injunction tailoring and "fencing in" defendants in FTC matters)
Sears, Roebuck & Co. v. F.T.C., 676 F.2d 385 (requiring "fencing in" where appropriate)
Medicor LLC, 217 F. Supp. 2d 1048 (treatment of earnings claims as material in business opportunity contexts)