Burnlounge Really Is a Pyramid Scheme, Says FTC in Lawsuit

While I was away, David and Bob both covered the announcement from the Federal Trade Commission, confirming what we already knew. Burnlounge has barely sold any actual songs, and pretty much all of the money it ever generated was from licensing fees for folks to open up their own branded stores.

I actually gave them the benefit of the doubt in the beginning, only to be convinced by the hate mail that clogged my inbox from “Burn Team” members that a company so completely on the defensive couldn’t possibly be up to much good. Remember, I got hate mail after I actually defended the company and offered suggestions on making a Burn site profitable.

If this business model is so revolutionary and so profitable, why would its supporters feel that threatening me to shut me up is an important step in their marketing plan?

What’s sad is that, like any good Ponzi scheme, Burnlounge relied on trusted networks of prominent community folks to build up a reputation. It’s no surprise that most of the activity happened in churches, in college towns, and in tightly knit music scenes where people are genuinely inclined to trust each other and ask few questions. I remember, when we still lived in Athens, getting pitched on Burnlounge at least twice at the Kroger. Now, here come the first of many stories about pillars of local communities who admit that they were duped by Burnlounge resellers. And the folks near the top of the pyramid, with more connections than common sense, are going to take the fall, as in this pending case in South Carolina.

Remember that, at its core, what Burnlounge is doing is still technically legal. That’s why the FTC has failed to get a restraining order to shut down Burnlounge operations. But, what’s legal isn’t always what’s ethical. Any responsible business owner would have to look at the books and wonder why, when there are plenty of examples of legal, ethical network marketing organizations, their products are simply failing to sell. Any responsible business owner would snap the reins on a licensee or a reseller who made false claims about their earnings and about the potential profits for their downlines. Any responsible owner would do more than throw their previous CEO under the bus. By the way, I never did hear from Alex about that open invitation to lunch. Maybe I will, now that he’s got more free time.