Stars Of HGTV's 'Flip Or Flop' Tangled In Alleged Real Estate Scheme At Center Of Federal Complaint
LOS ANGELES (CBSLA) — A federal court has entered a temporary restraining order against a company it says used deceptive promises and endorsements from celebrities like "Flip or Flop" stars Tarek and Christina El Moussa to lure consumers into real estate seminars costing thousands of dollars.
The Federal Trade Commission and the Utah Division of Consumer Protection announced their complaint against Utah-based Zurixx, LLC Friday.
The court order prohibits Zurixx from making unsupported marketing claims and from interfering with consumers' ability to review Zurixx and its products. The court has appointed a temporary monitor over Zurixx and instructed the companies to preserve their assets.
According to the FTC, Zurixx purports to offer consumers coaching and training on how to make large sums of money by flipping houses.
Its advertisements routinely feature endorsements from celebrities like Tarek and Christina El Moussa from HGTV's "Flip or Flop," Hilary Farr from HGTV's "Love It or List It," and Peter Souhleris and Dave Seymour from A&E's "Flipping Boston." Investigators say the ads entice consumers to free events that Zurixx claimed would teach consumers how to make large profits by flipping "using other people's money."
"From start to finish, these defendants used the promise of easy money and in-depth information to lure consumers down a path that could cost them thousands of dollars and put them in serious debt," said Andrew Smith, director of the FTC's Bureau of Consumer Protection. "When a company tells consumers they have the secret to get rich with little work, we encourage consumers to take a hard look at what's really being offered."
Florida teacher and pastor Doug Stephens says he was among those caught in the alleged scheme.
Stephens told CBS2/KCAL9's Jeff Nguyen instructors promised to teach him real estate secrets. But the seminars that start out free can quickly add up — costing more than $40,000 in some cases. Stephens says he was taken for $3,000.
"I had written the company to ask for my money back. They refused," he said.
Zurixx allegedly has required some consumers who received a refund to sign an agreement barring them from speaking with the FTC, state attorneys general, and other regulators; submitting complaints to the Better Business Bureau; or posting negative reviews about Zurixx. The complaint alleges that Zurixx has violated the FTC Act's prohibitions on misleading and deceptive conduct and the Consumer Review Fairness Act, as well as the Utah Consumer Sales Practices Act and the Utah Business Opportunity Disclosure Act.
The federal complaint also states people who paid for classes would be taught how to apply for new credit cards and increase their credit limits – and that would be used to pay for more instructions.
Stephens says he's speaking out in hopes others will learn from his mistakes.
In addition to halting business, the Utah company's assets have been frozen.
The Commission vote authorizing the staff to file the complaint filed in the U.S. District Court for the District of Utah was 5-0.
A spokesperson for Zurixx says the company welcomes the scrutiny and anticipates "a positive outcome as we work directly and openly with the agencies involved."
A spokesperson for HGTV had not responded to requests for comment at the time of this report.
