The turmoil surrounding Herbalife (NYSE: HLF), a health products multi-level marketing company, seems to get increasingly interesting. First, there was the on-air verbal joust between celebrated investor Carl Icahn and hedge fund manager Bill Ackman. Then, it was reported that at the request of the Federal Trade Commission (FTC) and three states, a federal court halted an allegedly illegal pyramid scheme. The case alleges that multi-level marketing (M-L-M) company, Fortune Hi-Tech Marketing, defrauded more than 100,000 consumers since 2001.
The news of the FTC action seemed to pressure M-L-M stocks but surprisingly might help Herbalife's assertion that it is not a pyramid scheme.