Is Your Comp Plan Next? FTC Crackdown on Income Promises Hits IM Mastery Academy

The Federal Trade Commission (FTC) is intensifying its efforts to hold multi-level marketing (MLM) companies accountable for deceptive income claims, and the latest target, IM Mastery Academy, is a stark reminder of what happens when promises of “financial freedom” outpace the truth.

In May 2025, the FTC and the Nevada Attorney General jointly filed a lawsuit against IM Mastery Academy, accusing the company of misleading recruits with exaggerated income promises and deceptive marketing. What followed was a wave of attention throughout the direct selling industry, as regulators made it clear that inflated earnings claims, high churn rates, and misleading recruitment tactics are no longer tolerated.

If your company’s compensation plan or marketing messages even hint at “unlimited income potential” without solid data to back it up, this case should have your full attention.

What Happened: The FTC and Nevada’s Case Against IM Mastery Academy

IM Mastery Academy marketed itself as an education platform offering “financial and investment training.” Participants were sold online “education packages” and subscription-based programs, which promised to teach skills like forex trading and cryptocurrency investing. On the surface, this seemed legitimate. But according to regulators, the company’s real focus wasn’t education; it was recruitment.

The FTC and Nevada Attorney General alleged that IM Mastery Academy operated more like an MLM built around recruiting new participants than a genuine educational business. The more recruits a participant brought in, the more bonuses and commissions they could earn. Meanwhile, actual profits from product sales or “education” were minimal.

The complaint stated that:

• 60% of customers quit within their first month, signaling immediate dissatisfaction or unrealistic expectations.

• 90% of recruits were gone within six months, suggesting that the overwhelming majority saw no real income opportunity.

• Few participants earned meaningful income, despite promises of financial freedom and wealth.

• The company allegedly promoted “get-rich” narratives on social media, featuring flashy lifestyles, luxury cars, and exotic travel to entice recruits.

The FTC is now seeking injunctions, penalties, and restitution for affected consumers. The case reinforces the agency’s aggressive stance toward MLMs that rely on recruitment-based compensation and income hype rather than verifiable, product-based earnings.

Why This Case Matters to the Direct Selling Industry

The IM Mastery Academy lawsuit isn’t an isolated event; it’s part of a pattern. Over the past several years, the FTC and state attorneys general have ramped up enforcement against MLMs that blur the line between opportunity and deception.

The agency’s message is clear: if you market dreams of wealth without proof, or rely heavily on recruitment to drive revenue, you are on their radar.

For legitimate direct selling and party-plan companies, this raises several critical questions:

• Are your income claims and testimonials backed by real data?

• Does your compensation plan reward product sales, not just recruitment?

• Can your company show that participants actually earn what your marketing materials suggest?

• Are you monitoring your distributors’ claims and correcting noncompliant posts?

If your answers are uncertain or worse, “not really,” it’s time for a compliance overhaul.

The Red Flags That Triggered FTC Action

Regulators have become increasingly sophisticated in detecting deception within MLM and affiliate marketing models. In the IM Mastery Academy case, several red flags stood out:

1. Exaggerated Income Claims

Statements like “achieve financial freedom,” “earn while you sleep,” or “quit your job in 90 days” appeared frequently in promotional materials and social media posts. The FTC considers these claims misleading unless backed by verifiable, statistically representative earnings data.

2. Lack of Earnings Disclosure

The company failed to provide accurate earnings disclosures showing what participants actually earned. Without this transparency, recruits were left with a false impression of success rates.

3. High Churn Rates

When 60% of recruits leave in one month and 90% within six, regulators view this as strong evidence that participants aren’t succeeding. High dropout rates indicate that promises don’t match reality, and that’s a red flag for enforcement.

4. Recruitment-Driven Revenue

The FTC has consistently warned that compensation tied primarily to recruitment; not genuine product sales creates a pyramid structure. IM Mastery Academy’s system allegedly rewarded participants for bringing in new members more than for selling educational packages.

5. Lifestyle Marketing

Social media played a major role in the company’s growth. Images of luxury lifestyles, cars, cash, exotic vacations were used to attract recruits. Without disclosure that these images didn’t represent typical results, the posts violated FTC guidelines.

Each of these red flags has been cited repeatedly in past FTC enforcement actions. Together, they create a pattern of deception that regulators are no longer willing to overlook.

Why Regulators Are Cracking Down Now

The FTC’s focus on income claims is not new, but recent events have pushed enforcement to new levels.

Post-pandemic, regulators noticed a surge in “financial freedom” marketing by MLMs, online coaching programs, and crypto-education companies, all promising quick wealth in uncertain times. Unfortunately, many of these ventures preyed on financial insecurity, promising life-changing results that almost no one achieved.

In 2024, the FTC released a Staff Report on MLM Income Disclosures, stating that the vast majority of participants earn little or nothing and many lose money. The report criticized deceptive averages, lack of transparency, and hidden costs that obscure the truth about earning potential.

Then, in early 2025, the FTC proposed a new Earnings Claim Rule, which would require all businesses making income claims, including MLMs, to substantiate them with hard data and disclose average earnings. Violations could result in heavy fines and injunctions.

The IM Mastery Academy lawsuit falls squarely into this timeline. It signals that the agency is actively building cases under the framework of these new policies.

Lessons for MLMs and Direct Selling Companies

The IM Mastery Academy case is more than a cautionary tale; it’s a compliance blueprint. Here’s what direct selling companies can learn:

1. Substantiate Every Income Claim

If you make or allow any income statement directly or through distributors, you must have documentation proving its accuracy. This includes averages, medians, and representative data.

2. Disclose Earnings Transparently

Publish a clear, accessible income disclosure statement showing what your average and median distributors earn. The FTC expects this to be public and easy to find.

3. Monitor Distributor Claims

Even if your company’s official marketing is compliant, your distributors’ social media posts can expose you to enforcement. Implement automated monitoring and corrective procedures to detect noncompliant posts quickly.

4. Reduce Reliance on Recruitment

Your compensation plan must reward retail product sales, not recruitment. If your model depends on enrollment fees or internal consumption, you risk being viewed as a pyramid scheme.

5. Track and Report Churn Rates

High dropout rates are red flags. If your participants are leaving faster than they succeed, investigate why and document improvements.

6. Train Distributors on Compliance

Provide mandatory compliance education covering income claims, product representations, and social media guidelines. Reinforce that honesty builds long-term trust and stability.

7. Conduct Regular Compliance Audits

Independent audits reveal weaknesses before regulators do. A third-party compliance review covering compensation, claims, and disclosures can save your company from costly mistakes.

The Role of Compliance in Protecting Reputation and Longevity

Compliance isn’t just about avoiding fines; it’s about building credibility in an industry where trust can be fragile. The best MLMs and direct selling companies know that transparency attracts serious entrepreneurs and consumers alike.

A well-designed compliance program can:

• Protect your company from lawsuits and government actions.

• Strengthen brand reputation and investor confidence.

• Improve distributor retention through clear expectations.

• Ensure that marketing and compensation structures align with FTC and SEC standards.

When compliance becomes part of your culture, not just a box to check, you safeguard your business against the kind of scrutiny now facing IM Mastery Academy.

Preparing for the Future: The FTC’s Earnings Rule

The proposed FTC Earnings Claim Rule could reshape how every MLM operates. Once finalized, it will require:

• Proof for every earnings claim, no matter how small.

• Public disclosure of typical participant earnings.

• Recordkeeping for all income-related statements.

• Severe penalties for unsubstantiated or misleading claims.

This means the era of vague promises like “be your own boss” or “earn unlimited income” is coming to an end. Companies that adapt early by documenting, disclosing, and auditing will thrive, while those that ignore these requirements may not survive the next wave of enforcement.

Conclusion: Don’t Wait Until It’s Too Late

The FTC’s lawsuit against IM Mastery Academy is a clear signal: unsupported earnings claims are no longer tolerated, and regulators are acting faster than ever. For MLMs and direct selling companies, this is a pivotal moment to strengthen compliance programs, review compensation structures, and monitor marketing content across every platform.

Your compensation plan might be compliant today, but one misleading social post or unverified claim could change that overnight.

If you’re unsure where your business stands, now is the time to act.

Protect Your Business Before It’s Too Late

At Direct Selling Solutions, we help MLM and direct selling companies identify compliance risks, fix weak spots, and build transparent systems that stand up to FTC scrutiny. From compensation plan analysis to social media monitoring, we ensure your business is built to last.

Don’t wait until your company is the next headline.

Book a compliance discovery call today and make sure your comp plan and marketing claims can withstand regulatory review.