The Federal Trade Commission on Wednesday launched an official inquiry into Herbalife, a nutritional supplement company that has been accused of operating a vast pyramid scheme.
The company announced the inquiry on its website, saying it plans to “cooperate fully” with the FTC. “We are confident that Herbalife is in compliance with all applicable laws and regulations,” the company said. Herbalife’s stock fell on Wednesday after trading of shares paused for about an hour at 1 p.m. EST, according to Marketwatch. When trading resumed, shares had fallen.
The inquiry comes amid accusations and a lobbying effort led by billionaire Bill Ackman, who says the company is complex pyramid scheme. Ackman placed a $1 billion short—a bet that pays off only if the company’s stock falls—on Herbalife last December, and according a recent report in the New York Times, he has been pressuring lawmakers to investigate the company. On Tuesday, Ackman accused the company of breaking Chinese laws.
Herbalife has fiercely defended itself against Ackman’s assault.
“Ackman’s unprecedented campaign to destroy Herbalife has now been exposed for what it is: a cynical, self-serving attempt to manipulate the market by buying his way into an investigation to cover his own reckless $1 billion dollar bet,” the company said in a statement. “There has never been merit to his accusations.”
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