An Irvine-based stock-trading school has agreed to pay what amounts to a $10 million penalty — a sum that includes the company founder’s Bentley — to settle a dispute with federal regulators over alleged “get-rich-quick” marketing practices.
Online Trading Academy and the Federal Trade Commission announced settlements to lawsuits filed earlier this year in which regulators claimed the school misled its customers as “the company’s own surveys and third party trading data showed that most purchasers made little to no money.”
The school said in a statement that it was ready for its “next chapter” as it ended “what primarily amounted to a dispute over marketing.”
“For over 23 years our focus has always been simple and unwavering: Provide exceptional financial education to empower students,” said CEO Eyal Shahar. “While this has been an unfortunate dispute, I continue to be moved beyond words by the actions of more than 10,000 students who supported us against the FTC’s allegations. We are profoundly humbled and passionately determined to get back to the work of serving our students with our excellent financial education and community in which we continue to invest.”
In a 2012 interview, Israel-native Shahar said he came to America with just $300 after losing all his money in the 1983 collapse of the Israeli stock market. The investment business started as essentially a trading operation in 1997, then in 2001 began concentrating on investor education.
Shahar agreed to pay, according to the commission, “$8.3 million and surrender a number of vehicles to the commission, including a Cessna 400 airplane, a 2006 Bentley Mulsanne, a luxury motor home, a Cadillac Escalade and six minivans.”
The school also agreed to offer debt forgiveness for students who borrowed from the firm to pay for classes. Depending on how many accept that offer, Shahar’s payment could be cut by as much as $4 million.
The FTC said the company and its leaders agreed to pay “between $5 and $9.1 million and turn over assets” that will result in “more than $10 million to benefit injured consumers.” The commission also won a $362 million judgment “which is partially suspended due to the defendants’ inability to pay.”
The company also agreed to stop “making claims about potential earnings unless the claims are truthful” and no longer call salespeople “education counselors, and from misrepresenting that instructors are active or successful traders.”
“OTA pitched a get-rich-quick investment strategy using fake or unrepresentative testimonials, depictions of wealth, and implied promises of profits,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection. “OTA had no support for its lavish earnings claims, and that’s illegal.”
Source: Orange County Register