FTC deconstruct all aspects of Digital Altitude’s “fraudulent operation”

As of yet I don’t have any news on the outcome of the scheduled preliminary injunction hearing today.

As per the FTC vs. Digital Altitude case docket over the past week or so though, here’s what we do know.

Defendants Alan Moore, Sean Brown and Morgan Johnson have consented to the entry of a preliminary injunction against them.

The consented preliminary injunctions stipulate the permanent appointment of the Digital Altitude Receiver and maintaining the current asset freeze.

Digital Altitude, Michael Force and Mary Dee are fighting the injunction and filed a Memorandum in Opposition on February 27th.

In response to the memorandum the FTC maintain

Digital Altitude operation took millions of dollars from consumers with false promises of substantial earnings and effective business coaching.

Since this Court issued the Temporary Restraining Order (“TRO”), the Federal Trade Commission (“FTC”) has amassed substantial additional evidence that Defendants violated the FTC Act.

The evidence shows that Digital Altitude was a pernicious scheme to part consumers from their money, for the enrichment of a few high-level Digital Altitude members.

The FTC claim Digital Altitude’s opposition

contains no evidence to the contrary, and does not show cause why a preliminary injunction should not (be) issue(d).

The FTC “raid” on Digital Altitude’s offices

Presented as “facts and evidence” in support of a preliminary injunction, the FTC’s reply to Digital Altitude’s opposition begins by detailing a “raid”o on the company’s offices.

On February 5, 2018, the Temporary Receiver, his attorney, members of his staff, and FTC staff, with the permission of the Temporary Receiver, accessed Digital Altitude’s offices in Lindon, UT.

The offices, which the previous owner had used as a snake breeding facility that was shut down after being raided by the FBI, still contained a large reptile enclosure and other accoutrements of a reptile breeding facility.

I’m not 100% sure if “previous owner” refers to Michael Force after the Receiver was appointed or the owner(s) before Force.

Either way, why the breeding equipment was still in Digital Altitude’s offices is unclear.

Also unclear is why Digital Altitude seemingly lied about the nature of the FTC’s visit to the company’s offices.

In their filed opposition, Digital Altitude claimed ‘the FTC stormed into their offices, armed officers in tow‘.

According to the FTC however,

the Receiver and the FTC were not accompanied by any law enforcement officers when they entered the Defendants’ call center.

The Receiver, alone, spoke with the owner of the property, who accompanied the receiver to the “offices.”

The Receiver invited the FTC in after several minutes.

Inside the Digital Altitude offices the FTC found

numerous cubicles, at which several of Digital Altitude’s employees were engaged in telemarketing to consumers.

Several of Digital Altitude’s employees’ computers had access to Digital Altitude’s corporate Google Drive account, and FTC staff downloaded all of the documents available on those Google accounts.

In addition to obtaining evidence from Digital Altitude’s offices, the FTC has also deposed Michael Force and Mary Dee.

The regulator claims these depositions

confirm that Digital Altitude had no basis for the earnings claims they made to consumers.

Digital Altitude made numerous false earnings representations

As is common with pyramid schemes that offer Income Disclosure Statements, Digital Altitude appear to have been fudging the numbers.

When questioned about the earnings statistics of “active affiliates” that Digital Altitude display, Mary Dee, testifying on behalf of Digital Altitude LLC, explained that an “active affiliate” is “an affiliate who is running traffic and making sales.”

In other words, the site’s bleak statistics (showing that of “active affiliates,” 60% make less than $100 per month) is only a picture of those who made money.

It completely leaves out all the consumers who try to make Digital Altitude’s system work, but earn nothing at all.

By leaving out victims who stopped losing money, Digital Altitude is able to drop the percentage of people who make less than $100 a month to 60%.

In reality the percentage is far greater.

When asked by the FTC to provide documentation to support earnings claims touted by Michael Force in Digital Altitude marketing videos, Dee stated she “did not know” where such “documents might be found”.

In his own deposition, Michael Force admitted Digital Altitude’s

“conversion” rates and projected earnings … were not an accurate depiction of what Digital Altitude members typically earn.

The crown of Digital Altitude’s false earnings claims however came from the court-appointed Receiver.

The Receiver’s “mathematical analysis” of Digital Altitude’s “internal data” revealed

out of 145,000 consumers who were persuaded to pay to join Digital Altitude for $37 or more, none earned six figures in ninety days.

Digital Altitude’s “coaches” were just salespeople

Digital Altitude represented that it provided ‘access to the world’s best coaches who will help you reach your goals‘.

According to the FTC’s evidence, all Digital Altitude’s coaches did was convince people to hand over money.

Evidence obtained since the TRO makes clear that Digital Altitude’s “coaches” do not provide any business training.

Instead, their job is to “convert” consumers into profits by way of a lengthy and deceptive sales pitch in which they pose as a “coach” and develop an emotional connection with the consumer.

In his deposition, Michael Force readily admitted Digital Altitude’s coaches were just salespeople.

Question: What do you mean by coaches?

Answer: Coaches, we had S1’s which sold the $2,000 product and then we had S2’s which sold the $10,000, $20,000 and $30,000 products.

They’re — at our height — they come and go because salespeople come and go.

The FTC claim obtained sales scripts

show that Digital Altitude’s so-called “coaches” were merely salespeople using the ploy of business coaching to ensnare consumers in an elaborate sales pitch.

And none of this was by accident or unintended.

According to the FTC, Digital Altitude’s sales funnel was misrepresented as a coaching system by design.

On a May 5, 2016 “Coaches Sales Call” with Michael Force and Digital Altitude salespeople, then-Digital Altitude Vice President of Sales Jeremy Miner explicitly articulates this sales strategy.

First, Miner explains that Digital Altitude’s Aspire “steps” were designed to build consumers’ emotional investment in the “coach” and the Digital Altitude “community”:

the reason why the coach has a daily call with them on Skype from Step 1 all the way to Step 21, is to build that relationship with that person.

And that’s why I try to tell everybody to do those on Skype, so they can see you on video, because if they can see you on video… instead of you talking to them on the phone, they start to look at you as, like, wow, this is a real person …

Miner goes on to explain that this method, with salespeople making approximately 7-10 daily calls to consumers, results in the highest sales figures:

[this approach] converts the highest.

We’ve tried to shorten it to three or four days. It doesn’t convert half as much, right?

So we always have it around that seven to ten range because it always converts the most.

We don’t do anything after that because it — you know, it takes too long.

At seven to ten days of daily appointments is kind of the sweet spot.

After those seven to ten daily calls, Miner explains that the salesperson should appeal to the consumer’s “fear of loss” to motivate them to buy into the highest membership levels.

The goal is to motivate consumers to pay for a higher level membership so that “they don’t pass up all their commissions to their sponsor from the leads that they are paying for, right? So it’s all a fear of loss.”

It appears that at no time during the training call was actual value provided by Digital Altitude’s products cited as a reason to convince people to hand over money.

Once the consumer is committed to purchasing a Digital Altitude membership, but while the consumer is finding a way to fund the purchase, Miner explains that the salesperson “is still doing a daily call with them, about five minutes, not as long.

You know, what do you learn, blah, blah.

It’s still a daily call that they’re going through the steps while they’re getting their funding together, okay?”

Miner then reiterates: “And that’s why we have those steps there.

… The reason why we have those 21 steps is because they psychologically convert the highest… So that’s why we do those daily calls.”

Miner goes on to detail the thought process behind Digital Altitude’s sales funnel, which to me might as well have been ripped from “Cult Indoctrination 101”.

Miner explains that most consumers are not ready to pay right away:

but most people, as you know, are not, right? Ninety percent of them aren’t.

So we have to build that trust with them. We have to get them emotionally involved.

And it’s not just emotionally involved with us; it’s emotionally involved in the entire community. . . So they would — when they wake up every day, it’s like them going to their job. It’s who that person is.

So they become emotionally attached. If you’re trying to sell them $27,000 worth of products two days after they come in, they don’t have that with the community.

They look — they look at the community as something from the outside.

But you go through daily training calls with the S1 and S2 for two to three weeks.

DA is who they are as a person.

If you want, like, 50, 60, 70 percent conversions at Ascend and, you know, 40 percent from Rise to Peak, you’re not going to do that pitching them two days later.

There’s just — there’s no trust there.

By getting those they pitch to “really psychologically persuade(d) … that they are all in”, Miner claimed the conversion numbers would make coaches “fall off (their) freaking chair(s)”.

Based on Jeremy Miner’s coach training, the FTC concludes

The Defendants were not concerned with providing a business education to consumers; they were concerned with how to extract the most money from consumers.

Once the sales agent (coach) has done the hard sales pitch, they should hound consumers on a daily basis to ensure that they obtain the money to purchase Rise.

None of the scripts the FTC has reviewed thus far contains actual business coaching or training. 

And if Jeremy Miner’s crafted slimy sales coaching wasn’t enough to leave you feeling like you needed a shower, here’s some examples of “the financial and emotional toll” Digital Altitude’s coaches wrought on the general public.

“I had a horrible experience with Digital Altitude and the coaches.

I got signed up and then was pressured into investing huge amounts of money and promised huge outcomes that I never got!

The coaches didn’t leave me alone and didn’t take no for an answer.

I’m now out huge amounts of money, we can barely pay bills for my family, and I’m sick about it.”

“Digital Altitude coaches completely took advantage of me.

I have not made a single penny with Digital Altitude, and I am in very serious trouble with credit card debt.

I currently owe tens of thousands of dollars to credit card companies and have no way to pay it back.

I have never in my life been so brainwashed and made to feel like complete scum by someone I trusted.

My coach Joe sold me on Apex to benefit my sponsor, my upline, and himself. He didn’t care about me and my family.”

“It’s sick what Digital Altitude is doing to people, just awful.

What you go through in the eighteen Aspire steps, and the brainwashing by these coaches is insane. ….

There are people … who got involved with Digital Altitude that could lose their homes over this, because they have no way to pay the debt back.

We could have been one of them.

Before I joined Digital Altitude, I had a [high] credit rating.

Now I am thousands of dollars in debt with no way to pay this back.

They brainwash you to not think about what happens if Digital Altitude doesn’t work for you.”

Since the unsealing of the FTC’s case against Digital Altitude, the regulator claims to have

received hundreds of new complaints from consumers who have been seriously harmed, both financially and emotionally, by Digital Altitude’s fraud.

That’s on top of “at least 57 consumer complaints” that were already “filed in the FTC’s Consumer Sentinel Network complaint database”.

In their opposition to a preliminary injunction, Digital Altitude, Michael Force and Mary Dee argued ‘that the only consumers who were dissatisfied were the 14 who provided declarations in support of the TRO‘.

Digital Altitude “deliberately deceived banks and payment processors”

In their initial complaint, the FTC brought up payment processors and banks terminating Digital Altitude’s accounts

because of Digital Altitudes’ suspect business practices, including numerous disputes of payments they had made to Digital Altitude.

The regulators reveals that since then,

the FTC has obtained copious additional evidence showing that this behavior not only occurred, but was standard procedure,
spearheaded by Mary Dee.

In her deposition, Dee admitted

Digital Altitude has a practice of paying third parties to open corporations, bank accounts, and ultimately merchant accounts in names unrelated to Digital Altitude, control of which the third parties then pass to Digital Altitude so that they can be used to process consumers’ payments to Digital Altitude.

In their opposition to a preliminary injunction, Digital Altitude, Michael Force and Mary Dee claim these “third parties” were “resellers”.

Dee’s own testimony is that “resellers are folks who – who, basically, sign for an account for us.”

Presumably unbeknownst to Digital Altitude, Force and Dee, the FTC

has obtained declarations from some of these “resellers,” along with copies of the written contracts.

The declarations and the contracts reflect what Dee admitted:

The “resellers” are not selling (or “reselling”) anything—they are simply paid a modest sum to open a merchant account and pass control of it to Digital Altitude.

The contracts specify that the reseller’s compensation is not based on the number or dollar amount of purchases processed, and that Digital Altitude owns all the money in the merchant account opened in the third party’s name.

In short, the “reseller” contracts are written agreements to deceive the banks and payment processors, and open a channel to the credit card processing network for Digital Altitude which the banks and payment processors have been trying to shut.

And if that doesn’t sound bad enough, according to the FTC it gets even worse.

It appears Digital Altitude have used the details of their “resellers” to open new accounts, without their knowledge.

Unbeknownst to Mr. Joseph, who controls Defendant The Upside, LLC, (Mary) Dee used Upside to seek new merchant accounts to keep money flowing from consumers to Digital Altitude.

Dee also, without Mr. Joseph’s knowledge or consent, applied for another merchant account using his name, social security
number, and the name of a different corporation he controls.

At Dee’s instruction, Defendant Alan Moore built a dummy website to be shown to the payment processor to support that application.

That account, too, would have been used by Digital Altitude.

Mr. Joseph also reveals that Dee asked him to connect her with family members or friends who would open new corporations and allow Digital Altitude to open up merchant accounts in their corporations’ names for a $500 fee.

Since the TRO was entered, the FTC claim to have

also received documents from the Receiver and Digital Altitude salesmen showing that Defendants maintained open merchant accounts in the names of at least six additional corporate entities (heretofore unknown to the FTC) for the purpose of accepting consumers’ credit card payments to Digital Altitude.

There is also discrepancy between Mary Dee and Michael Force as to signatures that appeared on merchant account applications and checks.

At his deposition, Force was shown several merchant account applications and checks that bore a signature for “Michael Force.”

He denied that he had signed the documents, saying they were probably signed by Defendant Dee.

Yet Force testified that he had never given Dee permission to sign his name.

Meanwhile, Dee testified “it would not be abnormal or… frowned upon” for her to sign such documents in Michael Force’s name.

Chat logs obtained by the FTC once again show the Digital Altitude’s intention to defraud payment processors and banks was by design.

In an online chat, Defendants Dee, Moore and Johnson discussed setting up fake websites to use in applying for merchant accounts in the names of third parties.

First, Dee spoke about concealing Digital Altitude’s (“DA”) identity, which Johnson echoed:

Mary Dee: don’t use our DA email addresses set up a separate URL, you can use the tax id under the ASCEND LLC in drive.

Morgan Johnson: [W]e need to set up a simple page that shows the coaching packages. Do not reference RISE, ASCEND, PEAK, APEX.

However, make the prices the same. ….

Defendant Johnson also mentioned creating fake invoices and purchase orders:

Morgan Johnson: Ok so with this I know that they will ask me to verify the first few orders.

This means I will need invoices (which I can create) but, what about purchase agreements Alan, are you creating a page for
this?

The conversation progressed to opening accounts in other people’s names, including Force’s wife Dalila:

Mary Dee: I have 3 more folks we can use today … 2 accts each means 8 accts.

The prob is no bank accts yet but let me see what I can do. Oh, and Dalila, did we do one in her name?

Mary Dee: I just emailed you guys another account and entity. We just need a website.

Hang tight. And…It will need an email too of course.

Finally, Moore commented on “making up” content for the dummy websites:

Alan Moore: Yes the website has obviously too little info to be a good site –especially for our price points – it’s just a shopping cart holder currently.

It does not talk About Us or what we do, etc, mostly because I don’t know what they do ….

Also compounded by having to create three of them – three times brand new sites out of thin air with full content is a lot of stuff to make up….

Based on these chat logs, the FTC concludes

The evidence is incontrovertible: Defendants knowingly deceived payment processors and banks to open merchant accounts in third parties’ names that were used to process consumers’ payments to Digital Altitude.

Fraud pervaded both Defendants’ relationships with consumers and with banks and payment processors.

Conclusion

The FTC conclude their filing by stating that the provided evidence ‘compels the issuance of a preliminary injunction against (the) Defendants‘.

Not only is the FTC’s evidence of Digital Altitude’s liability overwhelming, but Digital Altitude have put on no evidence to the contrary.

Digital Altitude’s fraudulent operation, and the staggering amount of consumer loss it has caused, justify injunctive relief to prevent further fraud and preserve assets for consumer redress.

The FTC allege Digital Altitude, Michael Force and Mary Dee caused over $50 million in damages to consumers.

The sought preliminary injunction to freeze seized assets without relief to pay living expenses.

Defendants’ request for relief from the asset freeze does not even address whether they could pay their expenses without such relief.

Despite Defendants’ protestations, neither the asset freeze nor any other provision of the TRO bars Defendants from obtaining lawful employment, provided they obey the conduct provisions of the TRO.

Force testified, however, that he has not taken any steps to earn income since the Court entered the TRO.

Force’s unwillingness to seek lawful employment or to rely on help from others entirely undercuts his request to unfreeze funds.

Force has also not shown that he has made any effort to reduce his significant monthly expenses, such as nearly $5,000 a month rent for his single-family house in the Hollywood Hills.

Consumers’ funds should not be used to support Force’s expensive accommodations.

As to Mary Dee, she’s arguing that a trace is required to prove her house was purchased by funds unrelated to Digital Altitude.

In addition to accusing her of already violated the TRO (“she altered and deleted files on Digital Altitude’s Google drive”), the FTC argue they don’t

need to show that frozen assets are attributable to the deceptive and unfair practices at issue in this case.

Dee has also claimed the asset freeze shouldn’t apply to her ‘because she was recently diagnosed with cancer, and had surgery‘.

To which the FTC reply that

although Dee’s predicament is unfortunate, she should not be permitted to use stolen consumer funds for her “mounting medical bills.”

Dee showed no compassion or concern for consumers who begged her for refunds, when they poured out their hearts about broken marriages and mountains of debt caused by joining Digital Altitude based on its deception.

As it stands the FTC has frozen around $1.2 million in assets, which

is far less than consumers lost, and consumers are therefore likely to receive far less than they spent.

Many consumers suffered terrible financial harm due to Digital Altitude.

Securing possible relief for them in the form of partial repayment outweighs any harm Defendants may suffer as a result of the asset freeze.

Stay tuned for an update on whether the Digital Altitude preliminary injunction was granted.

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