THOMPSON BURTON

PLLC

One Franklin Park

6100 Tower Circle, STE 200
Franklin, TN. 37067

*Kevin Thompson
kevin@thompsonburton.com

Direct Dial: (615) 465-6001

September 28, 2016

This memorandum is not intended on creating an Attorney-Client relationship.
We encourage others to do their own due diligence with respect to their
involvement with Digital Altitude. The content shared below are our opinions
based on our independent review of the business model. If the analysis is
flawed, we welcome Digital Altitude to provide facts that would justify an
update to the memo.
On the surface, Digital Altitude is a multi-level marketing (MLM) company that
teach[es] digital entrepreneurs how to start and grow a profitable online business with unique
products and world class events.1 However, a closer look into the business invokes an array of
concerns, such as pyramidal fraud, acting as an unregistered security, and possible implication of
the Business Opportunity Rule. With widespread inappropriate income claims floating around in
a variety of mediums and exorbitantly high product price points, all the necessary ingredients exist
for widespread consumer harm.
Digital Altitude Business Model
The Digital Altitude business is comprised of several products ranging in price from $40
to $28,000. The prices are included in more detail below. The business model is relatively simple
to understand: Purchase more product, become eligible to earn more money. When participants
purchase cheaper items, their earning potential is limited via smaller percentages on the
commissions, limited depth of the rewards, etc.
When participants in the downline purchase larger products than what the sponsor
purchased, the differential between what was purchased between the sponsor and downline is
passed up to the nearest upline participant that purchased an equivalent or more expensive item.
This puts pressure on all new participants to go all in to become fully qualified for all possible
sales. This point-of-sale pressure is reflected in numerous promotional videos online, both from
the company and field representatives. Rewards are paid on activity down three levels, sometimes
less depending on the size of the product purchased.
Applying Koscot to Digital Altitude Business Model
Pyramid schemes are inherently fraudulent because of their inevitable collapse.2
In 1975, the Federal Trade Commission established a two-pronged test essential to a pyramid
1
2

Taken from the Digital Altitude homepage, https://www.digitalaltitude.co/

See Webster v. Omnitrition Intl, Inc., 79 F.3d 776, 781 (9th Cir. 1996).

determination. The test is still used today. In the case In re Koscot Interplanetary, Inc., the FTC
held,
[Pyramid] schemes are characterized by the payment by participants
of money to the company in return for which they receive (1) the
right to sell a product and (2) the right to receive in return for
recruiting other participants into the program rewards which are
unrelated to the sale of products to ultimate users.
According to the Ninth Circuit, the right to receive rewards for recruitment is the MAIN
factor in the determination of a pyramid scheme. The court held,
As is apparent, the presence of the second element, recruitment with
rewards unrelated to products sales, is nothing more than an
elaborate chain letter device in which individuals who pay . . . with
the expectation of recouping it to some degree via recruitment . . ..
This interpretation of the second element is THE divisive issue. As the FTC has said, the
critical question . . . is whether the revenues that primarily support the commissions paid to all
participants are generated from purchases of goods and services that are not simply incidental to
the purchase of the right to participate in a money-making venture.3 The bottom line is rather
clear: recruitment rewards -- rewards unrelated to legitimate product sales -- are illegal.
To participate in Digital Altitude and earn commissions, an Affiliate must pay a
membership fee dependent upon the level he/she chooses to initially join. These fees can range
from $17 a month up to $127. An even closer examination of the compensation plan reveals a
business built inherently upon the need for Affiliates to buy to qualify in order to earn larger
commissions. An Affiliates qualification for commissions depends entirely upon the product that
he/she self-purchases. For example, an Affiliate who buys in at the basic product level of Aspire
is only qualified to earn commissions of other Aspire package sales. The Company makes this
clear in a document entitled, Digital Altitude: Compensation Plan Overview.
Sponsor lock means the sponsor locks for life at whatever product
level you currently are. So if you are only a (sic) Aspire Climber and
NOT A BASE, RISE, ASCEND, PEAK, or APEX CLIMBER it
means any new ASPIRE CLIMBERS you get will go to you for just
ASPIRE CLIMBER but they will automatically (sic) assigned to
your sponsor at the BASE, RISE, ASCEND, PEAK AND APEX for
life. Meaning you will never get the sale when they upgrade even if
you upgrade before them as they have already been locked to an (sic)
BASE, RISE, ASCEND, PEAK, APEX CLIMBER sponsor.4
Because of this, Affiliates are incentivized to purchase larger and more expensively-priced
packages in the effort to earn more lucrative commissions. As the website proclaims, Digital
3
4

Federal Trade Commission 2004 Staff Advisory Opinion Pyramid Scheme Analysis.
Taken from the Digital Altitude Compensation Plan Overview.

Altitude offers people 6 Steps to 6-Figures Online in 90-days or less with our System.5 As a
result of this inherently flawed business model, its reasonable to assume that commissions derive
from the recruitment of new participants and those participants subsequent self-purchases. In
essence, the end result looks like this: each participant profits off of the payment of prospective
participants whose primary goal or motivation behind said payment is to also receive the right to
make commissions. There is little, if any, motivation for retail sales to participants outside the
Digital Altitude genealogy.
In its case against the multi-level marketing company Vemma, the FTCs expert witness,
Stacie Bosley, offered analysis concerning Vemma that appears to be directly applicable to the
Digital Altitude business.
All forms of compensation are driven by recruitment or purchase
volume and there is no direct connection between this
compensation and retail sales or market demand. This [type of
business] structure incentivizes participants to purchase product for
the purposes of maintaining eligibility for recruitment rewards
(inventory loading) and to encourage their downlines to do the
same.
When Digital Altitude implores participants to go all-in (i.e., purchase all the high-ticket
packages) and reinforces such a decision with the Sponsor Lock tactic described above, it
mirrors a business structure that incentivizes inventory loading.
Digital Altitude as a possible Unregistered Security
In 1989, the Ninth Circuit affirmed the Court of Appeals in finding a program in which
participants invested money and successfully convinced prospects to buy courses in almost total
reliance on the efforts of the company was an investment contract and thereby securities within
the meaning of federal securities law.6 In comparing Digital Altitude to the Glenn Turner case, an
argument can be successfully made that Digital Altitude and Glenn Turner opportunities closely
mirror one another.
Operating as a wholly owned subsidiary of Glenn W. Turner Enterprises, Inc., Dare To Be
Great, Inc. (Dare) offered prospective participants five courses (i.e., Adventure I, Adventure II,
Adventure III, Adventure IV, and the $1,000 Plan). For those interested in the ability to receive
commissions, one had to purchase either the Adventure III, Adventure IV, or $1,000 plan. Upon
the purchase of one of these three plans, Dare then instructed a participant to convince a prospect
to attend an Adventure Meeting. At this Adventure Meeting, Dare employed a salesman to
effectively close the deal.
The Court found Adventure III, IV, and the $1,000 plan to be a security based upon the
participants inconsequential involvement in the sale of the plan. A security is defined as any
5
6

https://aspir.link/c1/
Sec. & Exch. Comm'n v. Glenn W. Turner Enterprises, Inc., 474 F.2d 476 (9th Cir. 1973)

scheme [that] involves the investment of money in a common enterprise with profits to come
solely from the efforts of others.7 The Courts analysis of the Dare scheme as an investment
ultimately boiled down to whether a participants personal effort negate the sole efforts of the
entity seeking the investment (i.e. Dare). The Court concluded,
Regardless of the fact that the purchaser here must contribute
something besides his own money, the essential managerial efforts
which affect the failure or success of the enterprise are those of
Dare, not his own.8
In evaluating Digital Altitude under the parameters of a security, the first few elements
of an investment of money and in a common enterprise can be met, in my opinion. With
regards to profits originating solely from the efforts of others, Digital Altitude mirrors the same
circumstances present in Glenn Turner.
Similar to Glenn Turners participants and their reliance on the salesmen to close the
deal and sell the courses, Digital Altitudes business model feature coaches who effectuate sales.
A YouTube video by Digital Altitude participant Dave C. Prosser illustrates this point:
Heres the kicker, heres the best part about that I didnt close one
of those sales myself. When you bring people into your digital
business, which is Aspire, the world class coaches take over.9
Or stated even more succinctly in another video, its a great system because the coaches close all
your sales for you.10 These representations do nothing to rebut the impression that the Company
and the effort of its coaches ultimately dictate the success or failure of the enterprise and
participants ability to earn commissions. Therefore, Digital Altitudes business opportunity
appears to be intertwined with an unregistered security in direct violation of the Securities Act of
1933.11
Digital Altitude Implicating the Business Opportunity Rule
In 2012, the FTC changed the definition of a business opportunity. Under the FTCs
Business Opportunity Rule (BOR), a business opportunity is a commercial arrangement that
possesses the following three required elements: (i) a seller solicits a prospective buyer to enter
into a new business; (ii) the prospective purchaser makes a required payment12; and (iii) the
seller expressly or by implication must represent that it or a designated person will provide any
7

Sec. & Exch. Comm'n v. W.J. Howey Co., 328 U.S. 293, 301 (1946).
Sec. & Exch. Comm'n v. Glenn W. Turner Enterprises, Inc., 474 F.2d 476, 483 (9th Cir. 1973).
9
https://www.youtube.com/watch?v=EKkwcr1xzPw at 1:10.
10
https://www.youtube.com/watch?v=grOZzN5OIbg at 1:20.
11
15 U.S.C. 77a et seq.
12
See 16. C.F.R. 437.1(p). Required payment as in all consideration that the purchaser must pay to the seller or
an affiliate, either by contract or by practical necessity, as a condition of obtaining or commencing operation of the
business opportunity. Such payment may be made directly or indirectly through a third party. A required payment
does not include payments for the purchase of reasonable amounts of inventory at bona fide wholesale prices for
resale or lease.
8

of the three types of business assistance:

(a) Providing locations for purchasers use or operation of equipment,
display, vending machines, or similar devices;
(b) Providing outlets, accounts, or customers, including, but not
limited to, Internet outlets, accounts, or customers, for the
purchasers goods or services; or
(c) Buying back any or all of the goods or services that the purchaser
makes, including providing payment for such service as, for
example, stuffing envelopes from the purchasers home.13
Typically, the vast majority of multi-level marketing companies will fall outside the
purview of the BOR. However, a company like Digital Altitude that appears to advertise lead and
traffic generation services appears to directly invoke it.
The first (i.e., the solicitation to enter a new business) and second elements (i.e. required
payment) invariably exist within any multi-level marketing opportunity. Yet, most MLMs fall
outside the scope of the BOR with regards to the third and often deciding element (i.e., buyers
assistance). The presence of all three aforementioned elements prompts the fulfillment of certain
requirements.
Section 437.1(m) of Title 16 of the Code of Federal Regulations defines providing
locations, outlets, accounts or customers to mean
furnishing the prospective purchaser with existing or potential
locations, outlets, accounts, or customers; requiring,
recommending, or suggesting one or more locators or lead
generating companies; providing a list of locator or lead generating
companies; collecting a fee on behalf of one or more locators or
lead generating companies; offering to furnish a list of locations; or
otherwise assisting the prospective purchaser in obtaining his or
her own locations, outlets, accounts, or customers, provided,
however, that advertising and general advice about business
development and training shall not be considered as providing
locations, outlets, accounts, or customers.
In reviewing Digital Altitudes marketing materials, it remains unclear whether the
discussion on lead and traffic generation crosses into the territory of the BOR or tenuously fits
within advertising or general advice about business development and training. Irrespective of
this, serious questions about Digital Altitude and the BOR remain.
In a video by Digital Altitude founder Michael Force, he indicates the Companys direct
assistance in generating traffic for participants. Above and beyond the traffic you just bought . .
. Youll need to have a strategy on not just relying on us deliver traffic to you. Of course we are
13

16. C.F.R. 437.1(c)(3)(i)-(iii).

going to deliver the traffic and youre going to have it.14 (emphasis added). He goes on to say,
But ultimately to reinvest your commission and develop the skillset of a marketer and skillset of
an affiliate marketer,15 which seems to implicate the aforementioned pyramid and securities
concerns.
In the event Digital Altitude does fall within the BOR, the Company as an offeror would
be forced to comply with several requirements. Namely, Digital Altitude would need to provide a
disclosure document pursuant to Section 437.3 and the presentation of said disclosure document
seven days prior to sale, amongst other things. Currently, the BOR requirements are not met.
Inappropriate Income Claims
Under Section 5(a) of the FTC Act, an income representation is deceptive if (1) there was
a representation, omission or practice, (2) that was likely to mislead customers acting reasonably
under the circumstances, and (3) the representation, omission or practice was material. In recent
enforcement actions against multi-level marketing companies, the FTC has made clear companies
and their participant should refrain from the use of deceptive income claims. In communications
with prospective participants, an entity may not make deceptive use of unusual earnings realized
by only a few without violating the FTC Act.16 Additionally, a material omission as to income
potential, such as a programs total failure to disclose information on the number of consumers
unlikely to achieve substantial income, is deceptive under the FTC Act.17
With Digital Altitude, a variety of deceptive income claims are easily found. In just a few
short minutes of research on the company, Digital Altitude participants made the following
statements in a variety of online formats:
(1) So far to date, Ive generated six thousand dollars in commissions, even had
my first thousand dollar day, and Ive been in the program for about two
months now.18
(2) I got involved about two weeks, maybe three weeks ago, and in that time
frame Ive generated over . . . $22,800 dollars in sales.19
(3) Two hundred $1 trials made me over seventy-three thousand dollars20 and
Today I made six thousand seven hundred and fifty dollars, and I crossed ten
K within seven days.21
Digital Altitudes website also features a material omission with regards to participants
14

https://www.youtube.com/watch?v=YBI49XP86Mg beginning at the 10:40 mark.

Id. at 10:58.
16
See Natl Dynamics Corp. v. FTC, 492 F.2d 1333, 1335 (2nd Cir. 1974).
17
FTC v. Five-Star Auto Club, Inc., 97 F.Supp. 2d 502, 532-33 (S.D. NY 2000).
18
Taken from a video off of Kevin Debays Affiliate Page, http://thedigitalaltitude.com/
19
Taken from a video uploaded to Dave C. Prossers YouTube channel,
https://www.youtube.com/watch?v=EKkwcr1xzPw
20
Taken from a video uploaded to Chiara Francicas YouTube channel,
https://www.youtube.com/watch?v=uMnFvlpbv6Y .
21
Taken from another Chiara Francicas video on her YouTube channel,
https://www.youtube.com/watch?v=n3757aHSUVI .
15

income potential. Irrespective of an earnings disclaimer displayed on the Company website22 and
last updated in October of 2015, Digital Altitude fails to prominently feature an income disclosure
statement. As case law makes clear, representative statements like the ones found in Digital
Altitudes Earnings Disclaimer, containing sentiments such as results may vary, are nevertheless
misleading if the consumer reasonably believes statements of earning potential like the ones made
above represent typical earnings.23
Opportunity for Serious Consumer Harm
Digital Altitudes exorbitant product price points coupled with a shamefully inadequate
refund policy have the potential for serious consumer harm. Even though the Companys website
makes finding the product prices unnecessarily difficult, the cost ranges from $37 up to $27, 997.
The all in price, where participants are encouraged to purchase ALL of the products to be fully
qualified for all commissions, is approximately $57,000+. The breakdown is as follows:
(a)
(b)
(c)
(d)
(e)
(f)

Aspire: $37
Base: $597
Rise: $1997
Ascend: $9,997
Peak: $16,997
Apex: $27,997.

For all Aspire products, there is a fourteen-day return policy. As for the remainder of the
product offerings, Digital Altitude has a strict 72-hour return policy.24 While the refund policy
for higher-priced products technically fulfills the FTCs Cooling Off Rule, ambiguous marketing
tools with prices in the tens of thousands should warrant deeper protections. The purchases remain
non-refundable, even when the buyer has yet to attend one of the purchased events.
A quick search of Digital Altitude on the Better Business Bureau (BBB) site revealed a
complaint that speaks directly to the inherent dangers of those who participate in this business:
I purchased into this program. It claims you can make 6 figures in 90
days. It gives you 14 days to get a refund but they fail to tell you that you
have to pay them over 50 thousand more dollars to actually have the
chance to make the 6 figures in 90 days. They also keep putting up walls
and roadblocks to stall and keep you from knowing these facts until after
your 14 days has passed and then they refuse to give you your money
back when you find out the truth.
I paid them over 2 thousand dollars. They tried to get me to get a high
interest loan to be able to give them more money. I told the so called
"coach" they assigned to me that that was impossible to afford. He then
22

http://www.digitalaltitude.co/disclaimer/
See FTC v. John Beck Amazing Profits, LLC, 865 F.Supp.2d 1052, 1072 (C.D. Cal. 2012); FTC v. Medicor, LLC,
217 F.Supp.2d 1048, 1054 (C.D. Cal. 2002).
24
http://www.digitalaltitude.co/refund-policy/
23

told me that there was no way for me to make money from marketing the
level I was at. He said I needed to buy into the more expensive packages
of the program or I would be wasting my time and money. I told him I
could not do that and wanted my money back since it is not what they
claimed and he told me that the 14 days has already passed so I was not
getting any money back. It was not long after that before I was locked
out of my account. I tried to email them but I got the email back saying
that if failed to go to them. But they didn't fail to send me emails saying
that my monthly payment did not go through to them. They were trying
to take more money out of my bank account even though they locked me
out of my account and I had absolutely no access to their program and
could not contact customer service because they blocked me out. I had to
cancel my debit card so they could not continue stealing money from my
checking account.25
This complaint remains unresolved as the BBB states, The business failed to respond to
the dispute. This exemplifies that high price points coupled with a poor refund policy make it
highly probable the Digital Altitude opportunity will continue to result in consumer harm.
Conclusion
In its materials on multi-level marketing, the FTC encourages prospects to ask the right
questions.26 Clearly, after a quick review, the Digital Altitude business model raises a multitude of
questions. In my opinion, the network marketing model is not designed to operate with these sorts
of products at these sorts of prices. In a day where the FTC is expecting to see meaningful retail
activity, the likelihood of there being retail sales via the Digital Altitude business is infinitesimally
small. With the all-in price being close to $57,000, and a small admin fee less than $100, its
highly unlikely that retail customers exist at the higher levels. And as expressed above, retail sales
are imperative for proving the legitimacy of the product offering.
I would not advise anyone to participate in this program or programs like it. In my opinion,
the risk of consumer harm is too substantial and the likelihood of regulatory activity is high.

25

The complaint in its entirety can be found here -- http://www.bbb.org/denver/business-reviews/internet-marketingservices/altitude-digital-in-denver-co-90115770/complaints

26
https://www.ftc.gov/tips-advice/business-center/guidance/multilevel-marketing