FTC Says Herbalife (HLF) NOT A Pyramid Scheme

In the ongoing battle between Herbalife and Wall Street billionaire hedge fund manager Bill Ackman, Herbalife just scored big time and shares were rallying as a result.

The Federal Trade Commission has determined this week that Herbalife is not a pyramid scheme or fraud like Ackman had alleged for years.

The news must have been a hard blow for Ackman who’s Pershing Square hedge fund has a long-running and very large short position in Herbalife. Pershing Square Holdings has already dropped 19.1% this year after falling 20.5% last year.

Ackman has once said that he would go “to the end of the earth” in his battle against Herbalife.

Herbalife may have scored a win but still will end up paying $$200 million in a settlement with the FTC. The settlement will make the company change some of its key business practices.

Herbalife also announced that it had reached a $3 million settlement with the Attorney General of Illinois that had also hung over the company.

Herbalife’s longtime CEO Michael Johnson said in a statement, “The settlements are an acknowledgment that our business model is sound and underscore our confidence in our ability to move forward successfully, otherwise we would not have agreed to the terms.”

Disclaimer: We have no position in Herbalife Ltd. (NYSE: HLF) or Rite Aid Corporation (NYSE: RAD) and have not been compensated for this article.