Source: The State 7/11/2007

BurnLounge ordered to surrender records

Online music retailer denies judge's allegations of pyramid scheme

A federal judge has ordered online music retailer BurnLounge to turn over its financial records and do away with a major part of its business plan that he called a "classic pyramid scheme."

The New York company agreed to a preliminary injunction with the Federal Trade Commission after government regulators sued BurnLounge in June.

BurnLounge became popular in Columbia after being marketed by local sports and music personalities, including USC broadcaster Todd Ellis and Hootie and the Blowfish.

The injunction issued last week requires BurnLounge to stop paying money to members who recruit other investors and forbids the company from disposing of any assets obtained before June 6.

The company also must put 20 percent of its future profits into an escrow account and turn over accounting and financial records, including records detailing the sales of Web packages and music.

Last month, the company's chief executive resigned after also being sued by the FTC.

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