Herbalife, the weight management product company that has been the accused by hedge fund manager Bill Ackman of shady business, has disclosed that the U.S. Federal Trade Commission has started a civil investigation into its practices.
Bloomberg reported that the civil investigation is not an indication of wrongdoing, but a subpoena requesting information. Robert Chapman, founder of hedge fund Chapman Capital, told the news outlet that the investigation will most likely “end with Herbalife intact while paying a palatable fine and agreeing to stricter controls on its multilevel marketing structure.”
Shares in Herbalife fell by more than 2% on Tuesday after Ackman, the founder and CEO of New York-based Pershing Square Capital Management, accused it of carrying illegal operations in China. Chinese laws prohibit multilevel marketing and direct marketing.
In 2012, Ackman made a $1 billion bet against Herbalife’s shares, calling it a pyramid scheme and criticized the company for inflating the suggested retail price of its products and overstating its retail sales in public filings.
Founded in 2004, New York-based Pershing Square manages $10 billion in assets.