News that federal regulators have launched an investigation of Herbalife (NYSE:HLF) sent that company’s shares tumbling almost 6% in Monday morning trading.
A Freedom of Information Act request from the New York Post forced the Federal Trade Commission to disclose documents that indicated that the government is conducting an on-going investigation of the company. The documents did not reveal if the probe is considering civil or criminal charges.
The FTC has received 192 complaints from former Herbalife distributors over failure to receive payments or refunds from the company. Others said the company had made false promises and enouraged its distibutors to lie. In disclosing the complaints to the newspaper, the FTC redacted certain parts of the documents, noting that it was not obligated to reveal information pertinent to “a law enforcement investigation.”
Revelation of the FTC’s probe comes after activist investor and hedge fund manager Bill Ackman took a $1 billion short position against Herbalife in December. Ackman denounced the company’s marketing model and called for regulatory action.