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FTC Opens Investigation into Herbalife; Shares Plunge

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HerbalifeThe Federal Trade Commission has opened a probe into Herbalife. The stock, which had been halted, is now trading down 14%. Before the news came out, it was up 4.45%.

Herbalife confirmed that they received a Civil Investigative Demand from the FTC.  

"Herbalife welcomes the inquiry given the tremendous amount of misinformation in the marketplace, and will cooperate fully with the FTC.  We are confident that Herbalife is in compliance with all applicable laws and regulations.  Herbalife is a financially strong and successful company, having created meaningful value for shareholders, significant opportunities for distributors and positively impacted the lives and health of its consumers for over 34 years," the company said in a statement.

A spokesperson for the FTC would not comment on the matter. A spokesperon for Pershing Square Capital Management also declined to comment on the investigation.

Herbalife, a multi-level marketing firm that sells weight loss products and nutritional supplements, has been at the center of a major hedge fund battle.

Hedge fund manager Bill Ackman, who runs Pershing Square Capital Management, announced about 14 months ago that he is betting $1 billion that the stock will go to $0.  Ackman's thesis is that the company operates as a "pyramid scheme" that targets lower income individuals, particularly those from the Hispanic population.


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