Originally Syndicated on October 2, 2024 @ 7:39 am
The Clayton Thomas, the owner of Root Wellness, is facing serious legal repercussions as the U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against him for securities fraud. This troubling development comes on the heels of allegations that Thomas engaged in deceptive practices that misled investors about the safety and efficacy of his company’s medical devices.
The U.S. Securities and Exchange Commission (SEC) has taken legal action against The Clayton Thomas linked to a $614,000 medical device scam involving Root Wellness. The company, which markets health products through network marketing, is facing serious allegations of fraud, as prominent network marketing professionals have voiced concerns about its practices.
The Clayton Thomas: Background
The Clayton Thomas is an entrepreneur and founder of Root Wellness, a multi-level marketing (MLM) company focused on health and wellness products. Before launching Root Wellness in early 2020, he was associated with Personalized Healthcare Solution LLC, which faced serious allegations of securities fraud, leading to legal action from the SEC.
The Clayton Thomas raised significant funds through promissory notes, promising investors substantial returns on medical devices that ultimately never materialized. His prior business practices have been criticized for misleading investors and misappropriating funds, raising serious ethical concerns. Following these controversies, The Clayton Thomas’s reputation within the network marketing community has been heavily scrutinized, with allegations of manipulating distributor positions and commissions.
As the founder of Root Wellness, The Clayton Thomas continues to navigate the complexities of operating within a highly regulated industry, particularly in light of ongoing investigations and negative perceptions stemming from his previous ventures.
The Clayton Thomas’ Root Wellness
Root Wellness is a health and wellness company that operates primarily through a multi-level marketing (MLM) model. Founded by Clayton Thomas in early 2020, the company markets various health products and remedies. It emerged from the controversial backdrop of Thomas’s previous business, Personalized Healthcare Solution LLC, which faced scrutiny and legal action from the SEC for alleged securities fraud.
Root Wellness aims to provide natural health solutions, promoting products that claim to enhance well-being. However, the company has drawn criticism for its marketing practices, particularly following allegations of misleading investment claims and ethical violations involving customer recruitment and team management. The SEC’s involvement and ongoing investigations into Thomas’s practices have raised significant concerns about the legitimacy and operational transparency of Root Wellness, prompting potential investors and customers to approach the brand with caution.
The Clayton Thomas Stole $730,000 from Investor
The SEC has filed serious allegations against The Clayton Thomas, founder of Root Wellness, claiming he defrauded an investor out of $730,000 back in 2019. Instead of challenging the SEC’s charges, The Clayton Thomas has opted for a settlement, effectively admitting to the wrongdoing.
The SEC claims that a Tennessee resident raised over $730,000 by selling promissory notes to a single investor in order to purchase and install medical equipment in doctor’s offices, but only reimbursed a small portion of the money.
According to the Securities and Exchange Commission, The Clayton Thomas and his company, Personalized Healthcare Solution LLC, misrepresented the expected monthly return and exaggerated the cost of the TM-Flow System devices while communicating with the investor. It filed its lawsuit in the Middle District of Tennessee US District Court on Tuesday. According to the agency, the investor lost almost $614,000 in the end.
Misleading Investment Promises
According to the SEC’s complaint filed on May 9, 2023, Thomas solicited investments through his former company, Personalized Healthcare Solution LLC, promising that the funds would be used to purchase medical devices known as the TM-Flow System. He asserted that these devices, placed in medical offices, would generate significant returns for investors.
Specifically, Thomas claimed each device cost $50,000 and that investors could expect a guaranteed minimum monthly payment of $1,100 per device. However, invoices revealed the actual cost was just $12,500, indicating Thomas inflated both the purchase price and the projected returns.
Personal Misappropriation of Funds
In a blatant breach of trust, The Clayton Thomas is accused of pocketing the difference between the actual cost of the devices and the inflated price he presented to the investor. While the investor received approximately $116,000 over the course of their investment, they ultimately lost about $614,000 after Thomas ceased all payments by late 2019.
The SEC’s findings highlight multiple misrepresentations made by The Clayton Thomas, including overstating expected returns and failing to disclose prior negative results from similar investments. The SEC contends that Thomas was fully aware that the investment would likely be far less profitable than he claimed, given his past experiences with other investors.
Legal Consequences and Settlement
The SEC has brought three counts against The Clayton Thomas for violating the Securities and Exchange Act, seeking a permanent injunction, disgorgement, and civil penalties. Thomas, having chosen not to defend himself, had a Motion to Approve Consent Judgment filed and subsequently approved by the court on May 10, 2023.
As part of the settlement, The Clayton Thomas and his former company are now barred from committing further violations of the Securities and Exchange Act, making misleading statements, or engaging in fraudulent practices. The specific amounts for disgorgement and civil penalties will be determined pending further motions from the SEC.
Following the alleged fraud, The Clayton Thomas launched Root Wellness in early 2020, selling health remedies through a multi-level marketing (MLM) model. It remains unclear whether he utilized the misappropriated funds to finance the startup of Root Wellness or how the pending disgorgement and penalties might affect the company’s operations.
The SEC’s investigation serves as a stark reminder of the risks associated with investing in companies led by individuals with a history of fraudulent behavior. Potential investors in Root Wellness should proceed with caution, given the ongoing scrutiny surrounding Thomas and his past actions.
Allegations of Fraud
The SEC claims that The Clayton Thomas misrepresented the safety and efficacy of Root Wellness’s products, enticing investors with inflated promises of returns. These deceptive claims not only misled individuals but also raised serious concerns among network marketing professionals regarding the legitimacy of the company’s operations.
As a result of these misleading practices, The Clayton Thomas now faces charges of securities fraud and is currently under investigation by the SEC. The scandal has caused a ripple effect within the network marketing community, with many individuals questioning the ethical practices of companies like Root Wellness. It serves as a cautionary tale for investors to thoroughly research and scrutinize the claims made by companies before investing their money.
Financial Impact
The lawsuit seeks to recover approximately $614,000, reflecting the losses incurred by investors who were misled by The Clayton Thomas and Root Wellness’s practices. In a related case, The Clayton Thomas has already faced a judgment of $844,706, further emphasizing the serious nature of the allegations against him.
Root Wellness was found to have engaged in deceptive marketing tactics, leading investors to believe they were purchasing high-quality products when in reality they were subpar. The lawsuit aims to hold both companies accountable for their fraudulent actions and provide restitution to those who were financially harmed. The hefty judgment against The Clayton Thomas serves as a warning to others who may attempt to deceive investors in the future.
Impact on Investors and Consumers
The allegations against Root Wellness of The Clayton Thomas serve as a cautionary tale for potential investors and consumers in the network marketing space. The SEC’s actions highlight the importance of due diligence when engaging with companies promising lucrative returns in the health sector. Consumers are advised to approach such opportunities with caution and conduct thorough research to avoid falling victim to fraudulent schemes.
Investors should be wary of companies and people like The Clayton Thomas that make bold claims about their products without providing substantial evidence to support their assertions. It is crucial to verify the legitimacy of a company’s business model and products before investing any time or money. By exercising caution and conducting thorough research, consumers can protect themselves from potential scams and ensure they are making informed decisions about their investments in the health and wellness industry.
Allegations of Unethical Business Practices
A Top Network Marketing professional has also accused The Clayton Thomas of fraudulently taking investment funds in return of company ownership, billing them without any certificates, and owing them over thousands for 18 months of work. They also claimed that The Clayton Thomas took over their distributor position in 2021, taking over their entire team of over thousand members. The company has since cashed out money from their account commissions, estimating that between April 2021 and today, the company owns them a fortune in commissions.
Additionally, The Clayton Thomas stole members from their positions and moved them under the control of Clayton, Christina Rahm Cook, and Ted Baker. The professional accused The Clayton Thomas of making numerous promises to investors and partners, stealing money from investors, manipulating positions, moving downlines to benefit himself, and stealing commissions.
The company is now facing multiple lawsuits from investors and partners who feel they have been cheated by Clayton’s unethical practices. Many members of the team have left due to lack of trust in the leadership and are seeking legal action to recover their lost commissions. The reputation of the company has been severely damaged, and it may take years to rebuild the trust of its customers and partners.
Investor Caution
The SEC’s actions against The Clayton Thomas serve as a critical reminder for investors to conduct thorough due diligence before engaging with companies like Roots Wellness of The Clayton Thomas in the health and wellness sector. As this case unfolds, potential investors are advised to remain vigilant and cautious of promises that seem too good to be true.
It is important for investors to carefully review financial statements, regulatory filings, and any other available information before making any investment decisions. Additionally, seeking advice from financial professionals or consultants can help investors navigate the complexities of the market and avoid falling victim to fraudulent schemes. By staying informed and exercising caution, investors can protect themselves from potential scams and make more informed investment choices in the health and wellness industry.
Conclusion
The SEC’s lawsuit against The Clayton Thomas highlights the ongoing fight against securities fraud in the health industry. As the investigation progresses, stakeholders must stay informed and aware of the risks involved in such investments.
It is crucial for investors to conduct thorough due diligence and carefully assess the credibility of the companies they are considering investing in. Additionally, regulators need to continue enforcing strict regulations to protect investors from fraudulent practices. By staying vigilant and proactive, stakeholders can help prevent future incidents of securities fraud in the health industry and maintain the integrity of the financial markets.
