FTC Asset Freeze Orders

The Federal Trade Commission (FTC) has many legal tools to prosecute companies and secure compliance with consumer protection laws. One of the most feared tools is the asset freeze order. The consequences of such an order can have a devastating impact on your ability to run your business and can have a long-lasting impact. Accordingly, it is always advisable to retain an experienced FTC defense attorney to represent you and your business as early in the process as possible if your business is ever the target of an FTC investigation or an investigation by a state attorney general, to avoid entry of such an order. Having an attorney representing you and your business early in an FTC investigation can help your business minimize the overall exposure, liability, and reputational damage.

The Federal Trade Commission Act, 15 U.S.C. §§ 41-58, grants broad powers to the FTC to prevent unfair or deceptive trade practices, seek monetary relief, enjoin FTC Act violations, and secure other equitable relief such as restitution and disgorgement. The FTC can also pierce the corporate veil and impose personal liability upon a company’s owners and officers.

Section 13(b) of the FTC Act, 15 U.S.C. §53(b), authorizes the FTC to seek TROs or preliminary injunctive relief if the agency has reason to believe (1) that a person or entity is violating or is about to violate any provision of a law enforced by the FTC; and (2) the enjoining thereof pending the issuance of a complaint and until such complaint is dismissed or set aside or until a final order is in the public interest. An asset freeze order is an order that the FTC can obtain to prevent defendant companies and their individual owners, officers, and employees from dissipating assets.

The FTC obtains an asset freeze order by initiating federal district court proceedings and petitioning the court for issuance of such relief. Many courts routinely issue asset freeze orders within a days or weeks of the FTC’s initiating of the action. A fact that many defendants have argued is fundamentally unfair is that the freeze order can be granted ex parte and without prior notice to a defendant, which can severely impact a business’s ability to operate or even pay for its defense in the subsequent action.

The purpose of asset freeze orders is to preserve assets to compensate defrauded consumers. The FTC and courts have often justified the imposition of such orders ex parte by citing to the significant risk that such assets may disappear if notice and delay are introduced into such proceedings.

The standard of proof for a petition for an asset freeze order is significantly more lenient than in private litigation given that the FTC need not show irreparable harm in order to obtain such an order. The evidence required is also much more lenient often consisting of little more than screenshots of the supposedly deceptive advertisements.

Under §13(b), a court must only determine that: (1) there is a likelihood that the FTC will ultimately succeed on the merits; and (2) the balance of equities favors issuance of the requested asset freeze order. To establish the first prong, the FTC must make a “prima facie showing of illegality.” Consumer protection receives great weight under the second—with some courts routinely determining this prong in favor of the FTC.

DiTommaso Lubin’s Chicago consumer fraud and business fraud defense lawyers assist businesses accused of fraud defend lawsuits or actions or the target of investigation by the Illinois Attorney General or the FTC.

Our Chicago business lawyers have more than thirty-five years of experience helping business clients on unraveling complex business fraud and breach of fiduciary duty cases. Our Chicago business, commercial, and class-action litigation lawyers represent individuals, family businesses and enterprises of all sizes in a variety of legal disputes, including disputes among partners and shareholders as well as lawsuits between businesses and consumer rights, auto fraud, and wage claim individual and class action cases. In every case, our goal is to resolve disputes as quickly and successfully as possible, helping business clients protect their investments and get back to business as usual. From offices in Elmhurst and Wilmette, near Waukegan, and Oak Brook, we serve clients throughout Illinois and the Midwest.

If you’re facing a business or class-action lawsuit or FTC, or the possibility of one, and you’d like to discuss how the experienced Illinois business dispute attorneys at DiTommaso Lubin can help defend your business, we would like to hear from you. To set up a consultation with one of our Naperville and Chicago business law attorneys and class action and consumer trial lawyers, please call us toll-free at 630-333-0333 or contact us online.