Dallas-based Ambit Energy is the target of a class action suit that alleges the company illegally operates a massive pyramid scheme by using its customers to market its electricity and natural gas services to family and friends with the promise of lower rates and then raises the rates on those customers.

The suit alleges that Ambit has defrauded its 13 million customers while growing its revenue from $1 million in 2006 to $1.2 billion in 2014. It alleges that Ambit and other defendants violated the Racketeer Influenced Corrupt Organizations Act (“RICO”) by “preying upon consumers in the deregulated energy market.”

The class action was filed in the U.S. District Court for the Northern District of Illinois, and names Ambit Energy Holdings, LLC, Ambit Midwest LLC, Ambit Texas LLC, Ambit Northeast LLC, Ambit New York LLC, Ambit Marketing LLC, Jere Thompson Jr. and Chris Chambless as defendants. The named plaintiff is Oleg Kostovetsky, a Skokie, Ill., resident who switched to Ambit and alleges his energy bills doubled after the switch.

According to the complaint, Ambit is accused of operating a pyramid scheme based on its marketing practice of offering free energy and other perks to customers that sign up family and friends as new Ambit customers. Once the referring customer — called “consultants” by Ambit — gains 15 referrals, he or she earns free energy and other benefits. The suit alleges that after the new customers switch from their existing energy provider to Ambit, the rates they pay are much greater than the rates they were promised by Ambit.

The class action suit seeks refunds for customers who overpaid as well as a one percent rebate on energy costs that the company allegedly said new customers would receive over what their previous energy provider would have charged.

The Cogdell Law Firm is a boutique law firm focusing on large, complex business and criminal financial-related litigation, including white collar criminal defense, securities fraud, health care fraud investigation, criminal appeals and state criminal defense. When results matter most, contact Dan Cogdell at (713) 426-2244 or [email protected].