SAN FRANCISCO (CN) - Lumosity will pay $2 million to settle Federal Trade Commission claims that it used false and deceptive claims and testimonials for its online brain-training exercises in nationwide ad campaigns.
Lumosity, which claims more than 35 million users in its ads, made false or unsubstantiated claims about real-world performance, age-related conditions, and a slew of specific health benefits, including "post-traumatic stress disorder, attention deficit hyperactivity disorder, traumatic brain injury, stroke, and side effects of chemotherapy," the FTC said in the Jan. 4 federal lawsuit.
It also made false claims about "improved athletic performance, delay in age-related decline in memory or other cognitive function, including protection against mild cognitive impairment, dementia, and Alzheimer's disease," the FTC said.
It also used deceptive testimonials, the FTC said. For instance: "Defendants failed to disclose, or disclose adequately, that they solicited the testimonials as part of a contest with prizes including a free iPad, a lifetime subscription to the Lumosity Program, and a round-trip to San Francisco."
The FTC sued Lumos Labs dba Lumosity, its CEO Kunal Sarkar and co-founder Michael Scanlon. The company agreed to pay $2 million to settle the suit on Tuesday, according to the FTC's website.
Lumosity says its games are designed by neuroscientists, based on "the science of neuroplasticity."
The 26-page lawsuit cited a long list of claims in Lumosity ads: that its games can "change lives," rehabilitate patients with brain trauma, improve sports skills, improve math skills for girls with Turner syndrome, improve classroom performance, enhance attention spans for people with ADHD, improve a person's job performance and attitude, and restore cognitive functions for breast cancer survivors, among other things.
But of the 160 user testimonials Luminosity used in its ads, 46 came from contests offering "significant prizes," the FTC said. It cited a 2012 Lumosity contest promotion seeking testimonials from users about improved athletic performance, followed by an ad touting the athletic benefits of playing Lumosity brain games.
"Show us how Lumosity has helped take your athletic abilities to the next level for the chance to win a lifetime subscription, the new iPad, and more," the 2012 contest promotion stated.
The FTC accused Lumosity and its top officers of violating the FTC Act, making false or unsubstantiated claims on performance, age-related conditions and health conditions, false proof claims and deceptive use of testimonials.
In a statement, Luminosity said the settlement will "allow the company to move on and continue delivering its research-based cognitive training platform to millions of active and future users."
The company also noted that neither the FTC action nor the settlement "pertains to the rigor of our research or the quality of the products - it is a reflection of marketing language that has been discontinued. Our focus as a company has not and will not change: We remain committed to moving the science of cognitive training forward and contributing meaningfully to the field's community and body of research."
San Francisco-based Lumosity was founded in 2005 and launched its brain games website in 2007. With $23.6 million in annual revenue, the startup was listed as one of America's most promising companies by Forbes Magazine in 2013.
Today, the company offers more than 50 web-based games and 25 mobile games to more than 70 million users in 182 countries, according to its website.
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