Beijing to probe Nu Skin pyramid scheme claims

Shares in Nu Skin Enterprises plunged the most in more than nine years after the central government said it would investigate the US maker of skin-care and nutritional products following a mainland newspaper report that it was a "suspected illegal pyramid scheme".

The State Administration for Industry and Commerce said it would probe Nu Skin's operations after the report by . The government had asked for an immediate investigation, the agency said on its website.

"We are absolutely not a pyramid scheme," Nu Skin chief executive M. Truman Hunt said on Thursday. "The newspaper account was not the result of a government-sponsored review or investigation of our business. But now that the news has come out they are obviously interested in following up with the allegations and making sure our operations are in compliance."

In a separate statement, Nu Skin said it will add procedures to reinforce training and education.

Nu Skin shares fell 26 per cent to US$84.80 at the close of trading in New York on Thursday, for the largest decrease since October 2004.

"We have initiated our own province-by-province business review and will invite relevant regulators to provide guidance," the company said. "There will likely be a negative impact on China revenue, but it is too early to know whether our previous guidance will be affected."

The fallout has been felt by other companies with the direct-sales model.