For some time there's been skepticism surrounding the questionable business model of BurnLounge, the Web music retailer meets multi-level marketing scheme. Now it would appear the US Federal Trade Commission (FTC) has been keeping a close eye on the online retailer too. In court documents filed against BurnLounge last week the FTC has accused the Web retailer of running an illegal investment scheme naming, amongst others, BurnLounge CEO, Alex Arnold, and former American Football player Rob DeBoer, one of BurnLounge's most prominent retailers.

According to news reports, the FTC has asked to examine BurnLounge's books in order to determine if more money is made from recruiting new members than from actually selling music. We're betting the FTC won't have too many late nights sorting that mystery out.

For some time BurnLounge has been an outsider in the online music industry, despite high profile supporters such as Justin Timberlake, Shaquille O'Neill and Public Enemy's Professor Griff the underlying business model when it came to selling music didn't match up with its impressive celebrity endorsements. BurnLounge music stores priced songs at a similar level to iTunes, yet in the beginning those songs couldn't even be played on iPods.

BurnLounge's supporters were vocal on forums with their claims of a transformative business model, but most of the time came off sounding like they had been drinking too much digital music Kool Aid. Ultimately BurnLounge is most disappointing because it took a great idea like syndicating music sales to music fans and turned it into a cynical marketing scheme for the benefit of very few.