Inside the troubled past of NXIVM founder Keith Raniere: Part 2

Before founding NXIVM, Keith Raniere started an ill-fated network marketing company Consumers' Buyline.
6:49 | 04/28/18

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Transcript for Inside the troubled past of NXIVM founder Keith Raniere: Part 2
Reporter: Before he was the smooth-talking sage in a "v"-neck sweater on YouTube -- When you get to something that's authentic, you experience this type of creativity, this soul. Reporter: Before he founded the strange and secretive group with a name like a Roman numeral, before he was arrested and charged with sex trafficking, Keith raniere had a checkered past as an alleged schemer and rip-off artist. His first big idea was hawking memberships in an ill-fated network marketing company called consumers' buyline. His name is Keith raniere. His idea is called consumers' buyline. Consumers' buyline, may I help you? Reporter: This promotional video for consumers' buyline from the 1990s features the late Eddie Albert of "Green acres" fame. And a painfully awkward pitchman, 31-year-old, Keith raniere. Keith, happy to see you again. Yes. Happy to see you too. It's an amazing idea. Yes, well, sometimes it even amazes me. But consumers' buyline is wonderful. And it's working. It really was a brilliant idea. It was based on the premise of, as a group, collectively, we can buy in bulk, and we can save a lot of money. Reporter: Toni Natalie knew raniere before he was vanguard. She even appears in this 1993 "American spotlight" program lauding consumers' buyline. Traditional markups are between 4% and 800% in the cosmetic industry. Reporter: Toni says she fell for Keith raniere's pitch which included the astounding claim that raniere is one of the smartest people in the world. He scored one of the three highest iqs ever reported. Reporter: When you met him, did he seem like a genius? He seemed like a geek, so I sat down and I asked him, "So, you have a 240 iq, why are you doing this? Why aren't you curing cancer? Why aren't you really making a difference?" And he said, "This is the platform that I'm gonna use, and I'm gonna change the world." Reporter: Unlike the man from "Green acres," attorneys general in several states didn't think raniere's idea was quite so amazing, or honest. We first told you about consumers' buyline in may, when the company was accused of being an illegal pyramid scheme. Reporter: Consumers' buyline settled without admitting wrongdoing, but promised to pay hundreds of thousands of dollars to the states. After that, the company went bust. By that time, Toni Natalie says she was on her way to becoming one of raniere's first casualties. She had left her husband and moved to Albany with her young son to be with Keith. They were together for nearly six years, until she left in 1999. She says in all-night talks, Keith drew out all of her secrets. Here's the smartest man in the world willing to help you through your emotional issues, and the reason that you're stuck in this world and the reason that you can't move on, and the reason you can't grow, is because you haven't learned how to heal that thing inside of you. Reporter: I'll help you -- I'm going to help you -- Reporter: Make it all better. I going to help you heal sexually, I'm going to help you heal intellectually. I'm going to show you the path. Reporter: Like other empowerment groups, nxivm has its own lingo. Students are taught about overcoming "Disintegrations" to become more "Potent" and less "Suppressive," and avoiding people termed "Parasites" or "Luciferians." According to former members, the sessions came to involve practices such as bowing and a special handshake. At nxivm's Albany headquarters, people inside can be seen wearing sashes. Former members say different colors denote rank. Former coach Margot joy Leviton says classes begin with a ritual handclap. And we do something that we would call a huddle. So, everyone would put their arms around each other in this big circle. We are committed to our success. And then straight in to the mission statement. There are no ultimate victims, therefore I will not choose to be a victim. Reporter: Margot says anyone unwilling to go along with the rituals -- Thank you, vanguard. Reporter: Would be scorned. We would just suppress them and be like, "Oh, they just don't get it. They just don't get it." I mean, if you step out of line, you get punished. You know, you get a lot of, like, strong thought control, you know, leveled at you. And you get told you -- Reporter: What does that mean, strong -- It means, basically, like, using intellect to try to outlogic you, to basically say, "You're the problem." If you question Keith raniere, the Hits the fan. I've had people killed because of my beliefs and because of their beliefs and because of things I've said. Reporter: Just watch raniere's reaction when a group of nxivm women confront him about the running of the organization. The effects are our company is falling apart. You don't have the experience of leadership. You don't have the experience of preserving people's lives with what you say, and the truth of the matter is, if -- Well, in a way, neither do you. Yes, I do. Reporter: From filmmakers to fledgling actors, nxivm seems to have had a special attraction for rising stars. You can see how someone coming along and saying, "I think you're special, I think you're amazing." All those doors that are slamming in your face, all those auditions you're getting rejected from, I've got the secret to make that all turn around. It can seem pretty appealing. No, you can borrow mine. Reporter: Jen kobelt is an aspiring actress in Vancouver, but when she joined nxivm she says her classmates treated her like a star. It was like I was a celebrity, like, I walked in and everyone was like, "Who's that girl," and they were so nice to me. Reporter: She says members were encouraged to socialize with other members. Outside friends faded away. We were told things not directly, but subtly. Do you want to be surrounded by people who are, you know, just living their life? Or do you want to be surrounded by people who have an ethical mission to change the world? Reporter: In a recent statement, nxivm claims a ten-year study shows "Extraordinary psychological benefits and results" from its teachings. And Margot, the former coach, says nxivm changed her life in positive ways. But she also describes feeling bullied and manipulated by some of the training, which she says caused her psychological trauma. It feels like they got in there and they messed with my wiring, or how I think, or my perceptions.

This transcript has been automatically generated and may not be 100% accurate.

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