The FTC, in a comprehensive settlement, stopped short of classifying Herbalife as a pyramid scheme but said the company "deceived consumers into believing they could earn substantial money selling diet, nutritional supplement and personal care products".
The shares climbed to $68.15 at 7:54 a.m.in early trading in NY.
The settlement comes after a two-year investigation by the FTC, which has probed Herbalife over accusations that the company focuses on recruiting more sales people instead of selling its products.
Herbalife disclosed in 2014 that it was being investigated by the FTC for possible "deceptive practices".
The company Friday that the FTC settlement doesn't change its business model as a direct selling company.
The agreement came after a two-year long investigation by the FTC to determine the legality of Herbalife's operating system, which rewards sellers who bring in more sellers. As a result of our research, over three years ago we concluded that Herbalife was not a pyramid scheme. But after the FTC's announcement allowing Herbalife to keep operating, its stock price rose.
In contrast, the company announced Friday that activist investor Carl Icahn and his company, Icahn Enterprises, had been given the right to increase their collective Herbalife stake from a maximum of 25% to a maximum of 34.99%. The only way this gets resolved is if Herbalife makes material changes to their incentive structure to stop the incentives to recruit.
The company, the Federal Trade Commission said when announcing an injunction to halt the scheme, "focuses on recruitment rather than retail sales of its products to generate this income", and while some people at the top were getting rich, "the vast majority of participants make no money, and a lot of them lose money".
Since that time, Herbalife has become a proxy battlefield for major Wall Street players who took opposing sides, some shorting the company's stock believing it would collapse, while others bought huge caches of Herbalife shares.
His Pershing chief Square Capital Management hedge fund invested $1 billion in a short bet against Herbalife shares in 2012, when they traded around $47.
In an interview with CNBC, Ackman said, "This is not going to be about a dollar amount that Herbalife pays to the government".
The FTC is also requiring Herbalife to "fully restructure their US business operations". It mandates a structure in which success depends on whether participants sell Herbalife products as opposed to buying them.
"The FTC's action today addresses numerous concerns that NCL and other experts on pyramid schemes raised about Herbalife's business practices", NCL Executive Director Sally Greenberg said in a statement. Herbalife already had gained 11 percent this year through Thursday. "Europe and other parts of the world might jump in and try to regulate the company as well", said Jim Corridore, an analyst at S&P Global, which maintained a hold opinion on Herbalife shares.