The Federal Trade Commission has opened a probe into Herbalife.

The stock, which had been halted, closed down more than 7% on Wednesday. It had fallen as much as 17% following the news.

Herbalife confirmed that they received a Civil Investigative Demand from the FTC.

"Herbalife welcomes the inquiry given the tremendous amount of misinformation in the marketplace, and will cooperate fully with the FTC. We are confident that Herbalife is in compliance with all applicable laws and regulations. Herbalife is a financially strong and successful company, having created meaningful value for shareholders, significant opportunities for distributors and positively impacted the lives and health of its consumers for over 34 years," the company said in a statement.

A spokesperson acknowledged the existence of the investigation, but said the FTC had no further comment. A spokesperson for Pershing Square Capital Management declined to comment on the investigation.

Herbalife, a multi-level marketing firm that sells weight loss products and nutritional supplements, has been at the center of a major hedge fund battle.

Hedge fund manager Bill Ackman, who runs Pershing Square Capital Management, announced about 14 months ago that he is betting $1 billion that the stock will go to $0. Ackman's thesis is that the company operates as a "pyramid scheme" that targets lower income individuals, particularly those from the Hispanic population.

Ackman believes that regulators, particularly the FTC, will be persuaded to shut the company down.

He was recently the subject of a critical page-one New York Times article about how he's been coordinating lobbying efforts in Washington, D.C. to bring the company down.

Ackman commented on a conference call yesterday it wasn't his "favorite" article, but he thinks it will be "helpful." He thinks that regulators will have to pay attention now that it's a mainstream news story.

Herbalife has publicly refuted Ackman's allegations that they operate as a pyramid scheme.

Since Ackman revealed his short in late 2012, the stock price has surged. A number of fund managers, most notably Carl Icahn, have also piled on by going long the stock. Icahn has even said that he thinks Ackman will be the victim of the "mother of all short squeezes."

The most recent estimate was that Ackman had suffered $500 million in paper losses on his bet. He's made back some of that money just now.

He has also maintained that he will continue take this short "to the end of the earth."

Just yesterday, Ackman hosted another conference call slamming Herbalife over its business practices in China. Ackman believes they are violating Chinese direct-selling laws.