Over the past few years two schemes have risen to the top of the Ponzi scheme cesspool currently ravaging the Brazilian MLM industry.
TelexFree hid behind the supposed sale of VOIP software whereas BBOM pretended they were selling GPS tracker units. Both companies claim to sell products to retail customers that simply don’t exist.
TelexFree charged affiliates an annual fee and promised to pay out a weekly guaranteed $20 ROI. BBOM charged affiliates between $300 and $1500 and promised to pay out a weekly guaranteed $80-$400 ROI.
Both schemes merely took new and re-invested money from affiliates and, after shuffling it through their respective facades, paid it back out to existing investors as guaranteed.
Not surprisingly when Brazilian regulators moved in on TelexFree and froze the company’s assets, it wasn’t long before BBOM was also targeted.
That the two companies share a pretty much identical “take new affiliate money and use it to pay off existing affiliates” core mechanic was already widely known, now however it appears that ties between TelexFree and BBOM extend far beyond the mere sharing of a Ponzi investment business model.
After previously speculating on financial ties between TelexFree and BBOM, Federal Prosecutors in the Brazilian state of São Paulo announced yesterday that they’d uncovered ‘financial transactions between the two companies and common people involved‘.
Based on their findings Federal Prosecutors named BBOM as the “successor” of TelexFree, possibly indicating that TelexFree was close to the end of the average two-year Ponzi scheme life-cycle.
Typically your modern-day online Ponzi scheme runs into cash-flow problems (too little new money coming in, too much money being paid out) around the two-year mark, after which the scheme collapses.
BBOM’s founder and President João Francisco de Paulo (right) was quick to respond to the Federal Prosecutor’s announcement, denying any such any ties existed.
“My accounts have not received any deposits since 7/10/2013. The previous balance was money received via participation in BBOM [Embrasystem] as a BBOM franchisee. It is lawful money, counted and declared.
One would think that if Federal Prosecutors had to “uncover” the transactions that they wouldn’t be as simple as the observing of money being transferred between Paulo’s personal bank accounts and those of TelexFree.
Far more likely in the case of Brazil’s biggest Ponzi schemes that run into hundreds of millions of dollars would be layer upon layer of carefully planned financial obfuscation. These guys know exactly what they’re doing and the stakes they’re playing for if caught, and in that sense Paulo’s brushing off of the Federal Prosecutor’s findings is childishly comical.
Meanwhile when TelexFree was contacted by the Brazilian media for a response to the Federal Prosecutor’s claims, TelexFree’s lawyers ‘were not available for comment‘.
Personally I’m hardly surprised to learn of financial ties between TelexFree and BBOM. And the transactions between “common persons” (affiliates) involved in both schemes is also entirely unsurprising.
Passed off as “generating multiple streams of income”, it’s common in Ponzi scheme circles for affiliate investors to mitigate their losses via participation in multiple investment schemes.
Sounds good in theory unless the entire house of cards comes crashing down, as has been the case with much of the MLM industry’s seedy revenue-sharing underbelly of late.
In addition to the evidence of financial ties between TelexFree and BBOM, São Paulo’s Prosecutors also revealed Paulo had transferred eleven million dollars out of BBOM to his own banking account(s), of which four million was siphoned off to the US for investment in “private pension funds”.
Paulo also owned four of the forty-nine luxury cars Prosecutors had seized as part of BBOM’s asset freeze back in mid August.
Meanwhile in addition to financial irregularities, logic holes in the Ponzi front side of BBOM’s business continue to be exposed by Brazilian regulators.
Federal Prosecutors in the state of Goiás analysed BBOM’s alleged sale of trackers, calculating that 1.5 million GPS trackers would need to have been sold to account for the revenue generated within the scheme.
Further investigation by Goiás’ Prosecutors revealed however that only sixty-nine thousand GPS trackers had been ordered from BBOM’s main supplier.
Despite the shortfall of over 1.4 million trackers that were never sold, BBOM still managed to pay its affiliates their guaranteed ROIs for the sale of said non-existent trackers to equally non-existent customers.
How the company plans to explain that discrepancy away when confronted by Federal Prosecutors in court remains to be seen.
Speaking of courts, there’s been a notable increase in requests of information pertaining to the future of TelexFree in the US and elsewhere around the world. Those seeking such information would do well to note the latest developments of the case against TelexFree in Brazil.
In addition to their civil case against the company, Acre’s Public Prosecutors have also now initiated a criminal investigation into the company. Thus far Prosecutor’s have brought in five of TelexFree’s top Brazilian affiliates for interrogation.
Furthermore the task force conducting the investigation have made it known they are exploring the possibility of initiating civil and criminal lawsuits against TelexFree’s top “net winners” (affiliates who made the most money in the scheme). If lawsuits are filed against TelexFree’s Brazilian net winners, possible charges laid against them would include counts of embezzlement and money laundering.
The above should also provide you with some insight into what TelexFree themselves as a company are facing later down the track once Public Prosecutors are finished their investigation.
With TelexFree being effectively shut down in the country they had the largest amount of investors and ROI reserves in, it should be painfully obvious the direction the company can be expected to take globally over the coming months.
As such, please be aware that any comments left by investors asking whether or not it’s safe to invest in TelexFree outside of Brazil will be marked as offtopic.