In mid February we reported that Brazil’s Bureau of Consumer Protection (Procon) had launched an investigation into TelexFree, an MLM scheme run out of Brazil, back in January 2013.
Procon’s investigation was concluded in February, with the bureau identifying “several controversial issues and possible crimes” in connection to the operation of TelexFree.
Following their investigation, Procon lodged an official complaint in Brazil and forwarded their findings to the State Prosecutors Office, the Minister of Finance and the Federal Police.
As of yet no information has surfaced on any action from the State Prosecutors Office or Federal Police. Brazil’s Minister of Finance however did launch their own investigation following Procon’s complaint, declaring late last week that TelexFree was “not sustainable”.
BehindMLM reader “Frontier” was first to alert us to the breaking news last week, citing a news report in Portuguese that announced the Ministry of Finance had concluded their investigation into TelexFree.
With Google translate not providing what I felt was an accurate translation of events, I held off writing about it but woke up today to find a more translatable article had been posted by the Brazillian website “iG”.
The Telexfree business of selling packages of internet telephony (VoIP, its acronym in English), is not sustainable and suggests a Ponzi scheme, which is a crime against the popular economy.
That is the conclusion of the Secretariat for Economic Monitoring of the Ministry of Finance (Seae / MF) in a statement on Thursday (14).
I’m not entirely sure how the Ministry of Finance (MoF) released their statement but the iG article suggests a court was involved,
The court further stated that the company responsible for the business Ympactus Comercial LTDA., Has partnerships with mobile operators or fixed, which would be necessary to ensure the provision of VoIP services, nor authorization to practice trading activities.
If I’m reading the above correctly (I believe “nor” is supposed to read “not”), the court is stating that evidence of VOIP business relations exist between Ympactus Commercial (TelexFree’s parent company) and mobile operators, however said relationships do not permit TelexFree to run an unsustainable Ponzi scheme.
According to the agency, there is evidence of two irregularities: stimulate the informal economy, because “the most substantial financial gains do not come the ads, but the entry of new publishers on the network’s original publisher (…)
If there is no entry of new stakeholders, it is impossible to get the advertised gains, indicating, unless contrary interpretation, the lack of sustainability of the business.
The above pretty much aligns with my own research into TelexFree (see BehindMLM TelexFree review here), with any VOIP services offered simply being a front for the AdCentral Ponzi scheme component of the business.
Following their investigation, the MoF announced that they will forward their findings to the Federal Police and Federal Public Ministry. Whether or not either agency moves on the scheme remains to be seen.
BehindMLM reader “Brazillian“, suggests that government action against the company seems unlikely:
Brazilian law is too permissive for this kind of system. I don’t even remember any case where authorithies shut down a scheme that was still active, recruiting. In nearly all cases, they wait until the “bubble” blows.
A few weeks ago I was contacted by TelexFree’s attorney and well-known MLM industry Gerry Nehra, who claimed that
the TelexFREE business model in the USA is NOT an investment, uses NO investment language, and pays ONLY on the sale of its VOIP long distance product.
When I pointed out that TelexFree in the US uses the exact same investment business model as in Brazil and included screenshots of the TelexFree website demonstrating as much, I never heard back from him.