Ministry of Finance: TelexFree “not sustainable”
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.
Stay tuned.
Too bad there’s no “3 strikes and you’re out” in the law business… Nehra may be looking at a third strike now. 😛
He’s pretty much bound to say favourable things about his client, because they are his client and he is their lawyer.
Lawyers never say “my client is guilty as sin”.
Lawyers pretty much always claim their client is pure as the driven snow. Sometimes that might be true, but lawyers will say it even when it’s not really true. Remember lawyers are “advocates” for their clients.
So when you hear a lawyer saying “my client is pure as the driven snow”, you really shouldn’t be surprised, regardless of who the client is. And you should put appropriate weight on th lawyer’s statement.
An interesting detail about Telexfree contract:
In few words, it meaans that Telexfree reserves itself the right not to pay $20 dollars a week for each AdCentral. Formally, the weekly $20 are a VOIP line that Telexfree gives to the member and buys back for $20.
The contract says that, if Telexfree wants, it can buy the line back for a smaller value, or even refuse to buy the line back
@Brazillian
That’s Ponzi speak for if new investment dries up don’t blame us if we stop paying you your weekly ROI.
If the ROI was truly tied into VOIP sales there’d be no need for that disclaimer.
It’s a misinterpretation of how the laws really works, assuming that AGREEMENTS have a higher priority than other laws.
For the AdCentrals to make any sense, TelexFree will need to earn some income on them from clients (other than the investors), directly or indirectly.
* Directly = clients are paying TelexFree for the work, and TelexFree is making a profit on each ad.
* Indirectly = the ads are attracting customers to TelexFree, other customers than the investors, and TelexFree is making a profit on sales to the customers.
If it doesn’t make any profit on the ads, it’s using money from new investors to pay old ones. And then it’s a fraudulent investment scheme. Disclaimers won’t change that fact.
You can’t AGREE with anyone that laws won’t apply to you, e.g. “investment laws won’t apply to this business because we’re calling it something else, and we have some work connected to the payouts”.
And you can generally not agree on conditions like “If I fail to deliver as promised, I will not be responsible for it”. You surely ARE responsible if you have made any misleading marketing claims, including marketing ACTIONS like paying out a ROI to early investors, including marketing omissions like failing to give correct information.
Or to put it more succinctly, you cannot agree to be cheated, or agree to breaking / allowing to break the law.
Meanwhile, Telexfree members are spreading an article where they say that all those negative news abou the company are possibly sponsored by banks and other MLM companies.
According to the article, an unidentified bank cashier, would have said that banks are worried by the ammount of people who are withdrawing their money to invest in Telexfree. The article also says that other MLM companies are massively losing members who are migrating to Telexfree, and so they all would have decided to join forces and defeat Telexfree.
http://www.cenariomt.com.br/noticia.asp?cod=276434&codDep=3
In other article, a Telexfree members says that the company is “democratizing the capitalist logic” (whatever it means):
http://www.telexfreerendaextra.com.br/2013/03/15/o-que-a-polemica-em-torno-do-telexfree-evidencia-captacao-de-poupanca-popular-ou-democratizacao-da-logica-capitalista/
Believe if you can!
Here’s some more info you guys might already know of:
Over the course of past week several news sites that reported the scheme have fallen victims to ddos attacks.
Telexfree released an official statement accusing customers of downplaying the voip product and usind the investiment opportunity as the main selling point, and ordered all personal pages tied to it to be deleted. In other words, they are bailing out.
@Brazillian
Dismissing “negative news” as being written by competitors and other MLM companies is standard practice in the MLM industry. It’s what companies do when they can’t address the information directly, ie. deflection.
That second site is just an Telexfree affiliate spam site. “Democratizing the capitalist logic” is obviously just wordsmithing “Ponzi scheme”.
Complaining about DDOS attacks is standard practice in the Ponzi scheme world. Next up is “we’ve been hacked”.
Oh poor them!
“Hey guys nobody is selling our VOIP, they’re all just promoting the Ponzi scheme we’re running. Totally not our fault that our affiliates marketing values are out of alignment!”
Just checked the TelexFree website and the AdCentral Ponzi scheme info is still there. Fail.
Oh well, if the company says so…
You pay TelexFree hundreds of dollars and get a guaranteed $20 a week ROI paid out of new investor money. Claiming this isn’t so “because it doesn’t say it on the site” is kind of silly (even though it does say it on the promoter page, sans “we’ll pay you out of new investor money”).
Nothing except the universal conclusion by Brazillian authorities that TelexFree is a Ponzi scheme.
Your knowledge of what US AG’s are and what they do seems lacking.
I get the impression your fresh off the TelexFree affiliate forums/Facebook page, pumped full of PR marketing crap. Might want to pop that bubble son.
Those that keep track of scams may recall this is EXACTLY what happened before Zeek Rewards collapsed. North Carolina Credit Union employee worried that people are taking money out to put into Zeek, called it possible fraud.
The company then reacted by claiming to have shut down the disinformation, and told affiliates to stop reading outside reports.
https://behindmlm.com/companies/zeek-rewards/nc-credit-union-warns-zeek-rewards-is-fraudulent/
News Telexfree MPF MP and RN will not investigate the company Telexfree
http://www.novojornal.jor.br/_conteudo/2013/03/economia/9064-mpf-e-mp-no-rn-nao-irao-investigar-empresa.php
Not the best of translations but sounds as if the Ministry of Public and Federal Prosecutor are yet to launch investigations (as of March 17th), but that the Finance Ministry has requested they do so.
Additional research for the investigations will be conducted by The 3rd Coordination and Review Board (Consumer and Economic Order) the Attorney General’s Office.
I think the article title might be a translation error as it definitely sounds like investigations are underway/planned.
It’d be pretty negligent of the Brazillian authorities to let TelexFree slip through their fingers at this stage of investigations.
according to a Telexfree director, people make confusion between reselling and pyramid:
http://economia.ig.com.br/2013-03-21/as-pessoas-confundem-revenda-com-piramide-diz-diretor-da-telexfree.html
He also says that Telexfree has been on US market for many years
It’s official! The investigation on TelexFree has been absolved of what Behind MLM has researched and posted.
For the record I’m yet to see “official” confirmation of anything, other than a poorly translated paragraph which appears to have originated from within TelexFree itself.
Seems to be complete bullshit, here’s a news article (Portuguese) from the 2nd of April reaffirming the investigations:
I know what your attempting to express here OZ. I don’t know if it’s a genuine concern that you have with TelexFree for your followers.
Or you may have a dissenting agenda here with TelexFree.
We just heard of this great news this morning. We just wanted to confirm this and discern it from corporate.
All of this will take time, I am sure that the Ministry of Finance has been granted time to take down all content from the Internet and or officially comment about the investigation.
I am sure that you will keep a close watch on this. So, just sit tight and let’s see how this roll’s out.
You might have just heard it this morning, I first saw it pop up 3-4 days ago.
Nothing official other than someone’s upline, upline, upline etc. from within TelexFree. Till official confirmation is made I’m treating it as BS.
Official, says who? How can it be verified?
Hello I am a member of telexfree in Colombia, I see bad things about the company, the case in Brazil, but the seat matrix is in United States what happen with telexfree in your country?
Because no investigations against telexfree by the Ministry of Finance of the United States that is my question.
No importa. Todo tu dinero que se encuentra en Brasil. Usted pagó a Brasil, no los EE.UU.. Compania en EE.UU. es falso. Está sólo dos buzones de correo. Nada mas.
Explico aqui en Ingles.
http://amlmskeptic.blogspot.com/2013/07/telexfree-location-lie-its-tvi-express.html
Oficina en Inglaterra tambien es falso.
http://amlmskeptic.blogspot.com/2013/09/telexfree-uk-office-is-lie-and-heres.html
(translation: It doesn’t matter. All your money is in Brasil. You paid Brazil, not the US. Company in the US is fake. it’s just two mailboxes, nothing more. Explained in English.
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Office in UK is fake too.
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