Brazilian Court suspends TelexFree operations
When news broke back in February that TelexFree was under criminal investigation in Brazil, many TelexFree affiliates went into a panic with the company’s then recent attempt at US market penetration stalling.
Then, after the Ministry of Finance came out and publicly declared that TelexFree was “not sustainable” and “a Ponzi scheme”, court action escalated and, to the best of my knowledge, somewhere along the line an order was passed prohibiting the Ministry of Finance from issuing any further statements on the case (which remained in progress), and to take down information they had already published.
As is common with Ponzi schemes, affiliates with the most to lose in the company and fearful of the impact the Ministry of Finance’s statements would have on their investor recruitment efforts, news of the above order somehow got turned into this:
It’s official! The investigation on TelexFree has been absolved of what Behind MLM has researched and posted.
Comments like the above were widely circulated by TelexFree affiliates in a campaign of misinformation, aimed at reassuring existing and prospective investors that TelexFree’s Brazilian regulatory problems were over.
Cue breaking news of continued Brazilian regulatory action against TelexFree in 3… 2… 1…
Spearheaded by public prosecutors in the Brazilian state of Acre, yesterday a nationally binding court ordered injunction put a stop to TelexFree’s business operations, including the registration of new affiliate investors, acceptance of new investments and paying any returns owed on existing affiliate investments.
Brazil’s Globo reports:
The 2nd Civil Court of Rio Branco upheld a civil action proposed by the prosecutor of Acre, and suspended payments and the accession of new contracts multilevel marketing company Telexfree until the final judgment of the principal action, under penalty of a daily fine R $ 500 thousand.
Holding a press conference yesterday immediately after the order against TelexFree was handed down, Nicole Gonzales from Brazil’s Consumer Protection body stated
Owners of the company are suspected of mounting a financial pyramid.
Telexfree in Brazil is recruiting investors and creating a pyramid scheme under the guise of multilevel marketing.
There are multilevel marketing companies already established in the market as Herbalife, Mary Kay and Tupperware.
They work with this system, in the case of Telexfree the interest is not to sell products but to recruit new people.
The focus of Telexfree in Brazil is not the sale of products or services, but membership new people to feed the payment system.
Or in other words, precisely what I had concluded back in July 2012 when I published my initial review of TelexFree.
The order, handed down by Judge Thais Borges, orders TelexFree to effectively cease all business operations in Brazil with the decision affecting ‘the promoters of Telexfree across the country or outside‘.
The measure was taken to prevent new people end up involved in the scheme and may be harmed.
An order was also made blocking the bank accounts of administrative and management staff of Telexfree.
What this means for TelexFree’s US affiliate investors, and those who were sucked into the recent US recruitment drive is currently unclear.
One thing seems certain though, anybody who tells you TelexFree’s regulatory problems in Brazil are over is clearly feeding you porky pies.
Quick to respond to the decision and seeking to reassure their investors that everything was fine, TelexFree uploaded a video to YouTube claiming
the company has not yet been officially notified of the decision but that is taking all measures to overturn the injunction of Justice Acre.
Yeah, good luck with that guys.
Footnote: The injunction order against TelexFree can be read in its entirety over at the Acre Public Prosecutor’s Office website (Portuguese).