TelexFree delay preliminary injunction hearing
According to the SEC vs. TelexFree case docket, on the 23rd of April TelexFree filed an emergency motion seeking to delay the hearing for the permanent injunction.
The company sought to set a new date for the hearing on May 5th, with the temporary restraining order to remain in place until then.
The reason cited for the delay is that TelexFree claim they need more time ‘to respond fully to the plaintiff’s request for a preliminary injunction‘.
Riiiiiiight.
With the date set three days after the final hearing in the Nevada bankruptcy case however, it appears the real reason TelexFree filed the emergency motion is to see what happens there first.
TelexFree have made it no secret they believe the Nevada bankruptcy filing will absolve them of all responsibility for the running of a billion dollar plus Ponzi scheme.
Yesterday saw the filing by the SEC to move the bankruptcy hearing to Massachusetts, which is expected to be heard by the end of the week. The DoJ have also filed a motion asking that a US Trustee be appointed to the case, which would effectively put the application in the control of regulators.
The DoJ motion I’m not sure on but due to the filing of an application to shorten the time to hear their motion, I expect the SEC motion to be heard by the end of the week. That would pretty much eliminate the confusion which is evident in today’s granting of TelexFree’s emergency motion.
Ruling on the motion, Judge Gorton granted the motion and ordered that a new hearing date be set for May 7th. The temporary restraining order, covering all defendants has been extended till April 25th, with a hearing for a preliminary injunction to be entered into against the remaining defendants (Faith Sloan, Randy Crosby, Santiago De La Rosa, Sanderly Rodrigues de Vasconcelos and Steve Labriola), to be heard on the same day.
Note that upon seeing the delaying of the preliminary injunction hearing for Joseph Craft, Carlos Wanzeler, James Merrill and TelexFree granted, Steve Labriola has also now filed his own request for a delay. That motion however hasn’t been ruled upon yet.
Labriola is claiming that he’s only just now retained an attorney on April the 23rd itself. As such, Labriola is claiming he needs more time because he hasn’t yet met with the attorney, nor is the attorney familiar with the case.
What Labriola has been doing up until now is unclear.
Looking forward, we now wait for a possible ruling on the SEC’s motion to move the bankruptcy hearing to Massachusetts by the end of the week, which would effectively put a stop to TelexFree’s abuse of the bankruptcy court. Till then, the company continues to dig itself a deeper hole, under the misguided notion that a Nevada Judge will grant them the relief they seek.
Namely the tearing up of the $1 billion in AdCentral ROI contracts the company currently owes its affiliates.
Stay tuned…
Footnote: Our thanks to Don @ ASD Updates for the tipoff.
I’m confused. If the hearing for the permanent restraining order for Craft, Wanzeler, Merill, and TF has been extended to May 7, then it makes no sense to only extend the TRO until April 25 for all defendents. Or am I reading it wrong?
@Naz
The TRO will be amended on the 25th, if the permanent injunction is passed against the other defendants on the 25th, then it needs to be modified to only apply to the May 7th defendants.
So the time will become longer, it has bad effect for promoters
@Oz
what do you thing how many percentage telexfree win?
In the SEC complaint and other documents, I haven’t read much about the money laundering and assett protection attempts of the individual defendents other than Merrill, Craft and Wenzeler. Therefore, it may me harder to get a permanent asset freeze on the rest of the individual defendents tomorrow (except Rodriguez who already has had problems with regulatory authorities before).
“Hope springs eternal” – William Shakespeare
“Telexfree falls in three – Muhamed Ali
In every motion filed that describes the creditors they mention only the Dom Republic and MA Brazilian community. Do they know that there are thousands of victims in CA and FL here in the US as well as around the globe ?
3 new docs at KCC, seems Telexfree is fighting back in full force
http://www.kccllc.net/telexfree/document/list/3846
The 3 new documents are pretty meaningless. The “fight” is over minutiae.
Document 71: We want 30 pages for our argument instead of normal 20, pretty please.
Document 72: We can’t meet on April 30, but we can do May 2.
Document 70: We object to everything SEC says and we want the case to stay in Nevada bankruptcy court.
They really are pulling what they did in Brazil all over again. File as much BS as possible and hope for the best.
I think they might be hoping to hoodwink the new judge before he catches up.
There’s too much to cover at the moment, so I think I’ll adopt a “wait for the rulings” approach.
The Motion to stay the TRO and permit Telexfree to use assets in the normal course of business has substance. I hate to say it but it would have been far less messy if the SEC had acted before Telexfree filed bankruptcy rather than after.
What’s the normal course of business for a Ponzi scheme though? Paying out ROIs?
I think the DoJ motion for a Trustee trumps “normal business operations”. The rules they cite specifically address what procedure must be followed in instances of fraud, deception etc.
One must “admire” (in a certain sick and schadenfreude way) the logic of such Ponzi minds.
TelexFree was a Ponzi right up to the day SEC and rest stopped the company… Because they entered into fraudulent contracts but in reality is paying early investors with late investor’s money.
TL;DR version
SEC: You owe people 1 billion while you only made 1 million. Yet you took in at least 300 million. Where’s the rest of it?
So TelexFree’s solution is to “invalidate” the contracts they wrote themselves, then tore up, through a bankruptcy. “You say we owe a billion? Now we owe NOTHING!”
TL;DR verion
TF: We are trying to dump the 1 billion debt. Can’t you see that? Leave us alone! (And stop asking where the 300 mil went!)
So what’s next? Pretty simple, actually. SEC will have to show the Nevada judge that 1) Fraudulent contracts were just that, fraudulent, and should not be allowed to be dumped with just a bankruptcy… It was evidence of fraud, not normal business practice, and thus NOT deserve bankruptcy protection.
2) Such a fraudulent company should be finished with a stake in the heart, rather than linger in legal limbo, to allow perps to reorganize.
3) Ruling is already conflicting with Massachusetts court.
I just skim-read through the “TRO is invalid” motion.
It still hinges on “we ran a Ponzi scheme for 2 years, now we want get out of jail free”. Also they’re asking to recover their assets themselves (as in TelexFree will handle inhouse clawbacks). WTF?
These guys have already proven to be deceitful time and time again. How are they filing this stuff with a straight face?
Only if you make an assumption that TelexFree was a business… and not a pyramid/Ponzi scheme.
DiskAvontade is still running, and KCC was prepaid with 350K retainer. What other assets do they need?
By the way, concerning the Telexfree website reactivations and sporadic promotions…the TRO only applies to entities and person who have received notice. The website could be operated by just about anyone who plausibly could claim they were not noticed.
In addition the TRO is being contested as a violation of the bankruptcy court’s automatic stay, so there is an incentive to keep on with business as usual until there a permanent injunction. That could be awhile, so as they say… “make hay while the sunshines.”
The only person/entities that have definitely gotten notice are those currently represented by counsel and the 30+ banks that the SEC identified as doing business with Telexfree. Everyone else is free to do whatever they want….at least for awhile.
They don’t. Their lawyers are doing the filing, and they are paid to present with a straight face.
And they keep going on about the debtors and creditors, as if the money owed is legitimate.
You don’t get to negotiate your Ponzi ROIs, it’s all fraudulent BS.
Well that is exactly the position that the Telex attorneys are arguing from, and from that perspective the SEC has violated the automatic stay.
All I am saying is that its a rebuttable assumption and Telexfree attorneys will argue otherwise.
Santiago De La Rosa and Randy Crosby have also just filed objections to the temporary restraining order in Massachussets too.
I hope the SEC have enough people on this, the next few days are likely to be pretty important.
One would have to take into consideration the precedent TelexFree are trying to set here too.
1. Run Ponzi scheme and make millions of dollars.
2. Become aware of regulatory investigation and pending shutdown when you are subpoenad for information.
3. Withdraw what’s left and rush off to the bankruptcy court to declare bankruptcy.
4. Get out of jail free.
If this stays in Bankruptcy KCC will eventually be due many millions, so will the Telexfree attorneys. Those fees can not be paid if all of Telexfrees money is frozen or if the income from Disk Avontade is all that is available for restructuring. They must have access to their bank accounts.
If not, if the TRO becomes a preliminary injuction and no money is available for operations then this will in all likelihood go to Chapter 7 (which is where it should be), but as you can see, Telefree’s attorneys are trying to keep the ship afloat and they will do that to the best of their ability. I assume they have been prepaid.
My head hurts, but I manage 2 go over this: kccllc.net/telexfree/document/1412524140424000000000001
And short story: 1-Very good legal conseling, 2-There are 4 main strategies by the legal team, first try to maintain venue and jurisdiction in Nevada claiming the precendency of the petiton for Bankruptcy over the SEC/Mass. petition.
Second, try to claim that the TRO is in direct violation of the chapter 11 provisions and should be partial removed.
Third, “and the most funny of all”, claim that “Mr. Merrill, Mr.Wanzeler, and Joseph Craft” are in no way involved whit TF operation since 17 April and that Macmillan is running the company and that under is administration TF his ready to adress business whit a new improved plan meeting all past and future obligations, and the most relevant strategy in my opinion trying to overwhelm the Nevada Judge whit so many legal precedents that the hearing for change of venue scheduled for the April 30 is postpone for a date after the May 2 hearing…
they are trying to directly declare void and null the TRO whit legal arguments and indirectly declare void the TRO resorting for it´s expiration date…did my best.
Big Crime vs. Big Government.
It’s not only about the ROIs, I’ve been seeing genuine questions from affiliates/clients about “how will we pay for the VOIP service we’re using without the backoffice?”. That part of the business is legitimate (or at least not questioned by the SEC), and it is used by a portion of the affiliates.
I believe this is at least part of the motivation to bring the site up again, with a BO working for VOIPs (which explains the Fuchs (by Carlos Castilho) reference to channeling old BO through VOIP BO to keep service running and accommodating new sales.
People who entered their BOs last night also noted that their accounts have been sort of flattened, as if they had expired or reset. You actually can see this in the FB image I posted last night, it says Qualifications: Inactive ; Combining(?) qualifications: Direct.” It was like this for everyone.
So the judge sets aside a million or two special trustee account and let SEC freeze the rest.
I would not be surprised if SEC is already writing an appeal to bankruptcy if they fail there, and emergency TRO to prevent the bankruptcy from going forth if approved.
In the meanwhile, SEC is going to be busy back in Mass chasing down where all the money went.
LOL I simply skipped all those pages of case precedents, but I suppose the judge can’t do the same. I also fear this strategy (old but quite efficient) can effectively send the venue hearing to the Greek calends.
Which brings up an interesting point, me not being a legalese guy: when is bankruptcy considered to have been filed: the moment a court clerk entered it into the system? Or the moment all pieces are complete to be considered?
What if the application was incomplete, like the TelexFree one? It was missing lots of required data.
I mean, it’s clear they filed bankruptcy just to get away from the SEC and the rest because they filed incomplete paperwork. Isn’t that an angle to hit them from? I’m sure some legal eagles will tell us…
Technically speaking, bankruptcy had not even been accepted by the court. When does the actual bankruptcy is judged to have stopped all creditors and whatnot (including the SEC?)
Sure but that does not give Telexfree the ability to reorganize the business, which is what the Telexfree attorney’s are trying to accomplish and which is why they are trying to invalidatet the TRO.
The Bankruptcy is considered filed in the day of the first petition.
If incomplete you can add to the first petition, althougth the Judge if proven, can change to a later date if the bankruptcy petition was filled under false excuse and results in irreparable damages to the creditors.
Its pretty clear that the Telexfree attorneys are arguing that the automatic stay dates to the date of the initial filing. This is of course the very reason they filed ASAP and without the normal schedules.
They knew they were in a race. File….argue about it later. If the law is on your side…argue the law….if the facts or on your side….argue the facts….if neither are on your side….just argue.
Law 101 There are precedents for everything.
Yes, in the Claim they go in to some detail in restructuring the scheme and their debt to the promotors, Macmillan is being portrayed has the most honest and experienced CEO in the industry…
Sounds right, and consistent with the actions of the Telexfree attorneys. The SEC will argue the exceptions of course.
Between these polar opposites sits the Judge, which just illustrates why Federal Judges have so much power. The attorney’s are very deferential to them for obvious reasons.
Guys, please don’t tell me these crooks are a step ahead in getting away with this? argh!
I foresee Carlos Costa and his Youtube crew will soon publish a new video claiming that was a HUGE victory, probably evoking God a thousand times and saying that everything will be fine by next week.
Already making coffee here, in order to spit it later.
I seriously doubt it!….They will be going to jail and all be made an example of.
You can also follow updates at the BostonGlobe.com site and in the search bar type in telexfree.
Except so far all TelexFree did was dissipate assets for past X months by paying its exec team millions here and there. I guess that’s one way to “reorganize” the business…
But filing an incomplete application and then filing various “motion to continue (delay)” is contempt of court, by abusing the bankruptcy system to impede investigation, isn’t it? 🙂 At least that’s what SEC will say.
Topic has now reached Wall Street Journal:
(Ozedit: link removed, WSJ is behind a paywall)
Germán Miranda Villalona, the director of the anti laundering department of the attorney general office,said 2 victims have denounced telexfree and will proceed now from words into actions, he also said they will proceed to block the telexfree website.
http://z101digital.com/app/article.aspx?id=125148
That’s in the Dominican Republic, right?
Yes, and its also important what the US Trustee has to say. The Judge very much relies on that. More so, at times than what the squabbling attorneys have to say.
Executive compensation is but one factor.
lmao…anyone translate this ?? telexfreel.com
It’s basically same as TelexChina
Sold only 1 million over 2 years as their “core” business, but voted to give themselves and companies they controlled tens of millions of dollars… sure that’ll go over well with a bankruptcy judge. 😀
Given enough time, the ringleaders will put away their cash to vanish. They need time to prepare their case but also to figure out where and who to trust their money to so that after the dust settles and if they are not arrested, they can live comfortably for the rest of their lives.
Don’t let your guard down.
Think AIG, United Airlines, Ford Motors all of which declared bankruptcy while their executives enjoyed perks and compensation packages far exceeding anything the boys a Telexfree even dreamed of. They all entered BK, the stockholders and bondholders took a bath, the CEO took a paycut but the companies are still with us.
Let me reiterate I do not think Telexfree will reorganize but the rules are the same for Telexfree as for any other company once they are under bankruptcy protection.
The very “worst” aspect of it (if you consider) is that the creditors have a big voice in what happens in a reorganization and there are a lot of lunatics who seem willing to take a bath as long as the company keeps operating.
Seems to be the sales pitch of some Telexfree creature. If you click the globe, you’re redirected to telexfree.com/ferrs .
Similar to telexfreecanada.net, who has already been mistaken by a Boston newspaper for the legitimate site of Telexfree-Canada. If you click join you’re led to telexfree.com/jesteban .
The SEC better get the FBI, Homeland and US Immigration into this or like cockroaches when the light is turned on, the top leaders will move money around so that if they are not convicted and arrested, they will simply leave the country to somewhere safe, not Brazil because Brazilians will eat them alive.
It would be important to check how many assets and cash has been transferred to relatives to prevent losses.
Who would be surprised to find out where millions have gone and are unaccounted for?
There are some developments at the KCC website, but all seem to be minor issues. The judge approved this and that (such as KCC clearance to post things and date for an hearing) but I don’t see anything of great interest there.
Maybe an order authorizing “joint administration of chapter 11 cases”? Is that the approval of the bankruptcy process?
Yes many of the creditor lunatics are actually insiders who would side with TelexFree.
In other words, the creditors listed by TF on their initial BK filing already made plenty of money from this scheme. So they are ok with the BK filing at this point because they will not be severely affected compared to the lower level affiliates who will be the ones taking the bath.
I think that it would be a travestry if this Bankruptcy filing actually goes through…
No minor stuff, after all, it seems the bankruptcy process was indeed accepted by the Court of Nevada under ch. 11
http://www.kccllc.net/telexfree/document/1412524140424000000000012
The bankruptcy process seems to have been approved by the Nevada Court, today. Creditors meeting is set to 22 May.
It sure seems like it. The SEC is asking for transfer of the bankruptcy case to Mass, KCC is noticing people, the initial creditors meeting is scheduled and unbelievably, someone has already filed a proof of claim. There is nothing that can not be undone but this train seems to have left the station.
However, there is sure to be a motion to convert to Chapter 7 liquidation at some point.
You’ve got to be kidding me! How can they approve this?
Not necessarily.. Graça Luísa, listed in the BK creditors list, has already jumped the sinking ship and is now selling her “plan B”, already plenty of rats on her facebook page joining her in The Next Big Thing®.
I *hate* legalese. As far as I can read it, it just says “consolidated case” (all three companies as one single case) is approved. Don’t know about the rest.
Blame that Apsan guy for telling people to file a claim… before bankruptcy was even approved.
Expect SEC to appeal this ASAP. Is Nevada one of those courts where there’s a bankruptcy court panel, or will SEC appeal to the District Court?
Nevada Court hearing to decide change of venue set to 2 May, despite disagreement of SEC attorneys.
Its not bad. Both companies and individuals have a legal and statutory right to file bankruptcy so it was a given. Its provided for in the Constitution of the USA.
However:
If the SEC makes this argument they would seem to prefer a Receivership or some other form of administration for the benefit of creditors but this may not be their tactic because….
BK brings the company under the jurisdiction of the Court which brings with it many useful restrictions (such as the company has to file schedules which aids discovery) and since the
BK Court is part of the Federal District Court system, it can transfer the case (or any part thereof) back to the original Federal District Court at any time. BK is also a necessary first step towards converting a Chapter 11 to a Chapter 7 Liquidation.
So what the SEC might wait for is a conversion of the Chap 11 to a Chapter 7 liquidation under the auspices of a Trustee….
Combined with the continuation and expansion of the original TRO (called a Preliminary Injunction) as issued by the District Court Massachusetts. This way both the Bankruptcy action and the Security violations cases that were brought by the SEC and Mass Securities Division can be heard by the same judge.
You may note that the US Trustee has already requested a Trustee be appointed and the transfer of Ch 11 venue from Nevada BK to Massachusetts BK. I view this as a prelude to consolidating all the action in a single courtroom with a Trustee and the Preliminary Injunction in place.
Here is a very clear and concise discussion of Bankruptcy:
http://www.hf-law.com/images/uploads/VBA_Summary_of_Chapter_11_Procedures_and_Process.pdf
The SEC asked for the expedited hearing and made the motion to change venue. There is no “disagreement.” They want the Mass judge in charge of this case and the sooner the better.
As I wrote a few minutes ago filing bk is a legal and statutory right. You can not stop someone from doing it, but the SEC can thereafter ask for a dismissal or conversion to Chapter 7.
KCC approved as claims administrator on an interim basis. At least they’re happy.
I pointed out something similar when I analysed his advices.
He was too eager to direct people in that direction. “Hurry up, just DO IT! Don’t use your brain”. And then we hear he’s an immigration attorney, and probably has connections to several of the EB5 companies registered through ADAMS, EWING & CRAFT.
EB5 is about immigration and Green Cards based on specific types of investments = “Job creating investments in specific areas”. Some of the ACE companies (Adams, Craft, Ewing) are focused on EB5 investments, e.g. selling franchises to investor immigrants.
Apsan probably have direct connections to TelexFree’s management’s advisors.
Maybe I misunderstood something in this question, but last time I saw it it was SEC wanting to set it to Apr 30 or before, and Telexfree to 2 May or after. But they maybe agreed on that in the between and I missed that info.
I doubt it will matter, KCC has interim approval and the claims register is live.
telexfree.com is up again… Logging to BO as a client is possible.
The SEC may have asked for an April 30 hearing but May 2 was what was approved by the Court.
When you used the word “disagreed” I thought you meant that they did not want a Hearing on shortened time. They clearly did, but could not get it as quickly as they asked…..but they still got it fast. Normally hearings must be noticed on the order of 10 to 20 days in advance so this was pretty quick.
The SEC has nothing to complain about here. I am sorry if I misunderstood you.
I used the wrong word indeed, due to this document being immediately after another about the shortening date of that Telexfree motion to denounce the TRO where the two SEC attorneys disagree, and due to the previous statement by the SEC that they wanted the hearing specifically before May 2. I apologize for the misunderstanding.
Looking at it again, however, it seems all parties must have been satisfied, since given the hour (9.30am) it possibly will be the first thing being decided in the May 2 hearings.
Don’t tell me that the bad guys are winning.
telexfree.com is up again… Logging to BO as a client is possible.
What about it: telexfree.com/legal_announcement.html
I’m going to try to put up a summary of all the stuff that’s been filed and what’s been ordered on the 24th (US time). Too many minor things going on to warrant separate articles.
Which ones are the “bad guys”, and which ones are the “good ones”? 🙂
Only if you believe any of this legal maneuvering negates the fact Telexfree was and is a billion dollar fraud.
The people behind TF are literally fighting for their lives and will use any means at their disposal to delay the inevitable, which is completely within their rights in the democratic system under which the USA operates.
Which does NOT alter the fact the result is inevitable, IM(very)HO.
It may take longer than people would like, but, rest assured, it will happen.
Hear,hear littletoundman
Thanks. SEC will continue to attempt to move the venue. The fact that the current judge allowed the case to proceed does NOT rule out the venue be moved.
Telexfree is active again.
SEC please end this game and seize the domain.
Charles, apparently they are not breaching their TRO (if it’s still on, it supposedly ended yesterday 2pm), and the access to the BO information may possibly help people collecting data to help them filling their Proofs of Claim (or save it to a later complaint against TelexFree), therefore it’s not really that bad if it’s back on.
Anyway, only VOIP (costumer) BO is working for now.
I think the motion to change venue is on for May 2. The SEC is moving fast on this issue.
Hopefully people find this useful – https://behindmlm.com/companies/telexfree/telexfree-court-status-24th-april-2014/
This may seem insignificant but as long as we are discussing things.
A Temporary Restraining Order is issued without notice upon the party to be restrained. Here the SEC obtained a TRO because it did not want to forewarn Telexfree and was able to convince the judge of the need.
Compare that with a preliminary injunction which may only be issued after notice and a hearing. Both sides get to argue their point of view.
Compare that with a permanent injunction which is ordered only when final judgment is rendered in the case.
Presently, the SEC is attempting to have the court issue a preliminary injunction, the purpose of which is to enjoin Telexfree indefinitely… that is until resolution of the SEC v Telexfree case (when presumably a permanent injunction will be ordered)
How did telexfree.com end up live again today? I thought the SEC has an active TRO and the FBI confiscated all of their servers????
I read earlier they have opened an office in Canada to continue the international fraud. The BCSC is “watching the situation”…. are they retarded to allow TelexFREE to operate in Canada under the circumstances surrounding the company throughout the rest of the world??