TelexFree lose final interlocutory appeal
You knew it was coming. I knew it was coming.
After nine previous appeal denials in court it seems the only people who refused to believe it was game over were TelexFree investors outside of Brazil still trying to convince people to invest, and those in Brazil who had invested their money with the company.
In what must have been a rather short hearing, once again upon consideration of evidence presented both by TelexFree and the Public Prosecutor’s Office of Acre, TelexFree has lost yet another appeal in court.
The hearing was for an interlocutory hearing and was held to decide once and for all whether the injunction barring TelexFree from paying commissions and its affiliates recruiting new investors should be lifted.
Things got off to a bit of an interesting start with Public Prosecutor William Silvia asking to be excused from the hearing, citing a possible conflict of interest given some of his family had invested in TelexFree.
Silvia was excused with the Public Prosecutor’s Office then being represented by Alvaro Pereira. After hearing both sides of the case, a panel of judges unanimously decided to uphold the injunction against TelexFree, denying the company relief by way of an interlocutory appeal.
Not only was the appeal denied but the judge’s were quite candidly blunt about what they thought of TelexFree.
Judge Samoel Evangelista noted
that the scheme has a short life and that selling VOIP is not the main activity those who join the company engage in, but rather it is the recruitment of new affiliates.
“The company’s entire advertising effort is designed not to promote the product but to attract new affiliates,” he explained.
Federal Judge Valdirene Cordeiro explained his own vote against the appeal, stating that
all that has been publicized in the media and presented in the (Public Prosecutor’s) file confirms the existence of a pyramid scheme.
Sympathising with TelexFree affiliates who had invested more than they could afford to lose, Judge Eva Evangelista remarked
I feel a sense of compassion towards the people who sold their only home and only car on the promise of easy money (with TelexFree).
This should be assessed through further civil action, with compensation paid out dependant on how much was invested.
As it stands now, I believe the question of TelexFree resuming business operations in Brazil is a closed book. No matter what TelexFree’s affiliates or the company might tell you, it’s just not going to happen.
TelexFree do now have the option of filing an appeal in the Superior Court, however that would appear to be a complete waste of time.
Ten appeals denied and you really think TelexFree hasn’t already served up every defence its lawyers can think of? Please.
Looking forward, from Judge Evangelista’s remarks it would appear that the next step will be determining what funds have been and can be recovered, with the goal of returning invested money to affiliate investors who were net losers in the scheme.
Whether or not that will involve a Receivership and clawback litigation of the net winners in the scheme remains to be seen. Criminal proceedings against TelexFree, its owners and possibly its affiliates beyond the investigatory stage are also yet to be announced.
Meanwhile to those investing and continuing to attract investors in offshore markets TelexFree operates in, be warned – the company just lost its major investment market in Brazil and two of the owners are currently hiding out in the US.
This is not a company projecting a steady and prosperous future. Like all Ponzi schemes one way or another business operations have come to an end – with it only being a matter of time before the permanent shutdown of business operations in Brazil reverberate elsewhere in TelexFree’s global operations.
Evidence of this is already observable, with news that Acre Public Prosecutor’s have now ‘asked a U.S. court to prevent the recruitment of new affiliates into Telexfree’.
Personally I for one will be glad to put this at times entertaining but altogether sorry chapter of MLM history to rest.
I’d express my hope that the closure of yet another pseudo-compliance based Ponzi scheme would prove yet again to participants that no matter how you dress one up, a Ponzi is still just that – however by the looks of some of the schemes in my inbox that I’ve yet to review, that hope would largely be a wasted effort.
Update 13th August – I can confirm that an appeal in the Superior Court will be filed (groan):
Wilson Roberto Furtado, a TelexFree lawyer, stated that TelexFree will take the case to the Superior Court of Justice.
Meanwhile Horst Fuchs, another of TelexFree’s lawyers, appears to be in outright denial over the decision:
Another attorney, Horst Fuchs, said that TelexFree’s new defeat was predictable since the case, from his point of view, is not being treated in accordance with the legal rules.
Good luck with that Mr. Fuchs.
I wonder why they didn’t simply fly Gerry Nehra down there to give a repeat performance of his “legal blessing” speach.
Or maybe Brazilian judges aren’t as easy to hoodwink as American MLM’ers.
Because Gerald Nehra is not licensed to practice law in Brazil. (And in fact, said so in his US speech)
I sometimes wonder if he is licensed to practice Law in the US…..
He doesn’t even have to be licensed to use a rubber stamp of approval.
What is gonna happen to Telex Free USA? Any negatives?
A Ponzi scheme having its biggest cache of revenue frozen and losing it’s biggest investor recruitment market is probably a considerable negative.
Brazil has its own problems (El Niño, floods, riots, etc.), so they won’t allow people in the U.S. to export him either. 🙂
IM(very)HO, it’s unlikely what is happening in Brazil will make much difference to regular HYIP ponzi players and “get-rich-quickers” but hopefully will reflect in smaller numbers of fresh new US victims being recruited.
Telexfree leader telling other affiliates to join political parties and run for parliament next year.
Telexfree lawyers try antecipatory bail for Carlos Costa. And the court denies.
http://g1.globo.com/ac/acre/noticia/2013/08/tj-ac-nega-habeas-corpus-preventivo-dono-da-telexfree.html
As I understand it you wouldn’t apply for anticipatory bail unless you were expecting to be arrested at some point in the future.
Probably a good indication of how TelexFree management expect this all to turn out.
In the meantime Costa is still putting out his Youtube videos, this last one (no. 12) was just released less than an hour ago – can we get a gist translation from the Portuguese speaking readers?
He seems to be placing a lot of importance on that big stack of papers. Maybe they got God to write up a new defense for the company?
There’s also something that looks like a 5×5 matrix table. Are they hoping that dumping the weekly guaranteed ROI will somehow absolve them of running a Ponzi scheme up until now?
Additionally, the matrix seems to revolve around individual $49.90 payments for the VOIP package. Isn’t that an indirect confession that up until now the scheme was just affiliate-funded. If commissions become tied to the individual sale of the packages, that’s going to put a stop to all this selling the packages back to the company nonsense.
PPBlog’s reporting that TelexFree doesn’t have a VOIP licence from Anatel, the Brazilian phone authority. TelexFree’s retort: they don’t need one.
He starts saying something like Horst Fuchs said, about that defeat being expected because the court is not judging well. He also states their intention to take the case to the STJ, in Brasília.
When he touchs the papers he says he want to show us “a bunch of documents” that allegadly were presented to the Acrean Court and not properly analysed.
Not surprisingly, he shows nothing, just mentions what might be there on his waved papers, the same thing he shamelessly did several times before. There is no zoom on any part that could indicate the nature of the documents, nor did him show the content of any of those.
He says that, although those supposedly important papers were ignored by the Court, they won’t give up.
When he looks exalted, he says the Acrean Ministry accused the firm of depending only of new affiliations. He says he will focus on one example of another income source, and also cites several others, although most of them are actually derivated from new affiliations (he cites even the renewal fee as an exemple, which is actually nothing more than a new affiliation of a current member).
The exemple he focus on is the so called “consumption marketing”, showed in that matrix. It seems to be a ridiculous attempt to confuse the huge unlearned Brazilian population, that can be impressed by any math you forge.
The matrix assumes someone will register 5 affiliates, each one taking other 5, until a 3.905 people net is formed. Then, every single one sells 5 of their useless Voip to other 5 people. He just multiplies this nonsense numbers with the value of Voip and comission, and states that the person who formed that “net” will receive almost USD 19.000 a month.
Basically, so, he is stating that, in Telexfree, the one who aggregates a huge number of people will recieve lots of money… What is new in that?
He then challenges anyone to debunk the sustentability of their business! By the way, the title of the video (O Desafio), means “the challenge”.
He claims they are proposing to the Acrean Judiciary to accept Telexfree resuming operations just with the way he showed in the matrix (an obivious Ponzi plan), and also states that, if this permission is granted for 90 days, Ympactus (Telexfree) will allow cadastrations for free.
Interesting that he claims the proposal is to operate only with the selling of their services, although the matrix showed clearly depends on massive affiliations.
After almost 9 and a half minutes, he states, once again, the firm is owned by God. He continuous talking about the proposal with an emphasis in those USD 19.000 a month, although no emphasis was made on the fact that this income is olny possible if your personal net of affiliates sells a total of 19.925 Voips, in his own calculations.
He asks the media to publicate his video and his numbers, and to show to “any specialist they want”, challanging them to debunk this.
With amazing audacity, he states that math is an exact science, like if that would implicate that the matrix he showed us would be necessarily flawless.
He finishes thanking journalist Eustáquio Palhares for leting him participate on his TVshow. He says the interview will be avaible on internet later.
The closure has another religious message, stating that their victory will be a God’s victory.
The problem with the matrix is twofold.
1. If affiliates can no longer sell their positions back to the company each week for the $20, they will free en masse. See JubiRev for an example of what happens when Ponzi schemes try to go legit.
2. Affiliates haven’t been able to sell overpriced VOIP in any significant number to retail customers, hence the entire reason it’s attached to a weekly $20 ROI Ponzi scheme to begin with. Switching over to a matrix does not change this. You’ll still just wind up with affiliates paying affiliates, only now through a matrix.
I’m going to go out on a limb and suggest neither Merril, Wanzeler or Costa are stupid. Switching up the compensation plan is their exit strategy.
And of course undermining any change would be the silly notion that the PPs or courts are just going to kiss and make up, forgetting the last 12+ months of Ponzi riches. Somebody is accountable and TelexFree management are painfully aware of it, hence the anticipatory bail application for Costa.
There’d have been two others filed for Merril and Wanzeler but they’re hiding out in the US. Obviously three out of three owners hiding overseas would raise one too many eyebrows.
Trying to pull a Perry Mason bluff, eh?
FYI, someone started a JamesMerrill wordpress blog and posted various articles like “the truth about TelexFree” or some dumb **** like that. 🙂
I could gladly have accepted Carlos Costa’s challenge, but he specifically required “experts” to look at his numbers. I don’t qualify for that definition. 🙂
The idea “If everyone recruit 5 new affiliates” is heavily flawed = impossible in reality. The average number people in a chain recruitment system can be able to recruit is slightly less than 1.0 (mathematically).
THE MATH AND LOGIC
If I recruit 5, and they recruit 25, the 31 of us will have recruited 30 new participants. If we recruit 125 more participants, the 156 of us will have recruited 155 new participants. And so on and so forth, the number will always be less than 1.0 in average.
If Carlos Costa’s ideas are the best defense system they have, TelexFree Brazil is clearly doomed.
Oz, In which official source did you hear about the request invetervenção Justice in U.S.?
That came from a Brazilian journalist (from iG). I’ve since been in contact with him and he’s not gotten any further answers from the Public Prosecutor’s Office or US regulators.
We thought if we could get the court it was filed in then that might shed some further light on exactly what they’ve asked for and who all was specifically involved.
Treat it as a dead-end for now pending any further developments. I personally think nothing is going to happen in the US with TF’s collapse in Brazil enough to implode the opportunity.
Costa can continue to pump out nonsensical videos but when the penny drops for the hundreds of thousands of Brazillian investors, they’re going to have a situation on their hands.
The journalist of the IG is my friend. But what I learned is that prosecutors had requested information about the U.S. Telexfree. Never had knowledge of a lawsuit in the U.S..
That was from the article quoted (translated). Can you double check it? He’s read my article and didn’t mention anything.
Next logical step then would be ascertaining from whom have the Acre PP’s approached for information.
The information was requested by the task force investigating the company. However, I believe that the application has advantage of criminal prosecutors, because they are investigating a criminal matter.
They requested information to the U.S. government on the operation of the company in the U.S..
Last week or the week before a judge ordered that details of the investigation be kept from the public, which adds to the problem.
Unfortunately we’re just going to have to see how things play out on the criminal side of things. From the looks of it at the moment they’re more concerned with safekeeping investor money and preventing Costa, Merril and Wanzeler from transferring it elsewhere.
Both TelexFree and BBOM have already been busted doing this so no doubt they’ll keep a close watch for any suspicious acticity. I imagine the civil side of the case will have to play out before any criminal proceedings will begin (similar to Zeek Rewards).
The initial injunction (18.06.2013) mentioned it indirectly. Official source was MP-AC, but we also used news from g1.globo.com and economia.ig.com.br as initial sources. I have even used information released from TJ-AC through the jus.br system.
There isn’t any ongoing lawsuit in the U.S., it’s more about “assistance from a Court in the U.S.”. That means passing pre-trial documents and orders THROUGH a court in the U.S. to the parties affected by the injunction.
Normal logic will say that the Court in Acre CAN use a Court in the U.S. to pass documents and orders to parties living in the U.S., i.e. it has the correct subject matter jurisdiction but has to use a local Court for personal and geographical jurisdiction.
James Merrill, Carlos Wanzeler and Lyvia Wanzeler have been listed as parties to the initial injunction. TelexFree LLC (or Inc.) was mentioned indirectly. But so far I haven’t seen ANY orders from the Court being specific about IF, WHEN and HOW to handle parties (people or entities) in the U.S.